BANKING LAW (ATTY.
FONTANILLA) / SMSANTOALLA
G.R. No. L-20583 January 23, 1967
REPUBLIC OF THE PHILIPPINES, petitioner, vs.SECURITY CREDIT AND
ACCEPTANCE CORPORATION, ROSENDO T. RESUELLO, PABLO TANJUTCO,
ARTURO SORIANO, RUBEN BELTRAN, BIENVENIDO V. ZAPA, PILAR G.
RESUELLO, RICARDO D. BALATBAT, JOSE SEBASTIAN and VITO TANJUTCO
JR., respondents.
FACTS: SCAC were registered with the SEC on March 1961. The Board of
Directors of the Corp adopted a set of by law which they filed with the SEC on
Sept 191. The Superintendent of the Banks of the Central Bank of the
Philippines asked its legal counsel an opinion on whether said Corporation is a
banking institution within the purview of RA 337
Legal Counsel opined “yes”
The Presidents Corporation, Resendo Resuello sought a reconsideration of that
opinion,, but was denied
Before this, the corporation applied with the SEC for the registration and
licensing of its Securities under the Securities Act and that before acting on this
application, The Central Bank gave them a copy of the Opinion. Which then told
them to comply with the requirements of the General Banking Act.
Members of the Intelligence division of the central bank and Manila PD
searched the premises of SCAC seizing documents and records, with court
authority, which was placed in the custody of the CBP. The examination of the
documents yielded these results.
finding that the corporation is:
1. Performing banking functions, without requisite certificate of
authority from the Monetary Board of the Central Bank, in violation
of Secs. 2 and 6 of Republic Act 337, in that it is soliciting and
accepting deposit from the public and lending out the funds so
received;
2. Soliciting and accepting savings deposits from the general
public when the company's articles of incorporation authorize it only
to engage primarily in financing agricultural, commercial and
industrial projects, and secondarily, in buying and selling stocks and
bonds of any corporation, thereby exceeding the scope of its powers
and authority as granted under its charter; consequently, such acts
are ultra-vires:
3. Soliciting subscriptions to the corporate shares of stock and
accepting deposits on account thereof, without prior registration
and/or licensing of such shares or securing exemption therefor, in
violation of the Securities Act; and
4. That being a private credit and financial institution, it should come
under the supervision of the Monetary Board of the Central Bank, by
virtue of the transfer of the authority, power, duties and functions of
the Secretary of Finance, Bank Commissioner and the defunct
Bureau of Banking, to the said Board, pursuant to Secs. 139 and 140
of Republic Act 265 and Secs. 88 and 89 of Republic Act 337."
(Emphasis Supplied.) that upon examination and evaluation of the
same records of the corporation, as well as of other documents and
pertinent pipers obtained elsewhere, the Superintendent of Banks,
submitted to the Monetary Board of the Central Bank a
memorandum dated August 28, 1962, stating inter alia.
11. Pursuant to the request for assistance by the Chief, Intelligence
Division, contained in his Memorandum to the Governor dated May
23, 1962 and in accordance with the written instructions of
Governor Castillo dated May 31, 1962, an examination of the books
and records of the Security Credit and Loans Organizations, Inc.
seized by the combined MPD-CB team was conducted by this
Department. The examination disclosed the following findings:
a. Considering the extent of its operations, the Security
Credit and Acceptance Corporation, Inc., receives
deposits from the public regularly. Such deposits are
treated in the Corporation's financial statements as
conditional subscription to capital stock. Accumulated
deposits of P5,000 of an individual depositor may be
converted into stock subscription to the capital stock of
the Security Credit and Acceptance Corporation at the
option of the depositor. Sale of its shares of stock or
subscriptions to its capital stock are offered to the public
as part of its regular operations.
b. That out of the funds obtained from the public
through the receipt of deposits and/or the
sale of securities, loans are made regularly to any
person by the Security Credit and Acceptance Corporation.
2019-2020
12. Section 2 of Republic Act No. 337, otherwise known as the
General Banking Act, defines the term, "banking institution" as follows:
Sec. 2. Only duly authorized persons and entities may
engage in the lending of funds obtained from the public
through the receipts of deposits or the sale of bonds,
securities, or obligations of any kind and all entities
regularly conducting operations shall be considered as
banking institutions and shall be subject to the provisions
of this Act, of the Central Bank Act, and of other pertinent
laws. ...
13. Premises considered, the examination disclosed that the
Security Credit and Acceptance Corporation is regularly lending funds
obtained from the receipt of deposits and/or the sale of securities. The
Corporation therefore is performing 'banking functions' as
contemplated in Republic Act No. 337, without having first complied
with the provisions of said Act.
In view of the foregoing, the monetary board decided that
1. That the Security Credit and Acceptance Corporation is
performing banking functions without having first complied with the
provisions of Republic Act No. 337, otherwise known as the General
Banking Act, in violation of Sections 2 and 6 thereof; and
2. That this case be referred to the Special Assistant to the Governor
(Legal Counsel) for whatever legal actions are warranted, including,
if warranted criminal action against the Persons criminally liable
and/or quo warranto proceedings with preliminary injunction
against the Corporation for its dissolution. (Emphasis supplied.)
Acting upon the memo, The Superintendent of Banks declared the corporations
in performing banking operations without having complied with law, that the
SCAC has already been informed of the resolution. However, It continues the
illegal banking operations
SCAC has established 74 branches throughout the Philippines and induced the
public to open 59,463 savings deposits accounts
ISSUE: Whether or not defendant corporation was engaged in banking
operations.
RULING: YES, The Defendant corporation has not secured the requisite authority
to engage in banking, a total of 59,463 savings account deposits have been
made by the public with the corporation and its 74 branches, with an aggregate
deposit of P1,689,136.74, which has been lent out to such persons as the
corporation deemed suitable therefor. It is clear that these transactions partake
of the nature of banking, as the term is used in Section 2 of the General Banking
Act. Indeed, a bank has been defined as: “a moneyed institute founded to
facilitate the borrowing, lending and safe-keeping of money and to deal, in
notes, bills of exchange, and credits.
Moreover, it has been held that an investment company which loans out the
money of its customers, collects the interest and charges a commission to both
lender and borrower, is a bank; that any person engaged in the business carried
on by banks of deposit, of discount, or of circulation is doing a banking business,
although but one of these functions is exercised.
defendant corporation has violated the law by engaging in banking without
securing the administrative authority required in Republic Act No. 337. That the
illegal transactions thus undertaken by defendant corporation warrant its
dissolution is apparent from the fact that the foregoing misuser of the corporate
funds and franchise affects the essence of its business, that it is willful and has
been repeated 59,463 times, and that its continuance inflicts injury upon the
public, owing to the number of persons affected thereby.
G.R. No. 218390
HONGKONG BANK INDEPENDENT LABOR UNION (HBILU), Petitioner vs.
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, Respondent
FACTS: In 2001, the Bangko Sentral ng Pilipinas (BSP) issued the Manual of
Regulations for Banks (MoRB). Relevent to the insant case is the Section on the
manual is the provision which states that “Financing plans and amendments
thereto shall be with prior approval of the BSP” as regards to the financial
assistance being given by the banks to its employees, as part of their fringe
benefits.
Pursuant to the said provision, Hongkong and Shanghai Banking Corporation
Limited (HSBC) submitted its Financial Assistance Plan (Plan) to BSP for
approval. It contained a credit checking proviso stating that “repayment
defaults on existing loans and adverse information on outside loans will be
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
considered in the evaluation of loan applications.” Later, the BSP approved the
submitted Plan.
Hongkong Bank Independent Labor Union (HBILU), the incumbent bargaining
agent of HSBC’s rank-and-file employees entered into CBA with the bank
without the said proviso containing the approved Financial Plan. When the CBA
was about to expire, the parties started negotiations for new one. During the
said negotiations, HSBC proposed amendments to align the wordings of the CBA
with its BSP-approved plan. HBILU objected such proposed amendments,
claiming that their insertions would curtail its members’ availment of salary
loans. HSBC Withdrew its proposed amendments and, consequently, the Article
containing without the provision remain unchanged.
Despite the withdrawal of the proposal, HSBC sent an e-mail to its employees
concerning the enforcement of the Plan, including the Credit Checking
provisions. Thereafter, HBILU member Vince Mananghaya applied for a loan
under the provisions of the CBA. His first loan application was approved, but the
second one was denied because of the external checks on his credit
background. HBILU raised the denial as a grievance issue with the National
Conciliation Mediation Board (NCMB), arguing that the additional requirement
of conducting external credit checking is not sanctioned under the CBA, such
cannot be unilaterally imposed by HSBC.
National Conciliation and Mediation Board: Rendered decision in favour of HSBC,
stating that as an employer, HSBC has the right to issue and implement
guidelines for the availment of loan accommodations under the CBA as part of
its management prerogative. NCMB also said that HSBC was constrained to
comply with the Manual given by BSP.
CA: Affirmed NCMB’s decision, stating that upon the approval of the Financial
Plan, HSBC became legally bound to enforce its provisions, including the
conduct of external credit checks on its loan applicants. CA also ruled that the
Plan should be deemed incorporated in the CBA because it is a regulatory
requirement of BSP without which the salary loan provisions of the CBA are
rendered inoperative.
Hence this petition.
ISSUE: Whether or not HSBC could validly enforce the credit-checking
requirement under its BSP-approved Plan even when the said requirement is
not recognized under the CBA
HELD: NO. Banks and Banking; Hongkong and Shanghai Banking Corporation
Limited (HSBC), being a bank, is statutorily required to conduct a credit check
on all of its borrowers, even though it be made under a loan accommodation
scheme, applying Section 40 of Republic Act (RA) No. 8791 (General Banking
Law of 2000).—It may also be argued that HSBC, being a bank, is statutorily
required to conduct a credit check on all of its borrowers, even though it be
made under a loan accommodation scheme, applying Section 40 of Republic
Act No. (RA) 8791 (General Banking Law of 2000). A reading of RA 8791,
however, reveals that loan accommodations to employees are not covered by
said statute. Nowhere in the law does it state that its provisions shall apply to
loans extended to bank employees which are granted under the latter’s fringe
benefits program. Had the law intended otherwise, it could have easily specified
such, similar to what was done for directors, officers, stockholders and their
related interests under Section 36 thereof. This conclusion is supported by the
very wording of Subsection X338.3 of the MORB.
Same; Loans; Republic Act (RA) No. 8791 only intended to cover loans by third
persons and those extended to directors, officers, stockholders and their related
interests.—RA 8791 only intended to cover loans by third persons and those
extended to directors, officers, stockholders and their related interests.
Consequently, Section 40 thereof, which requires a bank to ascertain that the
debtor is capable of fulfilling his commitments to it before granting a loan or
other credit accommodation, does not automatically apply to the type of loan
subject of the instant case. Furthermore, it is inaccurate to state that credit
checking is necessary, or even indispensable, in the grant of salary loans to the
bank’s employees, since the business of banking is imbued with public interest
and there is a fiduciary relationship between the depositor and the bank. It is
also incorrect to state that allowing bank employees to borrow funds from their
employer via salary loans without the prior conduct of a credit check is
inconsistent with this fiduciary obligation. This is so because there are other
ways of securing payment of said salary loans other than ascertaining whether
the borrowing employee has the capacity to pay the loan. Hongkong Bank
Independent Labor Union (HBILU) vs. Hongkong and Shanghai Banking
Corporation Limited, 855 SCRA 1, G.R. No. 218390 February 28, 2018.
FACTS: Fernando V. Quiaoit maintains peso and dollar accounts with the Bank
of the Philippine Islands (BPI) Greenhills-Crossroads Branch. Fernando, through
2019-2020
G.R. No. 199562
BANK OF THE PHILIPPINE ISLANDS and ANA C. GONZALES, Petitioners,
vs. SPOUSES FERNANDO V. QUIAOIT and NORA L. QUIAOIT, Respondents.
Merlyn Lambayong, encashed BPI Greenhills Check for US$20,000. Lambayong
delivered the dollar bills to the spouses Quiaoit in US$100 denomination in
US$10,000 per bundle. Nora then purchased plane tickets worth US$13,100 for
their travel abroad, using part of the US$20,000 bills withdrawn from BPI.
On 22 April 1999, the spouses Quiaoit left the Philippines for Jerusalem and
Europe. Nora was placed in a shameful and embarrassing situation when several
banks in Madrid, Spain refused to exchange some of the US$100 bills because
they were counterfeit. Nora was also threatened that she would be taken to the
police station when she tried to purchase an item in a shop with the dollar bills.
The spouses Quiaoit filed a complaint against BPI. They alleged that BPI failed
in its duty to ensure that the foreign currency bills it furnishes its clients are
genuine. According to them, they suffered public embarrassment, humiliation,
and possible imprisonment in a foreign country due to BPI's negligence and bad
faith.
BPI countered that it is the bank's standing policy and part of its internal control
to mark all dollar bills with "chapa" bearing the code of the branch when a
foreign currency bill is exchanged or withdrawn. BPI alleged that any local or
foreign currency bill deposited or withdrawn from the bank undergoes careful
and meticulous scrutiny by highly-trained and experienced personnel for
genuineness and authenticity. BPI alleged that the US$20,000 in US$100 bills
encashed by Fernando through Lambayong were inspected, counted,
personally examined, and subjected to a counterfeit detector machine by the
bank teller under Gonzales' direct supervision. Gonzales also personally
inspected and "piece-counted" the dollar bills which bore the identifying
"chapa" and examined their genuineness and authenticity. BPI alleged that after
its investigation, it was established that the 44 US$100 bills surrendered by the
spouses Quiaoit were not the same as the dollar bills disbursed to Lambayong.
The dollar bills did not bear the identiying "chapa" from BPI Greenhills and as
such, they came from another source.
ISSUE: Was BPI liable for the gross negligence amounting to bad faith in handling
dollar withdrawals?
RULING: YES, the General Banking Act of 2000 demands of banks the highest
standards of integrity and performance. The Court ruled that banks are under
obligation to treat the accounts of their depositors with meticulous care.The
Court ruled that the bank's compliance with this degree of diligence has to be
determined in accordance with the particular circumstances of each case.
In this case, BPI failed to exercise the highest degree of diligence that is not only
expected but required of a banking institution.
It was established that on 15 April 1999, Fernando informed BPI to prepare
US$20,000 that he would withdraw from his account. The withdrawal, through
encashment of BPI Greenhills Check No. 003434, was done five days later, or on
20 April 1999. BPI had ample opportunity to prepare the dollar bills. Since the
dollar bills were handed to Lambayong inside an envelope and in bundles,
Lambayong did not check them. However, as pointed out by the Court of
Appeals, BPI could have listed down the serial numbers of the dollar bills and
erased any doubt as to whether the counterfeit bills came from it. While BPI
Greenhills marked the dollar bills with "chapa" to identify that they came from
that branch, Lambayong was not informed of the markings and hence, she could
not have checked if all the bills were marked
BPI insists that there is no law requiring it to list down the serial numbers of the
dollar bills. However, it is well-settled that the diligence required of banks is
more than that of a good father of a family. Banks are required to exercise the
highest degree of diligence in its banking transactions. In releasing the dollar
bills without listing down their serial numbers, BPI failed to exercise the highest
degree of care and diligence required of it. BPI exposed not only its client but
also itself to the situation that led to this case. Had BPI listed down the serial
numbers, BPI's presentation of a copy of such listed serial numbers would
establish whether the returned 44 dollar bills came from BPI or not.
The Court has also applied the doctrine of last clear chance in banking
transactions.
The doctrine of last clear chance, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the defendant where
it appears that the defendant, by exercising reasonable care and prudence,
might have avoided injurious consequences to the plaintiff notwithstanding the
plaintiff's negligence. The doctrine necessarily assumes negligence on the part
of the defendant and contributory negligence on the part of the plaintiff, and
does not apply except upon that assumption. Stated differently, the antecedent
negligence of the plaintiff does not preclude him from recovering damages
caused by the supervening negligence of the defendant, who had the last fair
chance to prevent the impending harm by the exercise of due diligence.
Moreover, in situations where the doctrine has been applied, it was defendant's
failure to exercise such ordinary care, having the last clear chance to avoid loss
or injury, which was the proximate cause of the occurrence of such loss or injury.
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
As pointed out by the Court of Appeals, BPI had the last clear chance to prove
that all the dollar bills it issued to the spouses Quiaoit were genuine and that
the counterfeit bills did not come from it if only it listed down the serial numbers
of the bills. BPI's lapses in processing the transaction fall below the
extraordinary diligence required of it as a banking institution. Hence, it must
bear the consequences of its action. G.R. No. 138569. September 11, 2003.]
THE CONSOLIDATED BANK and TRUST CORPORATION, Petitioner, v. COURT
OF APPEALS and L.C. DIAZ and COMPANY, CPA’s, Respondents.
Solidbank’s tellers must exercise a high degree of diligence in insuring that they
return the passbook only to the depositor or his authorized representative. The
tellers know, or should know, that the rules on savings account provide that any
person in possession of the passbook is presumptively its owner.
FACTS: Solidbank is a domestic banking corporation while private respondent
L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership
engaged in the practice of accounting and which opened a savings account with
Solidbank. Diaz through its cashier, Mercedes Macaraya , filled up a savings cash
deposit slip and a savings checks deposit slip. Macaraya instructed the
messenger of L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank
and give him the Solidbank passbook. Calapre went to Solidbank and presented
to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged
receipt of the deposit by returning to Calapre the duplicate copies of the two
deposit slips. Since the transaction took time and Calapre had to make another
deposit for L.C. Diaz with Allied Bank, he left the passbook with
Solidbank. When Calapre returned to Solidbank to retrieve the passbook, Teller
No. 6 informed him that somebody got the passbook. Calapre went back to L.C.
Diaz and reported the incident to Macaraya. The following day,, L.C. Diaz
through its Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any
transaction using the same passbook until L.C. Diaz could open a new account
followed by a formal written request later that day. It was also on the same day
that L.C. Diaz learned of the unauthorized withdrawal the day before
of P300,000 from its savings account. The withdrawal slip bore the signatures
of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo.
The signatories, however, denied signing the withdrawal slip. A certain Noel
Tamayo received the P300,000.
L.C. Diaz demanded from Solidbank the return of its money but to no
avail. Hence, L.C. Diaz filed a Complaint for Recovery of a Sum of Money against
Solidbank with the Regional Trial Court. After trial, the trial court rendered a
decision absolving Solidbank and dismissing the complaint. Court of Appeals
reversed the decision of the trial court.
ISSUE: Whether or not Solidbank must be held liable for the fraudulent
withdrawal on private respondent’s account.
HELD: Solidbank’s tellers must exercise a high degree of diligence in insuring
that they return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on savings
account provide that any person in possession of the passbook is presumptively
its owner. If the tellers give the passbook to the wrong person, they would be
clothing that person presumptive ownership of the passbook, facilitating
unauthorized withdrawals by that person. For failing to return the passbook to
Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6
presumptively failed to observe such high degree of diligence in safeguarding
the passbook, and in insuring its return to the party authorized to receive the
same. However, L.C. Diaz was guilty of contributory negligence in allowing a
withdrawal slip signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced. Hence, the liability
of Solidbank for actual damages was reduced to only 60%, the remaining 40%
was borne by private respondent.
The contract between the bank and its depositor is governed by the provisions
of the Civil Code on simple loan. There is a debtor-creditor relationship between
the bank and its depositor. The bank is the debtor and the depositor is the
creditor. The law imposes on banks high standards in view of the fiduciary
nature of banking. RA 8791 declares that the State recognizes the “fiduciary
nature of banking that requires high standards of integrity and performance.”
This new provision in the general banking law, introduced in 2000, is a statutory
affirmation of Supreme Court decisions holding that “the bank is under
obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship.”
G.R. No. 127469 January 15, 2004
PHILIPPINE BANKING CORPORATION, petitioner, vs. COURT OF APPEALS and
LEONILO MARCOS, respondents.
2019-2020
FACTS: Leonilo Marcos filed in court a complaint for sum of money with
damages against Phil. Banking Corporation (PBC). Marcos allegedly made a time
deposit in 2 occasions the amt. of P664,897.67 and P764,897.67 through the
persuasion of his friend Pagsaligan, one of the bank’s officials. The bank issued
receipt for the first deposit while a letter-certification was issued for his second
deposit by Pagsaligan. Pagsaligan kept the various time deposit certificates.
When Marcos wanted to withdraw his time deposit and its accumulated interest
Pagsaligan encouraged him to open a letter of credit to the bank by executing 3
trust receipts agreement. He signed blank forms for domestic letter of credits,
trust receipts agreements and promissory notes. He was required to deposit
30% of the total amount of credit and his time deposit will secure the remaining
70% of the letters of credit.
He is now accusing the bank for unjustly collecting payment without deducting
the 30% of his down payment and charging him with accumulating interests
since his time deposit serves as collateral for his remaining obligation. He
further denied making a loan of P500,000 with 25% interest per annum covered
by a promissory note produced by the bank. The bank explained that the
promissory notes he executed are distinct from the trust receipt agreement and
denied falsifying the promissory note covering for the loan of P500,000. The
evidence presented on the promissory note however is merely a machine copy
of the document. The said loan was already paid by offsetting it from his time
deposit.
ISSUE: Whether or not the bank failed to take a proper account on Marcos’
deposits and payment of his loans?
RULING: The court held that the bank is liable for offsetting the time deposit of
Marcos to the fictitious promissory note for the 500,000 loan. The court upheld
the findings of the lower court on the discrepancies shown by the machine copy
of the duplicate of the promissory note and the suspicious claim of the bank
that it could not produce the original copy thereof. The mere machine copy of
the document has no evidentiary value before the court. The court held that
the bank did not forge the promissory note. Pagsaligan did to cover up his failure
to give the proper account of Marcos’ time deposits. This however does not
excuse the bank to return to Marcos the correct amount of his time deposit
with interest. Bank has the fiduciary duty before its clients. Its duty is to observe
the highest standards of integrity and performance. Assuming Pagsaligan is
responsible for the spurious promissory note the court held that a bank is liable
for the wrongful acts of its officers. The court made the proper account of the
total amount due to Marcos ordering the bank to give to him the same plus
moral and exemplary damages.
G.R. No. 157845 September 20, 2005
PHILIPPINE NATIONAL BANK, Petitioners, vs. NORMAN Y. PIKE, Respondent.
FACTS: Pike, gay entertainer, opened a dollar account at PNB Buendia branch for
which he was issued a passbook. Before leaving for abroad, Pike verbally
authorized AVP of PNB Buendia branch, Lorenzo T. Val, to honor all withdrawal
that will be made by Davasol, talent manager, who will be presenting a pre-
signed withdrawal slip bearing Pike’s signature. Subsequently, the passbook was
stolen in his house by his talent manager Joy Davasol who made 2 unauthorized
withdrawals. After knowing the incident, Pike demanded the total withdrawn
amount on the ground that he never authorized anyone to withdraw from his
account and signatures presented on withdrawal slips was forgeries. Pike
through his counsel, demanded the bank to credit back the amount of
unauthorized withdrawal on the ground that signatures was forged. Pike in a
letter to PNB prayed to lift the hold order that her sister made and allow her to
withdraw the remaining balance of the account provided that he will not hold
PNB responsible for the unauthorized withdrawal which was then approved by
PNB on the same date. On the other hand, PNB contends that they exercised
due diligence of a good father of a family in handling the transactions and
cannot grant the request of pike for refund. Plaintiff’s counsel denied that
petitioner made a promise not to hold PNB responsible for unauthorized
withdrawal which was answered by PNB stating that the withdrawal of
remaining balance barred the claim of petitioner for unauthorized withdrawals.
ISSUE: WON PNB is negligent in accommodating the pre-signed deposit slip
presented by Davasol.
HELD: Yes. Ordinarily, banks allow withdrawal by representative provided that
said representative was authorized and the signature of the principal is secured
on the space for such transaction. The signature of Pike was misplaced and still
it wasn’t corrected by Bal. PNB approved the withdrawal slip presented by
Davasol without taking any precautions regarding its authenticity. The admitted
withdrawal slips do not constitute the normal procedure with respect to
withdrawals of representatives. PNB alleged that they observed diligence of a
good father of a family but according to the jurisprudence, the bank is obliged
to treat the account of depositors with meticulous care always having in mind
its fiduciary nature which then makes the degree of diligence more than
ordinary diligence. Article 1172 of the NCC provides the degree of diligence
required by law to an obligor and a diligence below that will make the obligor
negligent.
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Hence, the petition is DENIED. PNB is ordered to refund PIKE $7,500 plus
interest 6% per annum to be computed from the date of the filing of the
complaint which interest rate shall become 12% per annum from the time the
judgement in this case becomes final and executory until its satisfaction, moral
and exemplary damages P 20,000 each, Atty. Fees P 20,000 and P 10,000
representing expenses of litigation.
G.R. No. 176434 June 25, 2008
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. LIFETIME MARKETING
CORPORATION, respondent.
FULL TEXT AND DIGEST
The Bank of the Philippine Islands (BPI) seeks the reversal of the Decision1 of
the Court of Appeals dated 31 July 2006 in CA-G.R. CV No. 62769 which ordered
it to pay Lifetime Marketing Corporation (LMC) actual damages in the amount
of P2,075,695.50 on account of its gross negligence in handling LMC's account.
The following facts, quoted from the decision of the Court of Appeals, are
undisputed:
On October 22, 1981, Lifetime Marketing Corporation (LMC, for brevity),
opened a current account with the Bank of the Philippine Islands (BPI, for
brevity), Greenhills-Edsa branch, denominated as Account No. 3101-0680-63.
In this account, the "sales agents" of LMC would have to deposit their
collections or payments to the latter. As a result, LMC and BPI, made a special
arrangement that the former's agents will accomplish three (3) copies of the
deposit slips, the third copy to be retained and held by the teller until LMC's
authorized representatives, Mrs. Virginia Mongon and Mrs. Violeta Ancajas,
shall retrieve them on the following banking day.
Sometime in 1986, LMC availed of the BPI's inter-branch banking network
services in Metro Manila, whereby the former's agents could make [a] deposit
to any BPI branch in Metro Manila under the same account. Under this system,
BPI's bank tellers were no longer obliged to retain the extra copy of the deposit
slips instead, they will rely on the machine-validated deposit slip, to be
submitted by LMC's agents. For its part, BPI would send to LMC a monthly bank
statement relating to the subject account. This practice was observed and
complied with by the parties.
As a business practice, the registered sales agents or the Lifetime Educational
Consultants of LMC, can get the books from the latter on consignment basis,
then they would go directly to their clients to sell. These agents or Lifetime
Educational Consultants would then pay to LMC, seven (7) days after they pick
up all the books to be sold. Since LMC have several agents around the
Philippines, it required to remit their payments through BPI, where LMC
maintained its current account. It has been LMC's practice to require its agents
to present a validated deposit slip and, on that basis, LMC would issue to the
latter an acknowledgement receipt.
Alice Laurel, is one of LMC's "Educational Consultants" or agents. On various
dates covering the period from May, [sic] 1991 up to August, 1992, Alice Laurel
deposited checks to LMC's subject account at different branches of BPI,
specifically: at the Harrison/Buendia branch-8 checks; at Arrangue branch-4
checks; at Araneta branch-1 check; at Binondo branch-3 checks; at Ermita
branch-5 checks; at Cubao Shopping branch-1 check; at Escolta branch-4
checks; at the Malate branch-2 checks; at Taft Avenue branch-2 checks; at Paseo
de Roxas branch-1 check; at J. Ruiz, San Juan branch, at West Avenue and
Commonwealth Quezon City branch - 2 checks; and at Vito Cruz branch-2
checks.
Each check thus deposited were retrieved by Alice Laurel after the deposit slips
were machine-validated, except the following thirteen (13) checks, which bore
no machine validation, to wit: CBC Check No. 484004, RCBC Check No. 419818,
CBC Check No. 484042, FEBTC Check No. 171857, RCBC Check No. 419847, CBC
Check No. 484053, MBTC Check No. 080726, CBC Check No. 484062, PBC Check
No. 158076, CBC Check No. 484027, CBC Check No. 484017, CBC Check No.
484023 and CBC Check No. 218190.
A verification with BPI by LMC showed that Alice Laurel made check deposits
with the named BPI branches and, after the check deposit slips were machine-
validated, requested the teller to reverse the transactions. Based on general
banking practices, however, the cancellation of deposit or payment transactions
upon request by any depositor or payor, requires that all copies of the deposit
slips must be retrieved or surrendered to the bank. This practice, in effect,
cancels the deposit or payment transaction, thus, it leaves no evidence for any
subsequent claim or misrepresentation made by any innocent third person.
Notwithstanding this, the verbal requests of Alice Laurel and her husband to
reverse the deposits even after the deposit slips were already received and
consummated were accommodated by BPI tellers.
Alice Laurel presented the machine-validated deposit slips to LMC which, on the
strength thereof, considered her account paid. LMC even granted her certain
privileges or prizes based on the deposits she made.
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The total aggregate amount covered by Alice Laurel's deposit slips was Two
Million Seven Hundred Sixty Seven Thousand, Five Hundred Ninety Four Pesos
(P2,767,594.00) and, for which, LMC paid Laurel the total sum of Five Hundred
Sixty Thousand Seven Hundred Twenty Six Pesos (P560,726.00) by way of "sales
discount and promo prizes."
The above fraudulent transactions of Alice Laurel and her husband was made
possible through BPI teller's failure to retrieve the duplicate original copies of
the deposit slips from the former, every time they ask for cancellation or
reversal of the deposit or payment transaction.
Upon discovery of this fraud in early August 1992, LMC made queries from the
BPI branches involved. In reply to said queries, BPI branch managers formally
admitted that they cancelled, without the permission of or due notice to LMC,
the deposit transactions made by Alice and her husband, and based only upon
the latter's verbal request or representation.
Thereafter, LMC immediately instituted a criminal action for Estafa against Alice
Laurel and her husband Thomas Limoanco, before the Regional Trial Court of
Makati, Branch 65, docketed as Criminal Case No. 93-7970 to 71, entitled
People of the Philippines v. Thomas Limoanco and Alice Laurel. This case for
estafa, however, was archived because summons could not be served upon the
spouses as they have absconded. Thus, the BPI's apparent reluctance to admit
liability and settle LMC's claim for damages, and a hopeless case of recovery
from Alice Laurel and her husband, has left LMC, with no option but to recover
damages from BPI.
On July 24, 1995, LMC, through its representative, Miss Consolacion C.
Rogacion, the President of the company, filed a Complaint for Damages against
BPI, docketed as Civil Case No. 95-1106, and was raffled to Regional Trial Court
of Makati City, Branch 141.
After trial on the merits, the court a quo rendered a Decision in favor of LMC.
The dispositive portion of which reads, as follows:
WHEREFORE, decision is hereby rendered ordering defendant bank to pay
plaintiff actual damages equitably reduced to one (1) million pesos plus
attorney's fees of P100,000.00.
No pronouncement as to costs.
SO ORDERED.2
Only BPI filed an appeal. The Court of Appeals affirmed the decision of the trial
court but increased the award of actual damages to P2,075,695.50 and deleted
the award of P100,000.00 as attorney's fees.3 Citing public interest, the
appellate court denied reconsideration in a Resolution4 dated 30 January 2007.
In this Petition for Review5 dated 19 March 2007, BPI insists that LMC should
have presented evidence to prove not only the amount of the checks that were
deposited and subsequently reversed, but also the actual delivery of the books
and the payment of "sales and promo prizes" to Alice Laurel. Failing this, there
was allegedly no basis for the award of actual damages. Moreover, the actual
damages should not have been increased because the decision of the trial court
became conclusive as regards LMC when it did not appeal the said decision.
BPI further avers that LMC's negligence in considering the machine-validated
check deposit slips as evidence of Alice Laurel's payment was the proximate
cause of its own loss. Allegedly, by allowing its agents to make deposits with
other BPI branches, LMC violated its own special arrangement with BPI's
Greenhills-EDSA branch for the latter to hold on to an extra copy of the deposit
slip for pick up by LMC's authorized representatives. BPI points out that the
deposits were in check and not in cash. As such, LMC should have borne in mind
that the machine validation in the deposit slips is still subject to the sufficiency
of the funds in the drawers' account. Furthermore, LMC allegedly ignored the
express notice indicated in its monthly bank statements and consequently failed
to check the accuracy of the transactions reflected therein.
In its Manifestation of Compliance by Respondent on the Order Dated 20 June
2007 Received on 29 July 2007 to Submit Comment,6 dated 9 August 2007, LMC
insists that it is indeed entitled to the actual damages awarded to it by the
appellate court.
BPI filed a Reply7 dated 15 January 2008, in reiteration of its submissions.
We have repeatedly emphasized that the banking industry is impressed with
public interest. Of paramount importance thereto is the trust and confidence of
the public in general. Accordingly, the highest degree of diligence is expected,
and high standards of integrity and performance are required of it. By the
nature of its functions, a bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of
its relationship with them.8 The fiduciary nature of banking, previously imposed
by case law, is now enshrined in Republic Act No. 8791 or the General Banking
Law of 2000. Section 2 thereof specifically says that the state recognizes the
fiduciary nature of banking that requires high standards of integrity and
performance.9
Whether BPI observed the highest degree of care in handling LMC's account is
the subject of the inquiry in this case.
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LMC sought recovery from BPI on a cause of action based on tort. Article 2176
of the Civil Code provides, "Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of this
Chapter." There are three elements of quasi-delict: (a) fault or negligence of the
defendant, or some other person for whose acts he must respond; (b) damages
suffered by the plaintiff; and (c) the connection of cause and effect between the
fault or negligence of the defendant and the damages incurred by the
plaintiff.10
In this case, both the trial court and the Court of Appeals found that the reversal
of the transactions in question was unilaterally undertaken by BPI's tellers
without following normal banking procedure which requires them to ensure
that all copies of the deposit slips are surrendered by the depositor. The
machine-validated deposit slips do not show that the transactions have been
cancelled, leading LMC to rely on these slips and to consider Alice Laurel's
account as already paid.
Negligence is the omission to do something which a reasonable man, guided by
those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man
would not do.11 Negligence in this case lies in the tellers' disregard of the
validation procedures in place and BPI's utter failure to supervise its employees.
Notably, BPI's managers admitted in several correspondences with LMC that the
deposit transactions were cancelled without LMC's knowledge and consent and
based only upon the request of Alice Laurel and her husband.12
It is well to reiterate that the degree of diligence required of banks is more than
that of a reasonable man or a good father of a family. In view of the fiduciary
nature of their relationship with their depositors, banks are duty-bound to treat
the accounts of their clients with the highest degree of care.13
BPI cannot escape liability because of LMC's failure to scrutinize the monthly
statements sent to it by the bank. This omission does not change the fact that
were it not for the wanton and reckless negligence of BPI's tellers in failing to
require the surrender of the machine-validated deposit slips before reversing
the deposit transactions, the loss would not have occurred. BPI's negligence is
undoubtedly the proximate cause of the loss. Proximate cause is that cause
which, in a natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not
have occurred.14
It is also true, however, that LMC should have been more vigilant in managing
and overseeing its own financial affairs. The damages awarded to it were
correctly reduced on account of its own contributory negligence in accordance
with Article 1172 of the Civil Code.15
Parenthetically, we find no merit in BPI's allegation that LMC should have
presented evidence of delivery of the books and payment of sales and promo
prizes to Alice Laurel. The evidence presented by LMC in the form of BPI's own
admission that the deposit transactions were reversed at the instance of Alice
Laurel and her husband, coupled with the machine-validated deposit slips16
which were supposed to have been deposited to LMC's account but were
cancelled without its knowledge and consent, sufficiently form the bases for the
actual damages claimed because they are the very same documents relied upon
by LMC in considering Alice Laurel's account paid and in granting her monetary
privileges and prizes.
Be that as it may, we find the appellate court's decision increasing the award of
actual damages in favor of LMC improper since the latter did not appeal from
the decision of the trial court. It is well-settled that a party who does not appeal
from the decision may not obtain any affirmative relief from the appellate court
other than what he has obtained from the lower court whose decision is
brought up on appeal. The exceptions to this rule, such as where there are (1)
errors affecting the lower court's jurisdiction over the subject matter, (2) plain
errors not specified, and (3) clerical errors, do not apply in this case.17
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 62769
dated 31 July 2006 and its Resolution dated January 30, 2007 are AFFIRMED
with the MODIFICATION that the Bank of the Philippine Islands is ordered to pay
actual damages to Lifetime Marketing Corporation in the amount of One Million
Pesos (P1,000,000.00). No pronouncement as to costs.
SO ORDERED.
DIGEST:
FACTS: A certain Alice Laurel (Laurel) deposited several checks in favor of
respondent. The deposit of these checks were later reversed upon request by
Laurel. In turn, the amount that was supposed to be credited to respondent was
cancelled.
The above fraudulent transactions of Laurel were made possible through BPI
tellers’ failure to retrieve the duplicate original copies of the deposit slips from
the former, every time they ask for cancellation or reversal of the deposit or
payment transaction. Respondent then filed a complaint for damages against
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petitioner.
ISSUE: WON BPI is liable for the negligence of the teller.
HELD: Yes. The court has repeatedly emphasized that the banking industry is
impressed with public interest of paramount importance, thereto, is the trust
and confidence of public in general. Accordingly, the highest degree of diligence
is expected, and high standards of integrity and performance are required of it.
By the nature of its functions, a bank is under obligation to treat the accounts
of its depositors with meticulous care, always having in mind the fiduciary
nature of its relationship with them.
G.R. No. 149454 May 28, 2004
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI
INTERNATIONALE LEONARDO T. YABUT, respondents.
x ----------------------------- x
G.R. No. 149507 May 28, 2004
CASA MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE
PHILIPPINE ISLANDS, respondent.
FULLTEXT AND DIGEST
By the nature of its functions, a bank is required to take meticulous care of the
deposits of its clients, who have the right to expect high standards of integrity
and performance from it. Among its obligations in furtherance thereof is
knowing the signatures of its clients. Depositors are not estopped from
questioning wrongful withdrawals, even if they have failed to question those
errors in the statements sent by the bank to them for verification.
The Case
Before us are two Petitions for Review1 under Rule 45 of the Rules of Court,
assailing the March 23, 2001 Decision2 and the August 17, 2001 Resolution3 of
the Court of Appeals (CA) in CA-GR CV No. 63561. The decretal portion of the
assailed Decision reads as follows:
"WHEREFORE, upon the premises, the decision appealed from is AFFIRMED
with the modification that defendant bank [Bank of the Philippine Islands (BPI)]
is held liable only for one-half of the value of the forged checks in the amount
of ₱547,115.00 after deductions subject to REIMBURSEMENT from third party
defendant Yabut who is likewise ORDERED to pay the other half to plaintiff
corporation [Casa Montessori Internationale (CASA)]."4
The assailed Resolution denied all the parties’ Motions for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
"On November 8, 1982, plaintiff CASA Montessori International5 opened
Current Account No. 0291-0081-01 with defendant BPI[,] with CASA’s President
Ms. Ma. Carina C. Lebron as one of its authorized signatories.
"In 1991, after investigating, plaintiff discovered that nine (9) of its checks had
been encashed by a certain Sonny D. Santos since 1990 in the total amount of
₱782,000.00, on the following dates and amounts:
"It turned out that ‘Sonny D. Santos’ with account at BPI’s Greenbelt Branch
[was] a fictitious name used by third party defendant Leonardo T. Yabut who
worked as external auditor of CASA. Third party defendant voluntarily admitted
that he forged the signature of Ms. Lebron and encashed the checks. "The PNP
Crime Laboratory conducted an examination of the nine (9) checks and
concluded that the handwritings thereon compared to the standard signature
of Ms. Lebron were not written by the latter.
"On March 4, 1991, plaintiff filed the herein Complaint for Collection with
Damages against defendant bank praying that the latter be ordered to reinstate
the amount of ₱782,500.007 in the current and savings accounts of the plaintiff
with interest at 6% per annum.
"On February 16, 1999, the RTC rendered the appealed decision in favor of the
plaintiff."8
Ruling of the Court of Appeals
Modifying the Decision of the Regional Trial Court (RTC), the CA apportioned
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the loss between BPI and CASA. The appellate court took into account CASA’s
contributory negligence that resulted in the undetected forgery. It then ordered
Leonardo T. Yabut to reimburse BPI half the total amount claimed; and CASA,
the other half. It also disallowed attorney’s fees and moral and exemplary
damages. Hence, these Petitions.9
Issues
In GR No. 149454, Petitioner BPI submits the following issues for our
consideration: "I. The Honorable Court of Appeals erred in deciding this case
NOT in accord with the applicable decisions of this Honorable Court to the effect
that forgery cannot be presumed; that it must be proved by clear, positive and
convincing evidence; and that the burden of proof lies on the party alleging the
forgery. "II. The Honorable Court of Appeals erred in deciding this case not in
accord with applicable laws, in particular the Negotiable Instruments Law (NIL)
which precludes CASA, on account of its own negligence, from asserting its
forgery claim against BPI, specially taking into account the absence of any
negligence on the part of BPI."10
In GR No. 149507, Petitioner CASA submits the following issues: "1. The
Honorable Court of Appeals erred when it ruled that ‘there is no showing that
[BPI], although negligent, acted in bad faith x x x’ thus denying the prayer for
the award of attorney’s fees, moral damages and exemplary damages to [CASA].
The Honorable Court also erred when it did not order [BPI] to pay interest on
the amounts due to [CASA]. "2. The Honorable Court of Appeals erred when it
declared that [CASA] was likewise negligent in the case at bar, thus warranting
its conclusion that the loss in the amount of ₱547,115.00 be ‘apportioned
between [CASA] and [BPI] x x x.’"11These issues can be narrowed down to
three. First, was there forgery under the Negotiable Instruments Law (NIL)?
Second, were any of the parties negligent and therefore precluded from setting
up forgery as a defense? Third, should moral and exemplary damages,
attorney’s fees, and interest be awarded?
The Court’s Ruling
The Petition in GR No. 149454 has no merit, while that in GR No. 149507 is
partly meritorious.
First Issue:
Forged Signature Wholly Inoperative
Section 23 of the NIL provides: "Section 23. Forged signature; effect of.-- When
a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right x x x to enforce
payment thereof against any party thereto, can be acquired through or under
such signature, unless the party against whom it is sought to enforce such right
is precluded from setting up the forgery or want of authority."12
Under this provision, a forged signature is a real13 or absolute defense,14 and
a person whose signature on a negotiable instrument is forged is deemed to
have never become a party thereto and to have never consented to the contract
that allegedly gave rise to it.15 The counterfeiting of any writing, consisting in
the signing of another’s name with intent to defraud, is forgery.16
In the present case, we hold that there was forgery of the drawer’s signature on
the check. First, both the CA17 and the RTC18 found that Respondent Yabut
himself had voluntarily admitted, through an Affidavit, that he had forged the
drawer’s signature and encashed the checks.19 He never refuted these
findings.20 That he had been coerced into admission was not corroborated by
any evidence on record.. Second, the appellate and the trial courts also ruled
that the PNP Crime Laboratory, after its examination of the said checks,22 had
concluded that the handwritings thereon -- compared to the standard signature
of the drawer -- were not hers.23 This conclusion was the same as that in the
Report24 that the PNP Crime Laboratory had earlier issued to BPI -- the drawee
bank -- upon the latter’s request.Indeed, we respect and affirm the RTC’s factual
findings, especially when affirmed by the CA, since these are supported by
substantial evidence on record.25
Voluntary Admission Not Violative of Constitutional Rights
The voluntary admission of Yabut did not violate his constitutional rights (1) on
custodial investigation, and (2) against self-incrimination. In the first place, he
was not under custodial investigation.26 His Affidavit was executed in private
and before private individuals.27 The mantle of protection under Section 12 of
Article III of the 1987 Constitution28 covers only the period "from the time a
person is taken into custody for investigation of his possible participation in the
commission of a crime or from the time he is singled out as a suspect in the
commission of a crime although not yet in custody."29
Therefore, to fall within the ambit of Section 12, quoted above, there must be
an arrest or a deprivation of freedom, with "questions propounded on him by
the police authorities for the purpose of eliciting admissions, confessions, or
any information."30 The said constitutional provision does "not apply to
spontaneous statements made in a voluntary manner"31 whereby an individual
orally admits to authorship of a crime.32 "What the Constitution proscribes is
the compulsory or coercive disclosure of incriminating facts."33
Moreover, the right against self-incrimination34 under Section 17 of Article III35
of the Constitution, which is ordinarily available only in criminal prosecutions,
extends to all other government proceedings -- including civil actions, legislative
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investigations,36 and administrative proceedings that possess a criminal or
penal aspect37 -- but not to private investigations done by private individuals.
Even in such government proceedings, this right may be waived,38 provided the
waiver is certain; unequivocal; and intelligently, understandingly and willingly
made. If in these government proceedings waiver is allowed, all the more is it
so in private investigations. It is of no moment that no criminal case has yet
been filed against Yabut. The filing thereof is entirely up to the appropriate
authorities or to the private individuals upon whom damage has been caused.
As we shall also explain later, it is not mandatory for CASA -- the plaintiff below -
- to implead Yabut in the civil case before the lower court.
Under these two constitutional provisions, "[t]he Bill of Rights40 does not
concern itself with the relation between a private individual and another
individual. It governs the relationship between the individual and the State."41
Moreover, the Bill of Rights "is a charter of liberties for the individual and a
limitation upon the power of the [S]tate."42 These rights43 are guaranteed to
preclude the slightest coercion by the State that may lead the accused "to admit
something false, not prevent him from freely and voluntarily telling the truth."
Yabut is not an accused here. Besides, his mere invocation of the aforesaid
rights "does not automatically entitle him to the constitutional protection."45
When he freely and voluntarily executed46 his Affidavit, the State was not even
involved. Such Affidavit may therefore be admitted without violating his
constitutional rights while under custodial investigation and against self-
incrimination.
Clear, Positive and Convincing Examination and Evidence
The examination by the PNP, though inconclusive, was nevertheless clear,
positive and convincing. Forgery "cannot be presumed."47 It must be
established by clear, positive and convincing evidence.48 Under the best
evidence rule as applied to documentary evidence like the checks in question,
no secondary or substitutionary evidence may inceptively be introduced, as the
original writing itself must be produced in court.49 But when, without bad faith
on the part of the offeror, the original checks have already been destroyed or
cannot be produced in court, secondary evidence may be produced.50 Without
bad faith on its part, CASA proved the loss or destruction of the original checks
through the Affidavit of the one person who knew of that fact51 -- Yabut. He
clearly admitted to discarding the paid checks to cover up his misdeed.52 In
such a situation, secondary evidence like microfilm copies may be introduced in
court. The drawer’s signatures on the microfilm copies were compared with the
standard signature. PNP Document Examiner II Josefina de la Cruz testified on
cross-examination that two different persons had written them.53 Although no
conclusive report could be issued in the absence of the original checks,54 she
affirmed that her findings were 90 percent conclusive.55 According to her, even
if the microfilm copies were the only basis of comparison, the differences were
evident.56 Besides, the RTC explained that although the Report was
inconclusive, no conclusive report could have been given by the PNP, anyway, in
the absence of the original checks.57 This explanation is valid; otherwise, no
such report can ever be relied upon in court.
Even with respect to documentary evidence, the best evidence rule applies only
when the contents of a document -- such as the drawer’s signature on a check -
- is the subject of inquiry.58 As to whether the document has been actually
executed, this rule does not apply; and testimonial as well as any other
secondary evidence is admissible.59 Carina Lebron herself, the drawer’s
authorized signatory, testified many times that she had never signed those
checks. Her testimonial evidence is admissible; the checks have not been
actually executed. The genuineness of her handwriting is proved, not only
through the court’s comparison of the questioned handwritings and admittedly
genuine specimens thereof,60 but above all by her.
The failure of CASA to produce the original checks neither gives rise to the
presumption of suppression of evidence61 nor creates an unfavorable
inference against it.62 Such failure merely authorizes the introduction of
secondary evidence63 in the form of microfilm copies. Of no consequence is
the fact that CASA did not present the signature card containing the signatures
with which those on the checks were compared.64 Specimens of standard
signatures are not limited to such a card. Considering that it was not produced
in evidence, other documents that bear the drawer’s authentic signature may
be resorted to.65 Besides, that card was in the possession of BPI -- the adverse
party.
We have held that without the original document containing the allegedly
forged signature, one cannot make a definitive comparison that would establish
forgery;66 and that a comparison based on a mere reproduction of the
document under controversy cannot produce reliable results.67 We have also
said, however, that a judge cannot merely rely on a handwriting expert’s
testimony,68 but should also exercise independent judgment in evaluating the
authenticity of a signature under scrutiny.69 In the present case, both the RTC
and the CA conducted independent examinations of the evidence presented
and arrived at reasonable and similar conclusions. Not only did they admit
secondary evidence; they also appositely considered testimonial and other
documentary evidence in the form of the Affidavit.
The best evidence rule admits of exceptions and, as we have discussed earlier,
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the first of these has been met.70 The result of examining a questioned
handwriting, even with the aid of experts and scientific instruments, may be
inconclusive;71 but it is a non sequitur to say that such result is not clear,
positive and convincing. The preponderance of evidence required in this case
has been satisfied.72
Second Issue:
Negligence Attributable to BPI Alone
Having established the forgery of the drawer’s signature, BPI -- the drawee --
erred in making payments by virtue thereof. The forged signatures are wholly
inoperative, and CASA -- the drawer whose authorized signatures do not appear
on the negotiable instruments -- cannot be held liable thereon. Neither is the
latter precluded from setting up forgery as a real defense.
Clear Negligence in Allowing Payment Under a Forged Signature
We have repeatedly emphasized that, since the banking business is impressed
with public interest, of paramount importance thereto is the trust and
confidence of the public in general. Consequently, the highest degree of
diligence73 is expected,74 and high standards of integrity and performance are
even required, of it.75 By the nature of its functions, a bank is "under obligation
to treat the accounts of its depositors with meticulous care,76 always having in
mind the fiduciary nature of their relationship."77
BPI contends that it has a signature verification procedure, in which checks are
honored only when the signatures therein are verified to be the same with or
similar to the specimen signatures on the signature cards. Nonetheless, it still
failed to detect the eight instances of forgery. Its negligence consisted in the
omission of that degree of diligence required78 of a bank. It cannot now feign
ignorance, for very early on we have already ruled that a bank is "bound to know
the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was
forged."79 In fact, BPI was the same bank involved when we issued this ruling
seventy years ago.
Neither Waiver nor Estoppel Results from Failure to Report Error in Bank
Statement
The monthly statements issued by BPI to its clients contain a notice worded as
follows: "If no error is reported in ten (10) days, account will be correct."80 Such
notice cannot be considered a waiver, even if CASA failed to report the error.
Neither is it estopped from questioning the mistake after the lapse of the ten-
day period.
This notice is a simple confirmation81 or "circularization" -- in accounting
parlance -- that requests client-depositors to affirm the accuracy of items
recorded by the banks.82 Its purpose is to obtain from the depositors a direct
corroboration of the correctness of their account balances with their respective
banks.83 Internal or external auditors of a bank use it as a basic audit
procedure84 -- the results of which its client-depositors are neither interested
in nor privy to -- to test the details of transactions and balances in the bank’s
records.85 Evidential matter obtained from independent sources outside a
bank only serves to provide greater assurance of reliability86 than that obtained
solely within it for purposes of an audit of its own financial statements, not
those of its client-depositors.
Furthermore, there is always the audit risk that errors would not be detected87
for various reasons. One, materiality is a consideration in audit planning;88 and
two, the information obtained from such a substantive test is merely
presumptive and cannot be the basis of a valid waiver.89 BPI has no right to
impose a condition unilaterally and thereafter consider failure to meet such
condition a waiver. Neither may CASA renounce a right90 it has never
possessed.91
Every right has subjects -- active and passive. While the active subject is entitled
to demand its enforcement, the passive one is duty-bound to suffer such
enforcement.
On the one hand, BPI could not have been an active subject, because it could
not have demanded from CASA a response to its notice. Besides, the notice was
a measly request worded as follows: "Please examine x x x and report x x x."93
CASA, on the other hand, could not have been a passive subject, either, because
it had no obligation to respond. It could -- as it did -- choose not to respond.
Estoppel precludes individuals from denying or asserting, by their own deed or
representation, anything contrary to that established as the truth, in legal
contemplation.94 Our rules on evidence even make a juris et de jure
presumption95 that whenever one has, by one’s own act or omission,
intentionally and deliberately led another to believe a particular thing to be true
and to act upon that belief, one cannot -- in any litigation arising from such act
or omission -- be permitted to falsify that supposed truth.
In the instant case, CASA never made any deed or representation that misled
BPI. The former’s omission, if any, may only be deemed an innocent mistake
oblivious to the procedures and consequences of periodic audits. Since its
conduct was due to such ignorance founded upon an innocent mistake,
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estoppel will not arise.97 A person who has no knowledge of or consent to a
transaction may not be estopped by it.98 "Estoppel cannot be sustained by
mere argument or doubtful inference x x x."99 CASA is not barred from
questioning BPI’s error even after the lapse of the period given in the notice.
Loss Borne by Proximate Source of Negligence
For allowing payment100 on the checks to a wrongful and fictitious payee, BPI -
- the drawee bank -- becomes liable to its depositor-drawer. Since the encashing
bank is one of its branches,101 BPI can easily go after it and hold it liable for
reimbursement.102 It "may not debit the drawer’s account103 and is not
entitled to indemnification from the drawer."104 In both law and equity, when
one of two innocent persons "must suffer by the wrongful act of a third person,
the loss must be borne by the one whose negligence was the proximate cause
of the loss or who put it into the power of the third person to perpetrate the
wrong."
Proximate cause is determined by the facts of the case.106 "It is that cause
which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not
have occurred."
Pursuant to its prime duty to ascertain well the genuineness of the signatures
of its client-depositors on checks being encashed, BPI is "expected to use
reasonable business prudence."108 In the performance of that obligation, it is
bound by its internal banking rules and regulations that form part of the
contract it enters into with its depositors.
Unfortunately, it failed in that regard. First, Yabut was able to open a bank
account in one of its branches without privity;110 that is, without the proper
verification of his corresponding identification papers. Second, BPI was unable
to discover early on not only this irregularity, but also the marked differences in
the signatures on the checks and those on the signature card. Third, despite the
examination procedures it conducted, the Central Verification Unit111 of the
bank even passed off these evidently different signatures as genuine. Without
exercising the required prudence on its part, BPI accepted and encashed the
eight checks presented to it. As a result, it proximately contributed to the fraud
and should be held primarily liable112 for the "negligence of its officers or
agents when acting within the course and scope of their employment."113 It
must bear the loss.
CASA Not Negligent in Its Financial Affairs
In this jurisdiction, the negligence of the party invoking forgery is recognized as
an exception114 to the general rule that a forged signature is wholly
inoperative.115 Contrary to BPI’s claim, however, we do not find CASA negligent
in handling its financial affairs. CASA, we stress, is not precluded from setting up
forgery as a real defense.
Role of Independent Auditor
The major purpose of an independent audit is to investigate and determine
objectively if the financial statements submitted for audit by a corporation have
been prepared in accordance with the appropriate financial reporting
practices116 of private entities. The relationship that arises therefrom is both
legal and moral.117 It begins with the execution of the engagement letter118
that embodies the terms and conditions of the audit and ends with the fulfilled
expectation of the auditor’s ethical119 and competent performance in all
aspects of the audit.120
The financial statements are representations of the client; but it is the auditor
who has the responsibility for the accuracy in the recording of data that
underlies their preparation, their form of presentation, and the opinion121
expressed therein.122 The auditor does not assume the role of employee or of
management in the client’s conduct of operations123 and is never under the
control or supervision124 of the client.
Yabut was an independent auditor125 hired by CASA. He handled its monthly
bank reconciliations and had access to all relevant documents and
checkbooks.126 In him was reposed the client’s127 trust and confidence128
that he would perform precisely those functions and apply the appropriate
procedures in accordance with generally accepted auditing standards.129 Yet
he did not meet these expectations. Nothing could be more horrible to a client
than to discover later on that the person tasked to detect fraud was the same
one who perpetrated it.
Cash Balances Open to Manipulation
It is a non sequitur to say that the person who receives the monthly bank
statements, together with the cancelled checks and other debit/credit
memoranda, shall examine the contents and give notice of any discrepancies
within a reasonable time. Awareness is not equipollent with discernment.
Besides, in the internal accounting control system prudently installed by
CASA,130 it was Yabut who should examine those documents in order to
prepare the bank reconciliations.131 He owned his working papers,132 and his
output consisted of his opinion as well as the client’s financial statements and
accompanying notes thereto. CASA had every right to rely solely upon his
output -- based on the terms of the audit engagement -- and could thus be
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unwittingly duped into believing that everything was in order. Besides, "[g]ood
faith is always presumed and it is the burden of the party claiming otherwise to
adduce clear and convincing evidence to the contrary."133
Moreover, there was a time gap between the period covered by the bank
statement and the date of its actual receipt. Lebron personally received the
December 1990 bank statement only in January 1991134 -- when she was also
informed of the forgery for the first time, after which she immediately
requested a "stop payment order." She cannot be faulted for the late detection
of the forged December check. After all, the bank account with BPI was not
personal but corporate, and she could not be expected to monitor closely all its
finances. A preschool teacher charged with molding the minds of the youth
cannot be burdened with the intricacies or complexities of corporate existence.
There is also a cutoff period such that checks issued during a given month, but
not presented for payment within that period, will not be reflected therein.135
An experienced auditor with intent to defraud can easily conceal any devious
scheme from a client unwary of the accounting processes involved by
manipulating the cash balances on record -- especially when bank transactions
are numerous, large and frequent. CASA could only be blamed, if at all, for its
unintelligent choice in the selection and appointment of an auditor -- a fault that
is not tantamount to negligence.
Negligence is not presumed, but proven by whoever alleges it.136 Its mere
existence "is not sufficient without proof that it, and no other cause,"137 has
given rise to damages.138 In addition, this fault is common to, if not prevalent
among, small and medium-sized business entities, thus leading the Professional
Regulation Commission (PRC), through the Board of Accountancy (BOA), to
require today not only accreditation for the practice of public accountancy,139
but also the registration of firms in the practice thereof. In fact, among the
attachments now required upon registration are the code of good
governance140 and a sworn statement on adequate and effective training.141
The missing checks were certainly reported by the bookkeeper142 to the
accountant143 -- her immediate supervisor -- and by the latter to the auditor.
However, both the accountant and the auditor, for reasons known only to them,
assured the bookkeeper that there were no irregularities.
The bookkeeper144 who had exclusive custody of the checkbooks145 did not
have to go directly to CASA’s president or to BPI. Although she rightfully
reported the matter, neither an investigation was conducted nor a resolution of
it was arrived at, precisely because the person at the top of the helm was the
culprit. The vouchers, invoices and check stubs in support of all check
disbursements could be concealed or fabricated -- even in collusion -- and
management would still have no way to verify its cash accountabilities.
Clearly then, Yabut was able to perpetrate the wrongful act through no fault of
CASA. If auditors may be held liable for breach of contract and negligence,146
with all the more reason may they be charged with the perpetration of fraud
upon an unsuspecting client. CASA had the discretion to pursue BPI alone under
the NIL, by reason of expediency or munificence or both. Money paid under a
mistake may rightfully be recovered,147 and under such terms as the injured
party may choose.
Third Issue:
Award of Monetary Claims
Moral Damages Denied
We deny CASA’s claim for moral damages.
In the absence of a wrongful act or omission,148 or of fraud or bad faith,149
moral damages cannot be awarded.150 The adverse result of an action does
not per se make the action wrongful, or the party liable for it. One may err, but
error alone is not a ground for granting such damages.151 While no proof of
pecuniary loss is necessary therefor -- with the amount to be awarded left to
the court’s discretion152 -- the claimant must nonetheless satisfactorily prove
the existence of its factual basis153 and causal relation154 to the claimant’s act
or omission. Regrettably, in this case CASA was unable to identify the particular
instance -- enumerated in the Civil Code -- upon which its claim for moral
damages is predicated.156 Neither bad faith nor negligence so gross that it
amounts to malice157 can be imputed to BPI. Bad faith, under the law, "does
not simply connote bad judgment or negligence;158 it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a
known duty through some motive or interest or ill will that partakes of the
nature of fraud."
As a general rule, a corporation -- being an artificial person without feelings,
emotions and senses, and having existence only in legal contemplation -- is not
entitled to moral damages,160 because it cannot experience physical suffering
and mental anguish.161 However, for breach of the fiduciary duty required of a
bank, a corporate client may claim such damages when its good reputation is
besmirched by such breach, and social humiliation results therefrom.162 CASA
was unable to prove that BPI had debased the good reputation of,163 and
consequently caused incalculable embarrassment to, the former. CASA’s mere
allegation or supposition thereof, without any sufficient evidence on record,164
is not enough.
Exemplary Damages Also Denied
We also deny CASA’s claim for exemplary damages. Imposed by way of
correction165 for the public good,166 exemplary damages cannot be recovered
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as a matter of right.167 As we have said earlier, there is no bad faith on the part
of BPI for paying the checks of CASA upon forged signatures. Therefore, the
former cannot be said to have acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.168 The latter, having no right to moral
damages, cannot demand exemplary damages. Attorney’s Fees Granted
Although it is a sound policy not to set a premium on the right to litigate,170
we find that CASA is entitled to reasonable attorney’s fees based on "factual,
legal, and equitable justification."When the act or omission of the defendant
has compelled the plaintiff to incur expenses to protect the latter’s interest,172
or where the court deems it just and equitable,173 attorney’s fees may be
recovered. In the present case, BPI persistently denied the claim of CASA under
the NIL to recredit the latter’s account for the value of the forged checks. This
denial constrained CASA to incur expenses and exert effort for more than ten
years in order to protect its corporate interest in its bank account. Besides, we
have already cautioned BPI on a similar act of negligence it had committed
seventy years ago, but it has remained unrelenting. Therefore, the Court deems
it just and equitable to grant ten percent (10%)174 of the total value adjudged
to CASA as attorney’s fees. Interest Allowed
For the failure of BPI to pay CASA upon demand and for compelling the latter to
resort to the courts to obtain payment, legal interest may be adjudicated at the
discretion of the Court, the same to run from the filing175 of the Complaint.176
Since a court judgment is not a loan or a forbearance of recovery, the legal
interest shall be at six percent (6%) per annum.177 "If the obligation consists in
the payment of a sum of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary, shall be the payment of
x x x legal interest, which is six percent per annum."178 The actual base for its
computation shall be "on the amount finally adjudged,"179 compounded180
annually to make up for the cost of money181 already lost to CASA.
Moreover, the failure of the CA to award interest does not prevent us from
granting it upon damages awarded for breach of contract.182 Because BPI
evidently breached its contract of deposit with CASA, we award interest in
addition to the total amount adjudged. Under Section 196 of the NIL, any case
not provided for shall be "governed by the provisions of existing legislation or,
in default thereof, by the rules of the law merchant."183 Damages are not
provided for in the NIL. Thus, we resort to the Code of Commerce and the Civil
Code. Under Article 2 of the Code of Commerce, acts of commerce shall be
governed by its provisions and, "in their absence, by the usages of commerce
generally observed in each place; and in the absence of both rules, by those of
the civil law."184 This law being silent, we look at Article 18 of the Civil Code,
which states: "In matters which are governed by the Code of Commerce and
special laws, their deficiency shall be supplied" by its provisions. A perusal of
these three statutes unmistakably shows that the award of interest under our
civil law is justified.
WHEREFORE, the Petition in GR No. 149454 is hereby DENIED, and that in GR
No. 149507 PARTLY GRANTED. The assailed Decision of the Court of Appeals is
AFFIRMED with modification: BPI is held liable for ₱547,115, the total value of
the forged checks less the amount already recovered by CASA from Leonardo T.
Yabut, plus interest at the legal rate of six percent (6%) per annum --
compounded annually, from the filing of the complaint until paid in full; and
attorney’s fees of ten percent (10%) thereof, subject to reimbursement from
Respondent Yabut for the entire amount, excepting attorney’s fees. Let a copy
of this Decision be furnished the Board of Accountancy of the Professional
Regulation Commission for such action as it may deem appropriate against
Respondent Yabut. No costs.
SO ORDERED.
DIGEST
FACTS: CASA Montessori (CASA) filed a complaint for collection with damages
against petitioner bank after it discovered that nine checks had been encashed
by a certain Sonny Santos in the total amount of P782,000.00. it turned out that
the signatures on the checks were made by the external auditor of CASA.
ISSUE: WON the bank is liable
HELD: Yes. We have repeatedly emphasized that, since the banking business is
impressed with public interest, of paramount importance thereto is the trust
and confidence of the public in general. Consequently, the highest degree of
diligence is expected, and high standards of integrity and performance are even
required, of it. By the nature of its functions, a bank is "under obligation to treat
the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship."
RTC ruled in favor of CASA. However, on appeal, the CA apportioned the loss
between BPI and CASA. It took into account CASA’s contributory negligence that
resulted in the undetected forgery.
BPI contends that it has a signature verification procedure, in which checks are
honored only when the signatures therein are verified to be the same with or
similar to the specimen signatures on the signature cards. Nonetheless, it still
failed to detect the eight instances of forgery. Its negligence consisted in the
omission of that degree of diligence required of a bank. It cannot now feign
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ignorance, for very early on we have already ruled that a bank is "bound to know
the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was
forged." In fact, BPI was the same bank involved when we issued this ruling
seventy years ago.
G.R. No. 141835 February 4, 2009
CENTRAL BANK OF THE PHILIPPINES, Petitioner, vs. CITYTRUST BANKING
CORPORATION, Respondent.
If the plaintiff’s negligence was only contributory, the immediate and proximate
cause of the injury being the defendant’s lack of due care, the plaintiff may
recover damages, but the courts shall mitigate the damages to be awarded.
FACTS: The Citytrust Banking Corporation (Citytrust) gave Central Bank of the
Philippines a list of signatures of five of its officers authorized to sign checks and
serve as drawers and indorsers for its account, and also the list of the roving
tellers authorized to perform other transactions on its behalf, one of whom was
Rounceval Flores (Flores).
Flores presented two checks to the Central Bank’s Senior Teller Iluminada dela
Cruz (Dela Cruz) and was subsequently approved. Dela Cruz prepared the cash
transfer slip where Flores should sign but instead he sign as one Rosauro C.
Cayabyab. This fact was missed by Dela Cruz. It was given to Cash Department
and the signatures were examined and later on paid Flores for the checks.
After one year and nine months, the Citytrust demanded that the checks be
cancelled and the funds taken out be returned because the check was stolen
before. Central Bank did not heed such call. Citytrust filed a complaint to collect
the sum of money with damages against Central Bank to the Regional Trial Court
(RTC). RTC found both parties negligent and held them equally liable for the
loss. Court of Appeals affirmed the decision.
ISSUE: Whether or not Citytrust can collect sum of money as damages from the
Central Bank
HELD: The law imposes on banks high standards in view of the fiduciary nature
of banking. Section 2 of Republic Act No. 8791 (R.A. 8791), which took effect
on 13 June 2000, declares that the State recognizes the “fiduciary nature of
banking that requires high standards of integrity and performance.”
This fiduciary relationship means that the bank’s obligation to observe “high
standards of integrity and performance” is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father
of a family. Article 1172 of the Civil Code states that the degree of diligence
required of an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a good father of a family. Section 2 of R.A. 8791
prescribes the statutory diligence required from banks - that banks must
observe “high standards of integrity and performance” in servicing their
depositors.
Citytrust’s failure to timely examine its account, cancel the checks and notify
petitioner of their alleged loss/theft should mitigate petitioner’s liability, in
accordance with Article 2179 of the Civil Code which provides that if the
plaintiff’s negligence was only contributory, the immediate and proximate cause
of the injury being the defendant’s lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded.
G.R. No. 133179 March 27, 2008
ALLIED BANKING CORPORATION, Petitioner, vs. LIM SIO WAN,
METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK,
Respondents.
FACTS: On Nov. 14, 1983 - respondent Lim deposited with petitioner Allied a
money market placement of P1,152,597.35 for a term of 31 days to mature on
December 15, 1983. On Dec. 5, 1983, a person claiming to be Lim called up an
officer of Allied, and instructed to pre-terminate Lim’s money market
placement, to issue a manager’s check representing the proceeds of the
placement, and to give the check to one Deborah Dee Santos who would pick
up the check. The bank issued Manager’s Check representing the proceeds of
Lim’s money market placement in the name of the latter, as payee. The check
was cross-checked “For Payee’s Account Only” and given to Santos.
Thereafter, the manager’s check was deposited in the account of Filipinas
Cement Corporation (FCC) at Metrobank with the forged signature of Lim as
indorser. Prior to the aforesaid event, on Sept. 21, 1983, FCC had deposited a
money market placement for P2M with Producers Bank. Santos was the money
market trader assigned to handle FCC’s account. When the placement matured,
FCC demanded the payment of the proceeds of the placement.
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On December 5, 1983 (the same date that Allied received the phone call
instructing to pre-terminate Lim’s placement), the Allied manager’s check in the
name of Lim was deposited with Metrobank in the account of FCC, purportedly
representing the proceeds of FCC’s money market placement with Producers
Bank. To clear the check and in compliance with the Philippine Clearing House
Corporation(PCHC) rules, Metrobank stamped a guaranty on the check, which
reads: “All prior endorsements and/or lack of endorsement guaranteed.” Upon
the presentment of the check, Allied funded the check even without checking
the authenticity of Lim’s purported indorsement. Thus, the amount on the face
of the check was credited to the account of FCC.
On December 14, 1983, upon the maturity date of the first money market
placement, Lim went to Allied to withdraw it. She was then informed that the
placement had been pre-terminated upon her instructions. She denied giving
any instructions and receiving the proceeds. Lim sent a demand letter to Allied
asking for the payment of the placement. Allied refused to pay, claiming that
the latter had authorized the pre-termination and its subsequent release to
Santos. Lim filed with the RTC a complaint against Allied to recover the proceeds
of money market placement.
RTC rendered a decision against Allied. It ordered Allied to pay Lim the amount
of P1,158,648.49 plus interest until fully paid.
CA modified the RTC’s decision. It ordered Allied to pay 60% and Metrobank
40% of the amount of P1,158,648.49 plus 12% interest until fully paid.
ISSUE: WON Metrobank should be ultimately liable as guarantor of all
endorsement on the check, it being the collecting bank.
HELD: No. Pursuant to Sec. 66 in relation to Sec. 65 of the NIL, the warranty
“that the instrument is genuine and in all respects what it purports to be” covers
all the defects in the instrument affecting the validity thereof, including a forged
indorsement. Thus, the last indorser will be liable for the amount indicated in
the negotiable instrument even if a previous indorsement was forged.
Precedents show that the court held in a line of cases that a collecting bank
which indorses a check bearing a forged indorsement and presents it to the
drawee bank guarantees all prior indorsements, including the forged
indorsement itself, and ultimately should be held liable. However, this general
rule is subject to exceptions. One such exception is when the issuance of the
check itself was attended with negligence. Thus, where the checks were
negligently issued, this Court held the institution issuing the check just as liable
as or more liable than the collecting bank.
In the instant case, the trial court correctly found Allied negligent in issuing the
manager’s check and in transmitting it to Santos without even a written
authorization. In fact, Allied did not even ask for the certificate evidencing the
money market placement or call up Lim at her residence or office to confirm
her instructions. Both actions could have prevented the whole fraudulent
transactions. Allied’s negligence must be considered as the proximate cause of
the resulting loss. To reiterate, had Allied exercised the diligence due from a
financial institution, the check would not have been issued and no loss of funds
would have resulted. In fact, there would have been no issuance of indorsement
had there been no check in the first place.
The liability of Allied, however, is concurrent with that of Metrobank as the last
indorser of the check. When Metrobank indorsed the check in compliance with
the PCHC Rules and Regulations without verifying the authenticity of Lim’s
indorsement and when it accepted the check despite the fact that it was cross-
checked payable to payee’s account only, its negligent indorsement contributed
to the easier release of Lim’s money and perpetuation of the fraud. Given the
relative participation of Allied and Metrobank, both banks cannot be adjudged
as equally liable. Hence, the 60:40 ratio of the liabilities of Allied and
Metrobank, as ruled by the CA, must be upheld.
ASSOCIATED BANK (Now WESTMONT BANK) vs. TAN
G.R. No. 156940 December 14, 2004
FACTS: Respondent Tan is a businessman and a regular depositor-creditor of the
petitioner, Associated Bank. Sometime in September 1990, he deposited a
postdated check with the petitioner in the amount of P101,000 issued to him
by a certain Willy Cheng from Tarlac. The check was duly entered in his bank
record. Allegedly, upon advice and instruction of petitioner that theP101,000
check was already cleared and backed up by sufficient funds, respondent, on
the same date, withdrew the sum of P240,000 from his account leaving a
balance of P57,793.45. A day after, TAN deposited the amount of P50,000
making his existing balance in the amount of P107,793.45, because he has
issued several checks to his business partners. However, his suppliers and
business partners went back to him alleging that the checks he issued bounced
for insufficiency of funds. Thereafter, respondent informed petitioner to take
positive steps regarding the matter for he has adequate and sufficient funds to
pay the amount of the subject checks. Nonetheless, petitioner did not bother
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
nor offer any apology regarding the incident. Respondent Tan filed a Complaint
for Damages on December 19, 1990, with the RTC against petitioner. The trial
court rendered a decision in favor of respondent and ordered petitioner to pay
damages and attorney’s fees. Appellate court affirmed the lower court’s
decision. CA ruled that the bank should not have authorized the withdrawal of
the value of the deposited check prior to its clearing. Petitioner filed a Petition
for Review before the Supreme Court.
ISSUE: W/N petitioner has the right to debit the amount of the dishonored
check from the account of respondent on the ground that the check was
withdrawn by respondent prior to its clearing
HELD: The Petition has no merit. The real issue here is not so much the right of
petitioner to debit respondent’s account but, rather, the manner in which it
exercised such right. Banks are granted by law the right to debit the value of a
dishonored check from a depositor’s account but they must do so with the
highest degree of care, so as not to prejudice the depositor unduly. The degree
of diligence required of banks is more than that of a good father of a family
where the fiduciary nature of their relationship with their depositors is
concerned. In this case, petitioner did not treat respondent’s account with the
highest degree of care. Respondent withdrew his money upon the advice of
petitioner that his money was already cleared. It is petitioner’s premature
authorization of the withdrawal that caused the respondent’s account balance
to fall to insufficient levels, and the subsequent dishonor of his own checks for
lack of funds.
G.R. No. 153571, September 18, 2003
BENGUET MANAGEMENT CORPORATION VS COURT OF APPEALS
FACTS:
Benguet Management Corporation (BMC) and Keppel Bank Philippines, Inc.
(KBPI), acting as trustee of the other respondent banks, entered into a Loan
Agreement and Mortgage Trust Indenture (MTI) whereby BMC, in consideration
of the syndicated loan of P190,000,000.00, constituted in favor of KBPI a
mortgage on several lots located in Alaminos, Laguna and Iba, Zambales. On
September 28, 2001, for failure of BMC to pay in full the installments due on
the Loan Agreement and Mortgage Trust Indenture, , KBPI filed an application
4 for extra-judicial foreclosure of mortgage before the Office of the Clerk of
Court of the Regional Trial Court of Iba, Zambales. The trial court granted the
foreclosure proceedings.
Hence, BMC filed a petition for certiorari with the Court of Appeals. In its
Resolution dated April 5, 2002, the Court of Appeals denied BMC’s prayer to
restrain the consolidation of title in the name of KBPI.
BMC filed a motion for reconsideration claiming, among others, that Section
47 of the General Banking Act (Republic Act No. 8791), which reduced the
period of redemption for extra-judicially foreclosed properties of juridical
persons from one year to — "until, but not after, the registration of the
certificate of foreclosure sale . . . which in no case shall be more than three (3)
months after foreclosure, whichever is earlier," is unduly discriminatory and
therefore unconstitutional.
On May 28, 2002, the Court of Appeals denied BMC’s motion for
reconsideration. Hence, BMC filed the instant petition, raising the issue among
others that the new law (General Banking Law of 2000) abrogating the right to
one-year redemption period of corporate mortgagors is unconstitutional.
Issue:
1. W/N the General Banking Law of 2000 is Constitutional
2. W/N KBPI violated the rule against forum-shopping in filing
applications for extra-judicial foreclosure of real estate mortgage
with both the RTCs in Iba and San Pablo City
HELD:
First Issue:
The resolution of the constitutionality of Section 47 of the General
Banking Act (Republic Act No. 8791) is not the very lis mota of the controversy:
1. Anent the constitutional issue raised by BMC, we have repeatedly
held that the constitutionality of a law may be passed upon by the Court, where
there is an actual case and that the resolution of the constitutional question
must be necessary in deciding the controversy.
2. In this case, the resolution of the constitutionality of Section 47
of the General Banking Act (Republic Act No. 8791) which reduced the period
of redemption of extra-judicially foreclosed properties of juridical persons is not
the very lis mota of the controversy. BMC is not asserting a legal right for which
it is entitled to a judicial determination at this time inasmuch as it may not even
be entitled to redeem the foreclosed properties. Until an actual controversy is
brought to test the constitutionality of Republic Act No. 8791, the presumption
of validity, which inheres in every statute, must be accorded to it.
Second Issue: Under the Procedure for Extra-Judicial Foreclosure of Mortgage,
an extra-judicial foreclosure covering several properties located in different
provinces but covering only one indebtedness requires the applicant to pay only
one filing fee. This is regardless of the number of properties to be foreclosed.
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However, the venue of the extra-judicial foreclosure proceedings is the place
where each of the mortgaged property is located. The rationale of this rule is
that an injunction order of the court is enforceable only within its territorial
limits. Therefore, those properties subject to the same mortgage but are
located in different provinces are outside the jurisdiction of the trial court. The
remedy of the law is to allow the applicant to file separate injunction suits with
another court which has jurisdiction over the latter properties. BMC is not guilty
of forum-shopping because the remedy provided by law is precisely to file
separate injunction suits.
San Fernando Rural Bank vs. Pampanga Omnibus Development and
Aquino; GR No. 168088
FACTS:
 Pampanga Omnibus Development Corporation (respondent PODC)
was the registered owner of a parcel of land
 PODC secured loans from San Fernando Rural Bank (petitioner
SFRB).
 Eliza M. Garbes (PODC President and daughter of Federico
Mendoza), also secured a loan from the petitioner.
 PODC failed to pay the loan.
 SFRB, filed a petition for extra-judicial foreclosure. SFRB emerged as
the winning bidder.
 The Ex-Officio Sheriff executed a Certificate of Sale and stated that
"the period of redemption of the property shall expire one (1) year
after registration in the Register of Deeds.
 On May 11, 2002, PODC executed a notarized deed of assignment
in favor of respondent Dominic G. Aquino over its right to redeem
the property.
 Respondent Aquino redeemed the property but petitioner rejected
the offer due to lack of the redemption price
 Ex-Officio Sheriff made another computation and allowed Aquino to
redeem the property consequently issuing Certificate of
Redemption. However ex-officio sheriff failed to file the Certificate
in the ROD.
 On June 10, 2002, SFRB, executed an Affidavit of Consolidationover
the property.
 It was alleged therein that PODC or any other person/entity with the
right of redemption did not exercise their right to repurchase within
one year from June 7, 2001. The affidavit was filed with the Office of
the Register of Deeds on the same day.
 On June 14, 2002, Aquino sent a letter to ROD informing them that
he has redeem the subject property and requested not to register
the Affidavit of Consolidation requested by SFRB.
 On June 18, 2002, ROD requested the Administrator of the Land
Registration Authority (LRA), by way of consulta, to issue an opinion
on whether a new title should be issued to SFRB, or the Certificate
of Redemption in favor of respondent Aquino.
 On October 15, 2002, SFRB filed a Petition for a Writ of Possession
over the property to be issued in its favor upon the filing of the
requisite bond in an amount equivalent to the market value of the
property or in an amount as the court may direct.
 By way of rejoinder, respondent PODC averred that the Certificate
of Redemption executed by the Ex-Officio Sheriff is presumed valid
and legal; the RTC, acting as a Land Registration Court, had no
jurisdiction to pass upon the validity of the Certificate of Redemption
 On December 12, 2002, the LRA resolved the consulta of the
Register of Deeds……“Considering that the document first presented
and entered in the Primary Entry Book of the registry is the Affidavit
of Consolidation in favor of the creditors, the mortgagee bank and
not the Certificate of Redemption in favor of the assignee of the
debtor-mortgagor, although admittedly, the latter instrument was
executed on the last day of the redemption period but not, in fact,
registered within the same period, under the premises, the
consolidating mortgagee is possessed with a superior right than the
redemptioner. Under the law, the first in registration is the first in
law.”
 On December 20, 2002, the court in LRC No. 890 issued an Order
granting the petition and ordered the issuance of a writ of
possession.
 PODC, filed a motion for reconsideration of the order, but the court
denied the motion.
 On March 6, 2003, PODC,filed a Petition for Certiorari with the CA
averting error that the RTC should have dismissed the petition for a
writ of possession pending determination of the substantial issues
by the LRA.
 SFRB in its comment asserted that that the RTC, sitting as a land
registration court, had jurisdiction over the petition for a writ of
possession; thus, the remedy of respondents should have to appeal
the assailed order and not to file a petition for certiorari in the CA.
 On May 14, 2003 The RTC granted the motion and issued a writ of
possession and the Sheriff implemented the writ and placed
petitioner in possession of the property.
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
 On September 4, 2003, SFRB filed a Complaintagainst PODC and the
Ex-Officio Sheriff in the RTC of Pampanga, for the nullification of the
Deed of Assignment executed by PODC in favor of Aquino and of the
Certificate of Redemption executed by the Ex-Officio Sheriff and for
damages.
 Meanwhile, the LRA Administrator issued a Resolution recalling the
Resolution dated December 12, 2002 and declared that the
Certificate of Redemption executed by the Ex-Officio Sheriff was
superior to the Affidavit of Consolidation filed by petitioner.
 On September 10, 2003, PODCfiled a Joint Motion to quash the writ
of possession issued by the trial court and for the issuance of a new
TCT. They averred that the LRA Administrator finally resolved that
the Certificate of Redemption issued by the Ex-Officio Sheriff was
superior to the Affidavit of Consolidation of petitioner.
 On November 10, 2003, the court denied the motion holding that
respondent Aquino, as the registered owner of the subject property,
should initiate the appropriate action in the proper court in order to
exclude petitioner or any other person from the physical possession
of his property.The court ruled that after placing SFRB in possession
of the property, the court had lost jurisdiction over the case.
 On November 27, 2003, PODC filed before the CA their Joint Notice
of Appeal from the November 10, 2003 Order of the RTC.
 On December 18, 2003, the CA rendered judgment in the joint
appeal granting the petition of PODC and setting aside the assailed
orders of the trial court.
 The appellate court ruled that the December 20, 2002 Order of the
RTC granting the petition for a writ of possession was interlocutory
and not final; hence, it may be questionedonly via petition for
certiorari under Rule 65 of the Rules of Court, not by appeal.
 SFRB moved for the reconsideration of the CAs decision however,
the CA denied the petition.
 SFRB then filed a petition for review on Certiorari for the reversal of
the decision and resolution of CA.
 SFRB avers that the December 20, 2002 Order of the RTC granting
the writ of possession in its favor was final; hence, the remedy of
respondents herein, as oppositors below, was to appeal to the CA
and not to file a special civil action for certiorari. In fact, petitioner
asserts, the writ of possession issued by the RTC had already been
implemented when respondents filed their petition in the CA on
December 10, 2003.
 SFRB further insisted that the RTC, acting as a Land Registration
Court, had limited jurisdiction; it had no jurisdiction to resolve the
issues on the validity of the deed of assignment and the legality of
respondent Aquino’s redemption of the property, as well as its
ownership. Only the RTC in the exercise of its general jurisdiction in
Civil Case No. 12765 (where petitioner assailed the deed of
assignment and the Certificate of Redemption executed by the Ex-
Officio Sheriff) was vested with jurisdiction to resolve these issues.
In resolving these issues, the CA thereby preempted the RTC in Civil
Case No. 12765 and deprived it of due process. In any event,
according to petitioner, the pronouncement of the CA on the
validity of the Deed of Assignment and Certificate of Redemption
was merely an obiter dictum.
ISSUE: Whether or not the Court of Appeals seriously erred when it
sanctioned the PODC resort to Certiorari under Rule 65 of the Revised
Rules of Court, questioning a final order and not an interlocutory order of
the RTC.
SC Ruling: The petition is meritorious.
 The CA erred in holding that the Order of the RTC granting the
petition for a writ of possession was merely interlocutory.
 Interlocutory orders are those that determine incidental matters and
which do not touch on the merits of the case or put an end to the
proceedings. A petition for certiorari under Rule 65 of the Rules of
Court is the proper remedy to question an improvident interlocutory
order. On the other hand, a final order is one that disposes of the
whole matter or terminates the particular proceedings or action
leaving nothing to be done but to enforce by execution what has
been determined. It is one that finally disposes of the pending action
so that nothing more can be done with it in the lower court.The
remedy to question a final order is appeal under Rule 41 of the Rules
of Court.
 Even if the trial court erred in granting a petition for a writ of
possession, such an error is merely an error of judgment correctible
by ordinary appeal and not by a petition for a writ of certiorari. Such
writ cannot be legally used for any other purpose.
 Certiorari is a remedy narrow in its scope and inflexible in character.
It is not a general utility tool in the legal workshop. Certiorari will issue
only to correct errors of jurisdiction and not to correct errors of
judgment. An error of judgment is one which the court may commit
in the exercise of its jurisdiction, and which error is reviewable only
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by an appeal. Error of jurisdiction is one where the act complained of
was issued by the court without or in excess of jurisdiction and which
error is correctible only by the extraordinary writ of certiorari. As long
as the court acts within its jurisdiction, any alleged errors committed
in the exercise of its discretion will amount to nothing more than
mere errors of judgment, correctible by an appeal if the aggrieved
party raised factual and legal issues; or a petition for review under
Rule 45 of the Rules of Court if only questions of law are involved.
 A certiorari writ may be issued if the court or quasi-judicial body
issues an order with grave abuse of discretion amounting to excess
or lack of jurisdiction. Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction or, in other words, where the power is exercised in an
arbitrary manner by reason of passion, prejudice, or personal
hostility, and it must be so patent or gross as to amount to an evasion
of a positive duty or to a virtual refusal to perform the duty enjoined
or to act at all in contemplation of law. Mere abuse of discretion is
not enough. Moreover, a party is entitled to a writ of certiorari only
if there is no appeal nor any plain, speedy or adequate relief in the
ordinary course of law.
 The raison d’etre for the rule is that when a court exercises its
jurisdiction, an error committed while so engaged does not deprive
it of the jurisdiction being exercised when the error was committed.
If it did, every error committed by a court would deprive it of its
jurisdiction and every erroneous judgment would be a void
judgment. In such a situation, the administration of justice would
not survive. Hence, where the issue or question involved affects the
wisdom or legal soundness of the decision – not the jurisdiction of
the court to render said decision – the same is beyond the province
of a special civil action for certiorari.
 IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
Decision of the Court of Appeals is SET ASIDE AND REVERSED.
RURAL BANK OF SAN MIGUEL, INC. vs. MONETARY BOARD
G.R. No. 150886, February 16, 2007
FACTS:
Petitioner bank was a domestic corporation engaged in banking. Respondent
Monetary Board issued a resolution prohibiting petitioner from doing business
in the Philippines and placed it under receivership with PDIC as its receiver. On
the basis of reports prepared by the PDIC stating that petitioner bank could not
resume business, the Monetary Board directed PDIC to proceed with the
liquidation. Petitioner filed a special civil action for certiorari and prohibition
with the CA, contending that there was no complete examination conducted
before the bank was closed.
ISSUE: Whether Section 30 of RA 7653 require a current and complete
examination of the bank before it can be closed and placed under receivership.
RULING: NO. Banco Filipino and other cases petitioners cite were decided using
Section 29 of the old law. Thus in Banco Filipino, we ruled that an “examination
[conducted] by the head of the appropriate supervising or examining
department or his examiners or agents into the condition of the bank” is
necessary before the MB can order its closure. However, RA 265, including
Section 29 thereof, was expressly repealed by RA 7653 which took effect in
1993. Resolution No. 105 was issued on January 21, 2000. Hence, petitioners’
reliance on Banco Filipino which was decided under RA 265 was misplaced. In
RA 7653, only a “report of the head of the supervising or examining
department” is necessary. This Court cannot look for or impose another
meaning on the term “report” or to construe it as synonymous with
“examination.” From the words used in Section 30, it is clear that RA 7653 no
longer requires that an examination be made before the MB can issue a closure
order. We cannot make it a requirement in the absence of legal basis.
Section 30 of RA 7653 does not require a current and complete examination of
the bank before it can be closed and placed under receivership. Section 30 of
RA 7653 provides:
SECTION 30. Proceedings in Receivership and Liquidation. — Whenever, upon
report of the head of the supervising or examining department, the Monetary
Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary
course of business: Provided, That this shall not include inability to
pay caused by extraordinary demands induced by financial panic in
the banking community;
(b) has insufficient realizable assets, as determined by the [BSP] to
meet its liabilities; or
(c) cannot continue in business without involving probable losses to
its depositors or creditors; or
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
(d) has willfully violated a cease and desist order under Section 37
that has become final, involving acts or transactions which amount
to fraud or a dissipation of the assets of the institution; in which
cases, the Monetary Board may summarily and without need for
prior hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution.
It is well-settled that the closure of a bank may be considered as an exercise of
police power. The action of the MB on this matter is final and executory. Such
exercise may nonetheless be subject to judicial inquiry and can be set aside if
found to be in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction.
The absence of an examination before the closure of RBSM did not mean that
there was no basis for the closure order. But it is clear under RA 7653 that the
basis need not arise from an examination as required in the old law. The court
rules that the MB had sufficient basis to arrive at a sound conclusion that there
were grounds that would justify RBSM’s closure. Therefore, MB and BSP
complied with all the requirements of RA 7653. By relying on a report before
placing a bank under receivership, the MB and BSP did not only follow the letter
of the law, they were also faithful to its spirit, which was to act expeditiously.
Accordingly, the issuance of Resolution No. 105 was untainted with
arbitrariness.
Central Bank Employees Association Inc. vs. Bangko Sentral ng Pilipinas
GR 148208, 15 December 2004
FACTS: On 3 July 1993, RA 7653 (the New Central Bank Act) took effect. It
abolished the old Central Bank of the Philippines, and created a new BSP.
On 8 June 2001, almost 8 years after the effectivity of RA 7653, the Central Bank
(now BSP) Employees Association, Inc., filed a petition for prohibition against
BSP and the Executive Secretary of the Office of the President, to restrain the
Bangko Sentral ng Pilipinas and the Executive Secretary from further
implementing the last proviso in Section 15(c), Article II of RA 7653, on the
ground that it is unconstitutional.
Article II, Section 15(c) of RA 7653 (Exercise of Authority) provides that:
"In the exercise of its authority, the Monetary Board shall ... (c) establish a human
resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system
shall aim to establish professionalism and excellence at all levels of the Bangko
Sentral in accordance with sound principles of management. A compensation
structure, based on job evaluation studies and wage surveys and subject to the
Board’s approval, shall be instituted as an integral component of the Bangko
Sentral’s human resource development program: Provided, That the Monetary
Board shall make its own system conform as closely as possible with the
principles provided for under Republic Act No. 6758 [Salary Standardization Act].
Provided, however, That compensation and wage structure of employees whose
positions fall under salary grade 19 and below shall be in accordance with the
rates prescribed under Republic Act No. 6758."
The Association alleges that the proviso makes an unconstitutional cut between
two classes of employees in the BSP, viz: (1) the BSP officers or those exempted
from the coverage of the Salary Standardization Law (SSL) (exempt class); and
(2) the rank-and-file (Salary Grade [SG] 19 and below), or those not exempted
from the coverage of the SSL (non-exempt class). It is contended that this
classification is “a classic case of class legislation,” allegedly not based on
substantial distinctions which make real differences, but solely on the SG of the
BSP personnel’s position.
In sum, petitioner posits that the classification is not reasonable but arbitrary
and capricious, and violates the equal protection clause of the Constitution.
Petitioner also stresses: (a) that R.A. No. 7653 has a separability clause, which
will allow the declaration of the unconstitutionality of the proviso in question
without affecting the other provisions; and (b) the urgency and propriety of the
petition, as some 2,994 BSP rank-and-file employees have been prejudiced since
1994 when the proviso was implemented. Petitioner concludes that: (1) since
the inequitable proviso has no force and effect of law, respondents'
implementation of such amounts to lack of jurisdiction; and (2) it has no appeal
nor any other plain, speedy and adequate remedy in the ordinary course except
through this petition for prohibition, which this Court should take cognizance
of, considering the transcendental importance of the legal issue involved.
ISSUE: Whether or not the rank-and-file employees of the BSP are unduly
discriminated upon by exempting BSP officers (SG 20 and above) from the
Salary Standardization Law thus violates the equal protection of law clause.
HELD: No. It is settled in constitutional law that the "equal protection" clause
does not prevent the Legislature from establishing classes of individuals or
objects upon which different rules shall operate - so long as the classification is
not unreasonable.
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With the passage of the subsequent laws amending the charter of the other
government financial institutions (GFIs), the continued operation of the last
provisio of Sec 15 (c), Art II of RA No 7653, constitutes invidious discrimination
on the 2,994 rank-and-file employees of Banko Sentral ng Pilipinas. The prior
view on the constitutionality of RA 7653 was confined to an evaluation of its
classification between the rank-and-file and the officers of the BSP, found
reasonable because there were substantial distinction that made real
differences between the 2 classes. The subsequent enactments, however,
constitute significant changes in circumstance that considerably alter the
reasonability of the continued operation of the last provisio of Sec 15 (c), Art II
of RA No 7653. This relates to the constitutionality of classifications between
the rank-and-file of the BSP and the 7 other GFIs. The classification must not
only be reasonable, but must also apply equally to all members of the class. The
provisio may be fair on its face and impartial in appearance but it cannot be
grossly discriminatory in its operation, so as practically to make unjust
distinctions between persons who are without differences. The inequality of
treatment cannot be justified on the mere assertion that each exemption rests
on the policy determination by the legislature. The policy determination
argument may support the inequality of treatment between the rank-and-file
and the officers of the BSP, but it cannot justify the inequality of treatment
between the rank-and-file of the BSP and the 7 other GFIs who are similarly
situated. The issue is not the declared policy of the law per se, but the
oppressive results of Congress inconsistent and unequal policy towards the
rank-and-file of the BSP and the 7 other GFIs. The challenge to the
constitutionality of Sec 15 (c), Art II of RA No 7653 is premised precisely on the
irrational discriminatory policy adopted by Congress in its treatment of persons
similarly situated. In the field of equal protection, the guarantee that “no
person shall be denied the equal protection of the laws” includes the
prohibition against enacting laws that allow invidious discrimination, directly or
indirectly. The equal protection clause does not demand absolute equality but
it requires that all persons shall be treated alike, under like circumstances and
conditions both as to priveleges conferred and liabilities enforced. Favoritism
and undue preference cannot be allowed. For the principles is that equal
protection and security shall be given to every person under circumstance
which, if not identical are analogous.
Miranda vs PDIC
FACTS: Petitioner Leticia G. Miranda was a depositor of Prime Savings Bank,
Santiago City Branch. On June 3, 1999, she withdrew substantial amounts from
her account, but instead of cash she opted to be issued a crossed cashier's
check. She was thus issued cashier's check no. 0000000518 in the sum of
P2,500,000.00 and cashier's check no. 0000000514 in the amount of
P3,002,000.00. Miranda deposited the two checks into her account in another
bank on the same day, however, Bangko Sentral ng Pilipinas (BSP) suspended
the clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3, 1999.
The two checks of petitioner were returned to her unpaid. On June 4, 1999,
Prime Savings Bank declared a bank holiday. On January 7, 2000, the BSP placed
Prime Savings Bank under the receivership of the Philippine Deposit Insurance
Corporation (PDIC). Miranda filed a civil action for sum of money to recover the
funds from her unpaid checks against Prime Savings Bank, PDIC and the BSP.
PDIC, BSP, and Prime Bank were ordered to pay jointly and solidarily the amount
of P5,502,000.00. CA reversed the trial court and ruled in favor of the PDIC and
BSP, dismissing the case against them.
ISSUES:
(1) Whether the two cashier's checks operate as an assignment of funds in the
hands of the petitioner;
(2) Whether the claim lodged by the petitioner is a disputed claim under Section
30 of Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank
Act, and therefore, under the jurisdiction of the liquidation court; and
(3) Whether the respondents are solidarily liable to the petitioner.
RULING: (1) No. There were no funds to speak of in the first place. The bank
was financially insolvent for sometime, even before the issuance of the checks
on June 3, 1999. As the CA correctly ruled, the issuance of the cashier's checks
to petitioner did not constitute an assignment of funds, of which there was
practically none at the time these were issued, as the bank was in dire financial
straits for some time.
(2) Yes. Regular courts do not have jurisdiction over actions filed by claimants
against an insolvent bank, unless there is a clear showing that the action taken
by the BSP, through the Monetary Board in the closure of financial institutions
was in excess of jurisdiction, or with grave abuse of discretion. "Disputed claims"
refer to all claims, whether they be against the assets of the insolvent bank, for
specific performance, breach of contract, damages, or whatever. Petitioner's
claim which involved the payment of the two cashier's checks that were not
honored by Prime Savings Bank due to its closure falls within the ambit of a
claim against the assets of the insolvent bank. The issuance of the cashier's
checks by Prime Savings Bank to the petitioner created a debtor/creditor
relationship between them. This disputed claim should therefore be lodged in
the liquidation proceedings by the petitioner as creditor, since the closure of
Prime Savings Bank has rendered all claims subsisting at that time moot which
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
can best be threshed out by the liquidation court and not the regular courts.
(3) It is only Prime Savings Bank that is liable to pay for the amount of the two
cashier's checks. Solidary liability cannot attach to the BSP, in its capacity as
government regulator of banks, and the PDIC as statutory receiver under R.A.
No. 7653, because they are the principal government agencies mandated by
law to determine the financial viability of banks and quasibanks, and facilitate
receivership and liquidation of closed financial institutions, upon a factual
determination of the latter's insolvency. BSP should not be held liable on the
crossed cashier's checks for it was not a party to the issuance of the same; nor
can it be held liable for imposing the sanctions on Prime Savings Bank which
indirectly affected Miranda, since it is mandated under Sec. 37 of R.A. No. 7653
to act accordingly. The BSP, through the Monetary Board was well within its
discretion to exercise this power granted by law to issue a resolution suspending
the interbank clearing privileges of Prime Savings Bank, having made a factual
determination that the bank had deficient cash reserves deposited before the
BSP. There is no showing that the BSP abused this discretionary power conferred
upon it by law. In the absence of fraud, the purchase of a cashier's check, like
the purchase of a draft on a correspondent bank, creates the relation of creditor
and debtor, not that of principal and agent, with the result that the purchaser
or holder thereof is not entitled to a preference over general creditors in the
assets of the bank issuing the check, when it fails before payment of the check.
However, in a situation involving the element of fraud, where a cashier's check
is purchased from a bank at a time when it is insolvent, as its officers know or
are bound to know by the exercise of reasonable diligence, it has been held that
the purchase is entitled to a preference in the assets of the bank on its
liquidation before the check is paid. As correctly found by the Court of Appeals:
Prime Savings as a bank did not collapse overnight but was hemorrhaging and
in financial extremis for some time, a fact which could not have gone unnoticed
by the bank officers. They could not have issued in good faith checks for the
total sum of P5,502,000.00 knowing that the bank's coffers could not meet this.
Clearly, there was fraud or the intent to deceive when the two cashier's checks
dated June 3, 1999 were issued by Prime Savings Bank to the petitioner.
Soriano vs BSP
FACTS: Soriano was charged for estafa through falsification of commercial
documents for allegedly securing a loan of 48 million in the name of two (2)
persons when in fact these individuals did not make any loan in the bank, nor
did the bank's officers approved or had any information about the said loan.
The state prosecutor conducted a Preliminary Investigation on the basis of
letters sent by the officers of Special Investigation of BSP together with 5
affidavits and filed two (2) separate information against Soriano for estafa
through falsification of commercial documents and violation of DORSI law.
Soriano moved for the quashal of the two (2) informations based on the ground:
● that the court has no jurisdiction over the offense charged, for the letter
transmitted by the BSP to the DOJ constituted the complaint and was defective
for failure to comply with the mandatory requirements of Sec. 3(a), Rule 112 of
the Rules of Court, such as statment of address of the petitioner and oath of
subscription and the signatories were not authorized persons to file the
complaint; and ;
● that the facts charged do not constitute an offense, for the commission of
estafa uner par. 1(b) of Art. 315 of the RPC is inherently incompatible with the
violation of DORSI law (Sec. 83 or RA 337 as amended by PD 1795), and
therefore a person cannot be charged of both offenses.
ISSUE: Whether a loan transaction within the ambit of the DOSRI law (violation
of Section 83 of RA 337, as amended) could be the subject of Estafa under
Article 315
HELD: We have examined the two informations against petitioner and we find
that they contain allegations which, if hypothetically admitted, would establish
the essential elements of the crime of DOSRI violation and estafa thru
falsification of commercial documents. Petitioner raises the theory that he
could not possibly be held liable for estafa in concurrence with the charge for
DOSRI violation. According to him, the DOSRI charge presupposes that he
acquired a loan, which would make the loan proceeds his own money and which
he could neither possibly misappropriate nor convert to the prejudice of
another, as required by the statutory definition of estafa.46 On the other hand,
if petitioner did not acquire any loan, there can be no DOSRI violation to speak
of. Thus, petitioner posits that the two offenses cannot co-exist. This theory
does not persuade us. Petitioner’s theory is based on the false premises that
the loan was extended to him by the bank in his own name, and that he became
the owner of the loan proceeds. Both premises are wrong. The bank money
(amounting to ₱8 million) which came to the possession of petitioner was
money held in trust or administration by him for the bank, in his fiduciary
capacity as the President of said bank. It is not accurate to say that petitioner
became the owner of the ₱8 million because it was the proceeds of a loan. That
would have been correct if the bank knowingly extended the loan to petitioner
himself. But that is not the case here. According to the information for estafa,
the loan was supposed to be for another person, a certain "Enrico Carlos";
petitioner, through falsification, made it appear that said "Enrico Carlos" applied
for the loan when in fact he ("Enrico Carlos") did not. Through such fraudulent
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device, petitioner obtained the loan proceeds and converted the same. Under
these circumstances, it cannot be said that petitioner became the legal owner
of the ₱8 million. Thus, petitioner remained the bank’s fiduciary with respect to
that money, which makes it capable of misappropriation or conversion in his
hands. Section 83 of RA 337 reads: Section 83. No director or officer of any
banking institution shall, either directly or indirectly, for himself or as the
representative or agent of others, borrow any of the deposits of funds of such
bank, nor shall he become a guarantor, indorser, or surety for loans from such
bank to others, or in any manner be an obligor for moneys 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 Superintendent of Banks. 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. x x x The
prohibition in Section 83 is broad enough to cover various modes of borrowing.
It covers loans by a bank director or officer (like herein petitioner) which are
made either: (1) directly, (2) indirectly, (3) for himself, (4) or as the
representative or agent of others. It applies even if the director or officer is a
mere guarantor, indorser or surety for someone else's loan or is in any manner
an obligor for money borrowed from the bank or loaned by it. The covered
transactions are prohibited unless the approval, reportorial and ceiling
requirements under Section 83 are complied with. The prohibition is intended
to protect the public, especially the depositors, from the overborrowing of bank
funds by bank officers, directors, stockholders and related interests, as such
overborrowing may lead to bank failures. It has been said that "banking
institutions are not created for the benefit of the directors [or officers]. While
directors have great powers as directors, they have no special privileges as
individuals. They cannot use the assets of the bank for their own benefit except
as permitted by law. Stringent restrictions are placed about them so that when
acting both for the bank and for one of themselves at the same time, they must
keep within certain prescribed lines regarded by the legislature as essential to
safety in the banking business". A direct borrowing is obviously one that is made
in the name of the DOSRI himself or where the DOSRI is a named party, while
an indirect borrowing includes one that is made by a third party, but the DOSRI
has a stake in the transaction. The latter type – indirect borrowing – applies
here. The information in Criminal Case 238-M-2001 alleges that petitioner "in
his capacity as President of Rural Bank of San Miguel – San Ildefonso branch x x
x indirectly borrow[ed] or secure[d] a loan with [RBSM] x x x knowing fully well
that the same has been done by him without the written consent and approval
of the majority of the board of directors x x x, and which consent and approval
the said accused deliberately failed to obtain and enter the same upon the
records of said banking institution and to transmit a copy thereof to the
supervising department of the said bank x x x by using the name of one
depositor Enrico Carlos x x x, the latter having no knowledge of the said loan,
and once in possession of the said amount of eight million pesos (₱8 million),
[petitioner] converted the same to his own personal use and benefit". The
foregoing information describes the manner of securing the loan as indirect;
names petitioner as the benefactor of the indirect loan; and states that the
requirements of the law were not complied with. It contains all the required
elements for a violation of Section 83, even if petitioner did not secure the loan
in his own name. The broad interpretation of the prohibition in Section 83 is
justified by the fact that it even expressly covers loans to third parties where
the third parties are aware of the transaction (such as principals represented by
the DOSRI), and where the DOSRI’s interest does not appear to be beneficial
but even burdensome (such as in cases when the DOSRI acts as a mere
guarantor or surety). If the law finds it necessary to protect the bank and the
banking system in such situations, it will surely be illogical for it to exclude a case
like this where the DOSRI acted for his own benefit, using the name of an
unsuspecting person. A contrary interpretation will effectively allow a DOSRI to
use dummies to circumvent the requirements of the law. In sum, the
information filed against petitioner do not negate each other.
PSBank vs Senate
FACTS: Petitioners Philippine Savings Bank (PSBank) and Pascual M. Garcia III
(Garcia), as President of PSBank, filed a Petition for Certiorari and Prohibition
seeking to nullity and set aside the Resolution of respondent Senate of the
Republic of the Philippines, sitting as an Impeachment Court, which granted the
prosecution's requests for subpoena duces tecum ad testificandum to PSBank
and/or its representatives requiring them to testify and produce before the
Impeachment Court documents relative to the foreign currency accounts that
were alleged to belong to then Supreme Court Chief Justice Renato C. Corona.
On November 5, 2012, and during the pendency of this petition, PSBank and
Garcia filed a Motion with Leave of Court to Withdraw the Petition averring that
subsequent events have overtaken the petition and that, with the termination
of the impeachment proceedings against former Chief Justice Corona, they are
no longer faced with the dilemma of either violating Republic Act No. 6426 or
being held in contempt of court for refusing to disclose the details of the subject
foreign currency deposits.
ISSUE: WON the Impeachement court acted arbitrarily when it issued the
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
assailed subpoena to obtain information concerning the deposits
HELD: It is well-settled that courts will not determine questions that have
become moot and academic because there is no longer any justiciable
controversy to speak of. The judgment will not serve any useful purpose or have
any practical legal effect because, in the nature of things, it cannot be
enforced.4 In Gancho-on v. Secretary of Labor and Employment, the Court
ruled: It is a rule of universal application that courts of justice constituted to
pass upon substantial rights will not consider questions in which no actual
interests are involved; they decline jurisdiction of moot cases. And where the
issue has become moot and academic, there is no justiciable controversy, so
that a declaration thereon would be of no practical use or value. There is no
actual substantial relief to which petitioners would be entitled and which would
be negated by the dismissal of the petition. (Citations omitted) Indeed, the main
issue of whether the Impeachment Court acted arbitrarily when it issued the
assailed subpoena to obtain information concerning the subject foreign
currency deposits notwithstanding the confidentiality of such deposits under
RA 6426 has been overtaken by events. The supervening conviction of Chief
Justice Corona on May 29, 2012, as well as his execution of a waiver against the
confidentiality of all his bank accounts, whether in peso or foreign currency, has
rendered the present petition moot and academic.
BSB Group vs Sally Go
FACTS: Petitioner, the BSB Group, Inc., is a duly organized domestic corporation
presided by its herein representative, Ricardo Bangayan. Respondent Sally Go 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, Ricardo Bangayan filed with the
Manila Prosecutor’s Office a complaint for estafa and/or qualified theft against
respondent, alleging that several checks representing the aggregate amount of
php 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 in Divisoria, Manila Branch. 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
METROBANK), in Jose Abad Santos, Tondo, Manila Branch. 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.
Before the testimony could be completed, respondent filed a motion to
suppress, invoking the privilege of confidentiality under RA 1405, or the Bank
Secrecy Act. Further, 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.
ISSUE: 1.Whether or not the testimony of Marasigan would violate the secrecy
rule under RA 1405 2.Whether or not there is a difference between “cash” and
“check”.
RULING: 1.YES. 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. 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,
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are not only incompetent 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.
2.YES. 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. 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. 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. 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.
G.R. No. 189206 June 8, 2011
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. THE
HONORABLE 15th DIVISION OF THE COURT OF APPEALS and INDUSTRIAL
BANK OF KOREA, TONG YANG MERCHANT BANK, HANAREUM BANKING
CORP., LAND BANK OF THE PHILIPPINES, WESTMONT BANK and DOMSAT
HOLDINGS, INC., Respondents.
FACTS:
 The controversy originated from a surety agreement by which
Domsat Holdings Inc. (Domsat) obtained a surety bond from GSIS to
secure the payment of the loan from the Banks.
 The obligation contained to guarantee the repayment of the
principal and interest on the loan granted the PRINCIPAL to be used
for the financing of the two (2) year lease of a Russian Satellite from
INTERSPUTNIK, in accordance with the terms and conditions of the
credit package entered into by the parties.
 When Domsat failed to pay the loan, GSIS refused to comply with its
obligation reasoning that Domsat did not use the loan proceeds for
the payment of rental for the satellite. GSIS alleged that Domsat,
with Westmont Bank as the conduit, transferred the U.S. $11 Million
loan proceeds from the Industrial Bank of Korea to Citibank New
York account of Westmont Bank and from there to the Binondo
Branch of Westmont Bank. The Banks filed a complaint before the
RTC of Makati against Domsat and GSIS.
 GSIS insists that Domsat's deposit with Westmont Bank can be
examined and inquired into. It anchored its argument on Republic
Act No. 1405 or the "Law on
 Secrecy of Bank Deposits," which allows the disclosure of bank
deposits in cases where the money deposited is the subject matter
of the litigation. GSIS asserts that the subject matter of the litigation
is the U.S. $11 Million obtained by Domsat from the Banks to
supposedly finance the lease of a Russian satellite from Intersputnik.
Whether or not it should be held liable as a surety for the principal
amount of U.S. $11 Million, GSIS contends, is contingent upon
whether Domsat indeed utilized the amount to lease a Russian
satellite as agreed in the Surety Bond Agreement. Hence, GSIS
argues that the whereabouts of the U.S. $11 Million is the subject
matter of the case and the disclosure of bank deposits relating to
the U.S. $11 Million should be allowed.
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
 Domsat denies the allegations of GSIS and reiterates that it did not
give a categorical or affirmative written consent or permission to
GSIS to examine its bank statements with Westmont Bank.
 The Banks maintain that Republic Act No. 1405 is not the applicable
law in the instant case because the Domsat deposit is a foreign
currency deposit, thus covered by Republic Act No. 6426. Under said
law, only the consent of the depositor shall serve as the exception
for the disclosure of his/her deposit.
ISSUE : Which of the two laws should apply in the instant case?
RULING:
 These two laws both support the confidentiality of bank deposits.
There is no conflict between them. Republic Act No. 1405 covers all
bank deposits in the Philippines and no distinction was made
between domestic and foreign deposits. Thus, Republic Act No.
1405 is considered a law of general application. On the other hand,
Republic Act No. 6426 was intended to encourage deposits from
foreign lenders and investors. It is a special law designed especially
for foreign currency deposits in the Philippines. A general law does
not nullify a specific or special law.
 In Intengan v. Court of Appeals, the SC categorically declared that for
foreign currency deposits, such as U.S. dollar deposits, the applicable
law is Republic Act No. 6426.
 Applying Section 8 of Republic Act No. 6426, absent the written
permission from Domsat, Westmont Bank cannot be legally
compelled to disclose the bank deposits of Domsat, otherwise, it
might expose itself to criminal liability under the same act.
The petition for certiorari is DISMISSED.
G.R. Nos. 157294-95 November 30, 2006
JOSEPH VICTOR G. EJERCITO, Petitioner, vs. SANDIGANBAYAN (Special
Division) and PEOPLE OF THE PHILIPPINES, Respondents.
FACTS: The Special Prosecution Panel filed before the Sandiganbayan a Request
for Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing
the President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her
authorized representative to produce documents relating to Trust Account No.
858 and Savings Account of President Estrada. The SB granted the request.
Estrada filed a Motion to Quash the subpoenas claiming that his bank accounts
are covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall
under any of the exceptions stated therein. He further claimed that the specific
identification of documents in the questioned subpoenas, including details on
dates and amounts, could only have been made possible by an earlier illegal
disclosure thereof by the EIB and the Philippine Deposit Insurance Corporation
(PDIC) in its capacity as receiver of the then Urban Bank. The disclosure being
illegal, petitioner concluded, the prosecution in the case may not be allowed to
make use of the information. The SB denied the motion.
ISSUE/S:
1. Is the Trust Account covered by the term “deposit”under the Bank Secrecy
Law?
2. Are the Trust and Savings Accounts of Estrada excepted from the protection
of the Bank Secrecy Law?
3. Does the fruit of poisonous tree principle apply?
RULING: 1. YES. The contention that trust accounts are not covered by the term
“deposits,”as used in R.A. 1405, by the mere fact that they do not entail a
creditor-debtor relationship between the trustor and the bank, does not lie. An
examination of the law shows that the term “deposits”used therein is to be
understood broadly and not limited only to accounts which give rise to a
creditor-debtor relationship between the depositor and the bank. If the money
deposited under an account may be used by banks for authorized loans to third
persons, then such account, regardless of whether it creates a creditor-debtor
relationship between the depositor and the bank, falls under the category of
accounts which the law precisely seeks to protect for the purpose of boosting
the economic development of the country.
Trust Account No. 858 is, without doubt, one such account. The Trust
Agreement between Estrada and Urban Bank provides that the trust account
covers “deposit, placement or investment of funds”by Urban Bank for and in
behalf of Estrada. The money deposited under Trust Account No. 858, was,
therefore, intended not merely to remain with the bank but to be invested by it
elsewhere. To hold that this type of account is not protected by R.A. 1405 would
encourage private hoarding of funds that could otherwise be invested by banks
in other ventures, contrary to the policy behind the law.
The phrase “of whatever nature”proscribes any restrictive interpretation of
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“deposits.”Moreover, it is clear from the immediately quoted provision that,
generally, the law applies not only to money which is deposited but also to those
which are invested. This further shows that the law was not intended to apply
only to “deposits”in the strict sense of the word. Otherwise, there would have
been no need to add the phrase “or invested.” Clearly, therefore, R.A. 1405 is
broad enough to cover Trust Account No. 858.
2. YES. The protection afforded by the law is, however, not absolute,
there being recognized exceptions thereto, as abovequoted Section 2 provides.
In the present case, two exceptions apply, to wit: (1) the examination of bank
accounts is upon order of a competent court in cases of bribery or dereliction
of duty of public officials, and (2) the money deposited or invested is the subject
matter of the litigation.
Estrada contends that since plunder is neither bribery nor dereliction of duty,
his accounts are not excepted from the protection of R.A. 1405. He is wrong.
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty
and no reason is seen why these two classes of cases cannot be excepted from
the rule making bank deposits confidential. The policy as to one cannot be
different from the policy as to the other. This policy expresses the notion that a
public office is a public trust and any person who enters upon its discharge does
so with the full knowledge that his life, so far as relevant to his duty, is open to
public scrutiny. An examination of the “overt or criminal acts as described in
Section 1(d)”of R.A. No. 7080 would make the similarity between plunder and
bribery even more pronounced since bribery is essentially included among
these criminal acts. Plunder being thus analogous to bribery, the exception to
R.A. 1405 applicable in cases of bribery must also apply to cases of plunder.
The plunder case now pending with the SB necessarily involves an inquiry into
the whereabouts of the amount purportedly acquired illegally by former
President Joseph Estrada. In light then of this Court’s pronouncement in Union
Bank, the subject matter of the litigation cannot be limited to bank accounts
under the name of President Estrada alone, but must include those accounts to
which the money purportedly acquired illegally or a portion thereof was alleged
to have been transferred. Trust Account No. 858 and Savings Account No. 0116-
17345-9 in the name of petitioner fall under this description and must thus be
part of the subject matter of the litigation.
In sum, exception (1) applies since the plunder case pending against former
President Estrada is analogous to bribery or dereliction of duty, while exception
(2) applies because the money deposited in petitioner’s bank accounts is said
to form part of the subject matter of the same plunder case.
3. NO. The “fruit of the poisonous tree” principle, which states that
once the primary source (the “tree”) is shown to have been unlawfully
obtained, any secondary or derivative evidence (the “fruit”) derived from it is
also inadmissible, does not apply in this case. In the first place, R.A. 1405 does
not provide for the application of this rule. R.A. 1405, it bears noting, nowhere
provides that an unlawful examination of bank accounts shall render the
evidence obtained therefrom inadmissible in evidence. Moreover, there is no
basis for applying the same in this case since the primary source for the detailed
information regarding petitioner’s bank accounts—the investigation previously
conducted by the Ombudsman—was lawful.
G.R. No. 170290 April 11, 2012
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, vs. CITIBANK,
N.A. and BANK OF AMERICA, S.T. & N.A., Respondents.
FACTS: Petitioner Philippine Deposit Insurance Corporation (PDIC) is a
government instrumentality created by virtue of Republic Act (R.A.) No. 3591,
as amended by R.A. No. 9302. Respondent Citibank, N.A. (Citibank) is a banking
corporation while respondent Bank of America, S.T. & N.A. (BA) is a national
banking association, both of which are duly organized and existing under the
laws of the United States of America and duly licensed to do business in
the Philippines, with offices in Makati City. In 1977, PDIC conducted an
examination of the books of account of Citibank. It discovered that Citibank, in
the course of its banking business, from September 30, 1974 to June 30, 1977,
received from its head office and other foreign branches a total
of P11,923,163,908.00 in dollars, covered by Certificates of Dollar Time Deposit
that were interest-bearing with corresponding maturity dates. These funds,
which were lodged in the books of Citibank under the account “Their Account-
Head Office/Branches-Foreign Currency,” were not reported to PDIC as deposit
liabilities that were subject to assessment for insurance. As such, in a letter
dated March 16, 1978, PDIC assessed Citibank for deficiency in the sum
of P1,595,081.96.
Similarly, sometime in 1979, PDIC examined the books of accounts of BA which
revealed that from September 30, 1976 to June 30, 1978, BA received from its
head office and its other foreign branches a total of P629,311,869.10 in dollars,
covered by Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates and lodged in their books under the account
“Due to Head Office/Branches.” Because BA also excluded these from its
deposit liabilities, PDIC wrote to BA on October 9, 1979, seeking the remittance
of P109,264.83 representing deficiency premium assessments for dollar
deposits.
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
Believing that litigation would inevitably arise from this dispute, Citibank and
BA each filed a petition for declaratory relief before the Court of First Instance
(now the Regional Trial Court) of Rizal on July 19, 1979 and December 11, 1979,
respectively. In their petitions, Citibank and BA sought a declaratory judgment
stating that the money placements they received from their head office and
other foreign branches were not deposits and did not give rise to insurable
deposit liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC
Charter) and, as a consequence, the deficiency assessments made by PDIC were
improper and erroneous. The cases were then consolidated.
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig
City (RTC) promulgated its Decision in favor of Citibank and BA. Aggrieved, PDIC
appealed to the CA which affirmed the ruling of the RTC in its October 27,
2005 Decision. Hence, this petition.
ISSUE: Whether or not a branch of a bank has a separate legal Personality.
HELD: No. A branch has no separate legal personality. This Court is of the
opinion that the key to the resolution of this controversy is the relationship of
the Philippine branches of Citibank and BA to their respective head offices and
their other foreign branches. The Court begins by examining the manner by
which a foreign corporation can establish its presence in the Philippines. It may
choose to incorporate its own subsidiary as a domestic corporation, in which
case such subsidiary would have its own separate and independent legal
personality to conduct business in the country. In the alternative, it may create
a branch in the Philippines, which would not be a legally independent unit, and
simply obtain a license to do business in the Philippines.
In the case of Citibank and BA, it is apparent that they both did not incorporate a
separate domestic corporation to represent its business interests in
the Philippines. Their Philippine branches are, as the name implies, merely
branches, without a separate legal personality from their parent company,
Citibank and BA. Thus, being one and the same entity, the funds placed by the
respondents in their respective branches in the Philippines should not be
treated as deposits made by third parties subject to deposit insurance under
the PDIC Charter. The purpose of the PDIC is to protect the depositing public in
the event of a bank closure. It has already been sufficiently established
by US jurisprudence and Philippine statutes that the head office shall answer
for the liabilities of its branch. Now, suppose the Philippine branch of Citibank
suddenly closes for some reason. Citibank N.A. would then be required to
answer for the deposit liabilities of Citibank Philippines. If the Court were to
adopt the posture of PDIC that the head office and the branch are two separate
entities and that the funds placed by the head office and its foreign branches
with the Philippine branch are considered deposits within the meaning of the
PDIC Charter, it would result to the incongruous situation where Citibank, as
the head office, would be placed in the ridiculous position of having to
reimburse itself, as depositor, for the losses it may incur occasioned by the
closure of Citibank Philippines. Surely our law makers could not have
envisioned such a preposterous circumstance when they created PDIC.
Finally, the Court agrees with the CA ruling that there is nothing in the
definition of a “bank” and a “banking institution” in Section 3(b) of the PDIC
Charter[27] which explicitly states that the head office of a foreign bank and its
other branches are separate and distinct from their Philippine branches.
There is no need to complicate the matter when it can be solved by simple logic
bolstered by law and jurisprudence. Based on the foregoing, it is clear that the
head office of a bank and its branches are considered as one under the eyes of
the law. While branches are treated as separate business units for commercial
and financial reporting purposes, in the end, the head office remains
responsible and answerable for the liabilities of its branches which are under
its supervision and control. As such, it is unreasonable for PDIC to require the
respondents, Citibank and BA, to insure the money placements made by their
home office and other branches. Deposit insurance is superfluous and entirely
unnecessary when, as in this case, the institution holding the funds and the one
which made the placements are one and the same legal entity.
G.R. No. 126911 April 30, 2003
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. THE
HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR ABAD, SABINA
ABAD, JOSEPHINE "JOSIE" BEATA ABAD-ORLINA, CECILIA ABAD, PIO ABAD,
DOMINIC ABAD, TEODORA ABAD, respondents.
FACTS: Prior to May 22, 1997, respondents had 71 certificates of time deposits
denominated as "Golden Time Deposits" (GTD) with an aggregate face value
of P1,115,889.96. May 22, 1987, a Friday, the Monetary Board (MB) of the
Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued
Resolution 5052 prohibiting Manila Banking Corporation to do business in the
Philippines, and placing its assets and affairs under receivership. The Resolution,
however, was not served on MBC until Tuesday the following week, or on May
26, 1987, when the designated Receiver took over. On May 25, 1987 - the next
banking day following the issuance of the MB Resolution, respondent Jose Abad
was at the MBC at 9:00 a.m. for the purpose of pre-terminating the71
aforementioned GTDs and re-depositing the fund represented thereby into 28
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new GTDs in denominations of P40,000.00 or less under the names of herein
respondents individually or jointly with each others Of the 28 new GTDs, Jose
Abad pre-terminated 8 and withdrew the value thereof in the total amount of
P320,000.00. Respondents thereafter filed their claims with the PDIC for the
payment of the remaining 20 insured GTDs. February 11, 1988, PDIC paid
respondents the value of 3 claims in the total amount of P120,000.00. PDIC,
however, withheld payment of the 17 remaining claims after Washington
Solidum, Deputy Receiver of MBC-Iloilo, submitted a report to the PDIC that
there was massive conversion and substitution of trust and deposit accounts on
May 25, 1987 at MBC-Iloilo. Because of the report, PDIC entertained serious
reservation in recognizing respondents' GTDs as deposit liabilities of MBC-Iloilo.
Thus, PDIC filed a petition for declaratory relief against respondents with the
RTC of Iloilo City, for a judicial declaration determination of the insurability of
respondents' GTD sat MBC-Iloilo. In their Answer respondents set up a
counterclaim against PDIC whereby they asked for payment of their insured
deposits. The Trial Court ordered petitioners to pay the balance of the deposit
insurance to respondents. The Court of Appeals affirmed the decision of
the lower court. Petitioner posits that the trial court erred in ordering it to
pay the balance of the deposit insurance to respondents, maintaining that the
instant petition stemmed from a petition for declaratory relief which does not
essentially entail an executory process, and the only relief that should have
been granted by the trial court is a declaration of the parties' rights and duties.
As such, petitioner continues, no order of payment may arise from the case as
this is beyond the office of declaratory relief proceedings.
ISSUE: Whether or not the trial court order the payment of the balance even if
the petition stemmed from a petition for declaratory relief which does
not essentially entail an executor process.
HELD: YES. Without doubt, a petition for declaratory relief does not essentially
entail an executory process. There is nothing in its nature, however, that
prohibits a counter claim from being set-up in the same action. There is nothing
in the nature of a special civil action for declaratory relief that prescribes the
filing of a counterclaim based on the same transaction, deed or contract subject
of the complaint. A special civil action is after all not essentially different from
an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules
of Court, except that the former deals with a special subject matter which
makes necessary some special regulation. But the identity between their
fundamental nature is such that the same rules governing ordinary civil suits
may and do apply to special civil actions if not inconsistent with or if they may
serve to supplement the provisions of the peculiar rules governing special laws.
PHILIPPINE DEPOSIT INSURANCE CORPORATION, vs. COURT OF APPEALS,
ROSA AQUERO, GERARD YU, ERIC YU, MINA YU, ELIZABETH NGKAION,
MERLY CUESCANO, LETICIA TAN, FELY RUMBANA, LORNA ACUB,
represented by their Attorney-in-Fact, JOHN FRANCIS COTAOCO
FACTS: Rosa Aquero et. al., plaintiffs-appellee, invested in money market
placements with the Premiere Financing Corporation (PFC) in the sum of
P10,000.00 each for which they were issued by the PFC corresponding
promissory notes and checks. John Francis Cotaoco, for and in behalf of
plaintiffs-appellees, went to the PFC to encash the promissory notes and
checks, but the PFC referred him to the Regent Saving Bank (RSB). Instead of
paying the promissory notes and checks, the RSB, upon agreement of Cotaoco,
issued the subject 13 certificates of time deposit, inclusive, each stating, among
others, that the same certifies that the bearer thereof has deposited with the
RSB the sum of P10,000.00.
On the maturity date, Cotaoco went to the RSB to encash the said certificates.
Thereat, the RSB Executive Vice President requested Cotaoco for a deferment
or an extension of a few days to enable the RSB to raise the amount to pay for
the same. Cotaoco agreed. Despite said extension, the RSB still failed to pay the
value of the certificates. Instead, RSB advised Cotaoco to file a claim with the
PDIC.
Subsequently, the Monetary Board of the Central Bank issued resolution
suspending the operations of the RSB. Eventually, the records of RSB were
secured and its deposit liabilities were eventually determined. The Monetary
Board issued another resolution liquidating the RSB. Thereafter, a masterlist or
inventory of the RSB assets and liabilities was prepared. However, the
certificates of time deposit of plaintiffs-appellees were not included in the list
on the ground that the certificates were not funded by the PFC or duly recorded
as liabilities of RSB. As a result, Rosa Aquero et. al., filed an action for collection
against PDIC, RSB and the Central Bank. The RTC then rendered decision
ordering the latter to pay jointly and severally the amount due to the plaintiffs.
ISSUE: Whether or not the PDIC is liable on the certificates of time deposits.
RULING: No. In order that a claim for deposit insurance with the PDIC may
prosper, the law requires that a corresponding deposit be placed in the insured
bank. This is implicit from a reading of the following provisions of R.A. 3591
provides that, whenever an insured bank shall have been closed on account of
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
insolvency, payment of the insured deposits in such bank shall be made by the
Corporation as soon as possible. A deposit as define R.A. 3591 may be
constituted only if money or the equivalent of money is received by a bank. The
evidence convincingly shows that the subject CTDs were indeed issued without
RSB receiving any money therefor. No deposit, as defined in Section 3 (f) of R.A.
No. 3591, therefore came into existence. Accordingly, petitioner PDIC cannot
be held liable for value of the certificates of time deposit held by private
respondents.
G.R. No. 170281 January 18, 2008
REPUBLIC OF THE PHILIPPINES, represented by the ANTI-MONEY
LAUNDERING COUNCIL, petitioner, vs. GLASGOW CREDIT AND COLLECTION
SERVICES, INC. and CITYSTATE SAVINGS BANK, INC., respondents.
This is a petition for review1 of the order2 dated October 27, 2005 of the
Regional Trial Court (RTC) of Manila, Branch 47, dismissing the complaint for
forfeiture3 filed by the Republic of the Philippines, represented by the Anti-
Money Laundering Council (AMLC) against respondents Glasgow Credit and
Collection Services, Inc. (Glasgow) and Citystate Savings Bank, Inc. (CSBI).
On July 18, 2003, the Republic filed a complaint in the RTC Manila for civil
forfeiture of assets (with urgent plea for issuance of temporary restraining
order [TRO] and/or writ of preliminary injunction) against the bank deposits in
account number CA-005-10-000121-5 maintained by Glasgow in CSBI. The
case, filed pursuant to RA 9160 (the Anti-Money Laundering Act of 2001), as
amended, was docketed as Civil Case No. 03-107319.
Acting on the Republic’s urgent plea for the issuance of a TRO, the executive
judge4 of RTC Manila issued a 72-hour TRO dated July 21, 2003. The case was
thereafter raffled to Branch 47 and the hearing on the application for issuance
of a writ of preliminary injunction was set on August 4, 2003. After hearing, the
trial court (through then Presiding Judge Marivic T. Balisi-Umali) issued an order
granting the issuance of a writ of preliminary injunction. The injunctive writ was
issued on August 8, 2003. Meanwhile, summons to Glasgow was returned
"unserved" as it could no longer be found at its last known address.
On October 8, 2003, the Republic filed a verified omnibus motion for (a)
issuance of alias summons and (b) leave of court to serve summons by
publication. In an order dated October 15, 2003, the trial court directed the
issuance of alias summons. However, no mention was made of the motion for
leave of court to serve summons by publication. In an order dated January 30,
2004, the trial court archived the case allegedly for failure of the Republic to
serve the alias summons. The Republic filed an ex parte omnibus motion to (a)
reinstate the case and (b) resolve its pending motion for leave of court to serve
summons by publication.
In an order dated May 31, 2004, the trial court ordered the reinstatement of
the case and directed the Republic to serve the alias summons on Glasgow and
CSBI within 15 days. However, it did not resolve the Republic’s motion for leave
of court to serve summons by publication declaring:
Until and unless a return is made on the alias summons, any action
on [the Republic’s] motion for leave of court to serve summons by
publication would be untenable if not premature.
On July 12, 2004, the Republic (through the Office of the Solicitor General
[OSG]) received a copy of the sheriff’s return dated June 30, 2004 stating that
the alias summons was returned "unserved" as Glasgow was no longer holding
office at the given address since July 2002 and left no forwarding address.
Meanwhile, the Republic’s motion for leave of court to serve summons by
publication remained unresolved. Thus, on August 11, 2005, the Republic filed
a manifestation and ex parte motion to resolve its motion for leave of court to
serve summons by publication.
On August 12, 2005, the OSG received a copy of Glasgow’s "Motion to Dismiss
(By Way of Special Appearance)" dated August 11, 2005. It alleged that (1) the
court had no jurisdiction over its person as summons had not yet been served
on it; (2) the complaint was premature and stated no cause of action as there
was still no conviction for estafa or other criminal violations implicating
Glasgow and (3) there was failure to prosecute on the part of the Republic.
The Republic opposed Glasgow’s motion to dismiss. It contended that its suit
was an action quasi in rem where jurisdiction over the person of the defendant
was not a prerequisite to confer jurisdiction on the court. It asserted that prior
conviction for unlawful activity was not a precondition to the filing of a civil
forfeiture case and that its complaint alleged ultimate facts sufficient to
establish a cause of action. It denied that it failed to prosecute the case.
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On October 27, 2005, the trial court issued the assailed order. It dismissed the
case on the following grounds: (1) improper venue as it should have been filed
in the RTC of Pasig where CSBI, the depository bank of the account sought to
be forfeited, was located; (2) insufficiency of the complaint in form and
substance and (3) failure to prosecute. It lifted the writ of preliminary injunction
and directed CSBI to release to Glasgow or its authorized representative the
funds in CA-005-10-000121-5.
Raising questions of law, the Republic filed this petition.
On November 23, 2005, this Court issued a TRO restraining Glasgow and CSBI,
their agents, representatives and/or persons acting upon their orders from
implementing the assailed October 27, 2005 order. It restrained Glasgow from
removing, dissipating or disposing of the funds in account no. CA-005-10-
000121-5 and CSBI from allowing any transaction on the said account.
The petition essentially presents the following issue: whether the complaint for
civil forfeiture was correctly dismissed on grounds of improper venue,
insufficiency in form and substance and failure to prosecute.
The Court agrees with the Republic.
The Complaint Was Filed In The Proper Venue
In its assailed order, the trial court cited the grounds raised by Glasgow in
support of its motion to dismiss:
1. That this [c]ourt has no jurisdiction over the person of Glasgow
considering that no [s]ummons has been served upon it, and it has
not entered its appearance voluntarily;
2. That the [c]omplaint for forfeiture is premature because of the
absence of a prior finding by any tribunal that Glasgow was engaged
in unlawful activity: [i]n connection therewith[,] Glasgow argues
that the [c]omplaint states no cause of action; and
3. That there is failure to prosecute, in that, up to now, summons
has yet to be served upon Glasgow.5
But inasmuch as Glasgow never questioned the venue of the Republic’s
complaint for civil forfeiture against it, how could the trial court have dismissed
the complaint for improper venue? In Dacoycoy v. Intermediate Appellate
Court6 (reiterated in Rudolf Lietz Holdings, Inc. v. Registry of Deeds of Parañaque
City),7 this Court ruled:
The motu proprio dismissal of petitioner’s complaint by [the] trial
court on the ground of improper venue is plain error…. (emphasis
supplied)
At any rate, the trial court was a proper venue.
On November 15, 2005, this Court issued A.M. No. 05-11-04-SC, the Rule of
Procedure in Cases of Civil Forfeiture, Asset Preservation, and Freezing of
Monetary Instrument, Property, or Proceeds Representing, Involving, or
Relating to an Unlawful Activity or Money Laundering Offense under RA 9160,
as amended (Rule of Procedure in Cases of Civil Forfeiture). The order
dismissing the Republic’s complaint for civil forfeiture of Glasgow’s account in
CSBI has not yet attained finality on account of the pendency of this appeal.
Thus, the Rule of Procedure in Cases of Civil Forfeiture applies to the Republic’s
complaint.8 Moreover, Glasgow itself judicially admitted that the Rule of
Procedure in Cases of Civil Forfeiture is "applicable to the instant case."9
Section 3, Title II (Civil Forfeiture in the Regional Trial Court) of the Rule of
Procedure in Cases of Civil Forfeiture provides:
Sec. 3. Venue of cases cognizable by the regional trial court. – A
petition for civil forfeiture shall be filed in any regional trial court of
the judicial region where the monetary instrument, property or
proceeds representing, involving, or relating to an unlawful activity
or to a money laundering offense are located; provided, however,
that where all or any portion of the monetary instrument, property
or proceeds is located outside the Philippines, the petition may be
filed in the regional trial court in Manila or of the judicial region
where any portion of the monetary instrument, property, or
proceeds is located, at the option of the petitioner. (emphasis
supplied)
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
Under Section 3, Title II of the Rule of Procedure in Cases of Civil Forfeiture,
therefore, the venue of civil forfeiture cases is any RTC of the judicial region
where the monetary instrument, property or proceeds representing, involving,
or relating to an unlawful activity or to a money laundering offense are located.
Pasig City, where the account sought to be forfeited in this case is situated, is
within the National Capital Judicial Region (NCJR). Clearly, the complaint for civil
forfeiture of the account may be filed in any RTC of the NCJR. Since the RTC
Manila is one of the RTCs of the NCJR,10 it was a proper venue of the Republic’s
complaint for civil forfeiture of Glasgow’s account.
The Complaint Was Sufficient In Form And Substance
In the assailed order, the trial court evaluated the Republic’s complaint to
determine its sufficiency in form and substance:
At the outset, this [c]ourt, before it proceeds, takes the opportunity
to examine the [c]omplaint and determine whether it is sufficient in
form and substance.
Before this [c]ourt is a [c]omplaint for Civil Forfeiture of Assets filed
by the [AMLC], represented by the Office of the Solicitor General[,]
against Glasgow and [CSBI] as necessary party. The [c]omplaint
principally alleges the following:
(a) Glasgow is a corporation existing under the laws of the
Philippines, with principal office address at Unit 703, 7th Floor,
Citystate Center [Building], No. 709 Shaw Boulevard[,] Pasig City;
(b) [CSBI] is a corporation existing under the laws of the Philippines,
with principal office at Citystate Center Building, No. 709 Shaw
Boulevard, Pasig City;
(c) Glasgow has funds in the amount of P21,301,430.28 deposited
with [CSBI], under CA 005-10-000121-5;
(d) As events have proved, aforestated bank account is related to
the unlawful activities of Estafa and violation of Securities
Regulation Code;
(e) The deposit has been subject of Suspicious Transaction Reports;
(f) After appropriate investigation, the AMLC issued Resolutions No.
094 (dated July 10, 2002), 096 (dated July 12, 2002), 101 (dated July
23, 2002), and 108 (dated August 2, 2002), directing the issuance of
freeze orders against the bank accounts of Glasgow;
(g) Pursuant to said AMLC Resolutions, Freeze Orders Nos. 008-010,
011 and 013 were issued on different dates, addressed to the
concerned banks;
(h) The facts and circumstances plainly showing that defendant
Glasgow’s bank account and deposit are related to the unlawful
activities of Estafa and violation of Securities Regulation Code, as
well as to a money laundering offense [which] [has] been
summarized by the AMLC in its Resolution No. 094; and
(i) Because defendant Glasgow’s bank account and deposits are
related to the unlawful activities of Estafa and violation of Securities
Regulation Code, as well as [to] money laundering offense as
aforestated, and being the subject of covered transaction reports
and eventual freeze orders, the same should properly be forfeited
in favor of the government in accordance with Section 12, R.A. 9160,
as amended.11
In a motion to dismiss for failure to state a cause of action, the focus is on the
sufficiency, not the veracity, of the material allegations.12 The determination is
confined to the four corners of the complaint and nowhere else.13
In a motion to dismiss a complaint based on lack of cause of action,
the question submitted to the court for determination is the
sufficiency of the allegations made in the complaint to constitute a
cause of action and not whether those allegations of fact are true,
for said motion must hypothetically admit the truth of the facts
alleged in the complaint.
The test of the sufficiency of the facts alleged in the complaint is
whether or not, admitting the facts alleged, the court could render a
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valid judgment upon the same in accordance with the prayer of the
complaint.14 (emphasis ours)
In this connection, Section 4, Title II of the Rule of Procedure in Cases of Civil
Forfeiture provides:
Sec. 4. Contents of the petition for civil forfeiture. - The petition for
civil forfeiture shall be verified and contain the following allegations:
(a) The name and address of the respondent;
(b) A description with reasonable particularity of the
monetary instrument, property, or proceeds, and their
location; and
(c) The acts or omissions prohibited by and the specific
provisions of the Anti-Money Laundering Act, as
amended, which are alleged to be the grounds relied
upon for the forfeiture of the monetary instrument,
property, or proceeds; and
[(d)] The reliefs prayed for.
Here, the verified complaint of the Republic contained the following
allegations:
(a) the name and address of the primary defendant therein,
Glasgow;15
(b) a description of the proceeds of Glasgow’s unlawful activities
with particularity, as well as the location thereof, account no. CA-
005-10-000121-5 in the amount of P21,301,430.28 maintained with
CSBI;
(c) the acts prohibited by and the specific provisions of RA 9160, as
amended, constituting the grounds for the forfeiture of the said
proceeds. In particular, suspicious transaction reports showed that
Glasgow engaged in unlawful activities of estafa and violation of the
Securities Regulation Code (under Section 3(i)(9) and (13), RA 9160,
as amended); the proceeds of the unlawful activities were
transacted and deposited with CSBI in account no. CA-005-10-
000121-5 thereby making them appear to have originated from
legitimate sources; as such, Glasgow engaged in money laundering
(under Section 4, RA 9160, as amended); and the AMLC subjected
the account to freeze order and
(d) the reliefs prayed for, namely, the issuance of a TRO or writ of
preliminary injunction and the forfeiture of the account in favor of
the government as well as other reliefs just and equitable under the
premises.
The form and substance of the Republic’s complaint substantially conformed
with Section 4, Title II of the Rule of Procedure in Cases of Civil Forfeiture.
Moreover, Section 12(a) of RA 9160, as amended, provides:
SEC. 12. Forfeiture Provisions. –
(a) Civil Forfeiture. – When there is a covered transaction report
made, and the court has, in a petition filed for the purpose
ordered seizure of any monetary instrument or property, in
whole or in part, directly or indirectly, related to said report,
the Revised Rules of Court on civil forfeiture shall apply.
In relation thereto, Rule 12.2 of the Revised Implementing Rules and
Regulations of RA 9160, as amended, states:
RULE 12
Forfeiture Provisions
xxx xxx xxx
Rule 12.2. When Civil Forfeiture May be Applied. – When there is a
SUSPICIOUS TRANSACTION REPORT OR A COVERED TRANSACTION
REPORT DEEMED SUSPICIOUS AFTER INVESTIGATION BY THE AMLC,
and the court has, in a petition filed for the purpose, ordered the
seizure of any monetary instrument or property, in whole or in part,
directly or indirectly, related to said report, the Revised Rules of
Court on civil forfeiture shall apply.
RA 9160, as amended, and its implementing rules and regulations lay down two
conditions when applying for civil forfeiture:
(1) when there is a suspicious transaction report or a covered
transaction report deemed suspicious after investigation by the
AMLC and
(2) the court has, in a petition filed for the purpose, ordered the
seizure of any monetary instrument or property, in whole or in part,
directly or indirectly, related to said report.
It is the preliminary seizure of the property in question which brings it within
the reach of the judicial process.16 It is actually within the court’s possession
when it is submitted to the process of the court.17 The injunctive writ issued on
August 8, 2003 removed account no. CA-005-10-000121-5 from the effective
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
control of either Glasgow or CSBI or their representatives or agents and
subjected it to the process of the court.
Since account no. CA-005-10-000121-5 of Glasgow in CSBI was (1) covered by
several suspicious transaction reports and (2) placed under the control of the
trial court upon the issuance of the writ of preliminary injunction, the
conditions provided in Section 12(a) of RA 9160, as amended, were satisfied.
Hence, the Republic, represented by the AMLC, properly instituted the
complaint for civil forfeiture.
Whether or not there is truth in the allegation that account no. CA-005-10-
000121-5 contains the proceeds of unlawful activities is an evidentiary matter
that may be proven during trial. The complaint, however, did not even have to
show or allege that Glasgow had been implicated in a conviction for, or the
commission of, the unlawful activities of estafa and violation of the Securities
Regulation Code.
A criminal conviction for an unlawful activity is not a prerequisite for the
institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt
for an unlawful activity is not an essential element of civil forfeiture.
Section 6 of RA 9160, as amended, provides:
SEC. 6. Prosecution of Money Laundering. –
(a) Any person may be charged with and convicted of both the
offense of money laundering and the unlawful activity as herein
defined.
(b) Any proceeding relating to the unlawful activity shall be given
precedence over the prosecution of any offense or violation under
this Act without prejudice to the freezing and other remedies
provided. (emphasis supplied)
Rule 6.1 of the Revised Implementing Rules and Regulations of RA 9160, as
amended, states:
Rule 6.1. Prosecution of Money Laundering –
(a) Any person may be charged with and convicted of both the
offense of money laundering and the unlawful activity as defined
under Rule 3(i) of the AMLA.
(b) Any proceeding relating to the unlawful activity shall be given
precedence over the prosecution of any offense or violation under
the AMLA without prejudice to the application ex-parte by the AMLC
to the Court of Appeals for a freeze order with respect to the
monetary instrument or property involved therein and resort to
other remedies provided under the AMLA, the Rules of Court and
other pertinent laws and rules. (emphasis supplied)
Finally, Section 27 of the Rule of Procedure in Cases of Civil Forfeiture provides:
Sec. 27. No prior charge, pendency or conviction necessary. – No
prior criminal charge, pendency of or conviction for an unlawful
activity or money laundering offense is necessary for the
commencement or the resolution of a petition for civil forfeiture.
(emphasis supplied)
Thus, regardless of the absence, pendency or outcome of a criminal
prosecution for the unlawful activity or for money laundering, an action for civil
forfeiture may be separately and independently prosecuted and resolved.
There Was No Failure To Prosecute
The trial court faulted the Republic for its alleged failure to prosecute the case.
Nothing could be more erroneous.
Immediately after the complaint was filed, the trial court ordered its deputy
sheriff/process server to serve summons and notice of the hearing on the
application for issuance of TRO and/or writ of preliminary injunction. The
subpoena to Glasgow was, however, returned unserved as Glasgow "could no
longer be found at its given address" and had moved out of the building since
August 1, 2002.
Meanwhile, after due hearing, the trial court issued a writ of preliminary
injunction enjoining Glasgow from removing, dissipating or disposing of the
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subject bank deposits and CSBI from allowing any transaction on, withdrawal,
transfer, removal, dissipation or disposition thereof.
As the summons on Glasgow was returned "unserved," and considering that its
whereabouts could not be ascertained despite diligent inquiry, the Republic
filed a verified omnibus motion for (a) issuance of alias summons and (b) leave
of court to serve summons by publication on October 8, 2003. While the trial
court issued an alias summons in its order dated October 15, 2003, it kept quiet
on the prayer for leave of court to serve summons by publication.
Subsequently, in an order dated January 30, 2004, the trial court archived the
case for failure of the Republic to cause the service of alias summons. The
Republic filed an ex parte omnibus motion to (a) reinstate the case and (b)
resolve its pending motion for leave of court to serve summons by publication.
In an order dated May 31, 2004, the trial court ordered the reinstatement of
the case and directed the Republic to cause the service of the alias summons
on Glasgow and CSBI within 15 days. However, it deferred its action on the
Republic’s motion for leave of court to serve summons by publication until a
return was made on the alias summons.
Meanwhile, the Republic continued to exert efforts to obtain information from
other government agencies on the whereabouts or current status of
respondent Glasgow if only to save on expenses of publication of summons. Its
efforts, however, proved futile. The records on file with the Securities and
Exchange Commission provided no information. Other inquiries yielded
negative results.
On July 12, 2004, the Republic received a copy of the sheriff’s return dated June
30, 2004 stating that the alias summons had been returned "unserved" as
Glasgow was no longer holding office at the given address since July 2002 and
left no forwarding address. Still, no action was taken by the trial court on the
Republic’s motion for leave of court to serve summons by publication. Thus, on
August 11, 2005, the Republic filed a manifestation and ex parte motion to
resolve its motion for leave of court to serve summons by publication.
It was at that point that Glasgow filed a motion to dismiss by way of special
appearance which the Republic vigorously opposed. Strangely, to say the least,
the trial court issued the assailed order granting Glasgow’s motion.
Given these circumstances, how could the Republic be faulted for failure to
prosecute the complaint for civil forfeiture? While there was admittedly a delay
in the proceeding, it could not be entirely or primarily ascribed to the Republic.
That Glasgow’s whereabouts could not be ascertained was not only beyond the
Republic’s control, it was also attributable to Glasgow which left its principal
office address without informing the Securities and Exchange Commission or
any official regulatory body (like the Bureau of Internal Revenue or the
Department of Trade and Industry) of its new address. Moreover, as early as
October 8, 2003, the Republic was already seeking leave of court to serve
summons by publication.
In Marahay v. Melicor,18 this Court ruled:
While a court can dismiss a case on the ground of non prosequitur,
the real test for the exercise of such power is whether, under the
circumstances, plaintiff is chargeable with want of due diligence in
failing to proceed with reasonable promptitude. In the absence of a
pattern or scheme to delay the disposition of the case or a wanton
failure to observe the mandatory requirement of the rules on the part
of the plaintiff, as in the case at bar, courts should decide to dispense
with rather than wield their authority to dismiss. (emphasis supplied)
We see no pattern or scheme on the part of the Republic to delay the
disposition of the case or a wanton failure to observe the mandatory
requirement of the rules. The trial court should not have so eagerly wielded its
power to dismiss the Republic’s complaint.
Service Of Summons May Be By Publication
In Republic v. Sandiganbayan,19 this Court declared that the rule is settled that
forfeiture proceedings are actions in rem. While that case involved forfeiture
proceedings under RA 1379, the same principle applies in cases for civil
forfeiture under RA 9160, as amended, since both cases do not terminate in
the imposition of a penalty but merely in the forfeiture of the properties either
acquired illegally or related to unlawful activities in favor of the State.
As an action in rem, it is a proceeding against the thing itself instead of against
the person.20 In actions in rem or quasi in rem, jurisdiction over the person of
the defendant is not a prerequisite to conferring jurisdiction on the court,
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
provided that the court acquires jurisdiction over the res.21 Nonetheless,
summons must be served upon the defendant in order to satisfy the
requirements of due process.22 For this purpose, service may be made by
publication as such mode of service is allowed in actions in rem and quasi in
rem.23
In this connection, Section 8, Title II of the Rule of Procedure in Cases of Civil
Forfeiture provides:
Sec. 8. Notice and manner of service. - (a) The respondent shall be given notice
of the petition in the same manner as service of summons under Rule 14 of the
Rules of Court and the following rules:
1. The notice shall be served on respondent personally, or by any
other means prescribed in Rule 14 of the Rules of Court;
2. The notice shall contain: (i) the title of the case; (ii) the docket
number; (iii) the cause of action; and (iv) the relief prayed for; and
3. The notice shall likewise contain a proviso that, if no comment or
opposition is filed within the reglementary period, the court shall
hear the case ex parte and render such judgment as may be
warranted by the facts alleged in the petition and its supporting
evidence.
(b) Where the respondent is designated as an unknown
owner or whenever his whereabouts are unknown and
cannot be ascertained by diligent inquiry, service may, by
leave of court, be effected upon him by publication of the
notice of the petition in a newspaper of general
circulation in such places and for such time as the court
may order. In the event that the cost of publication
exceeds the value or amount of the property to be
forfeited by ten percent, publication shall not be
required. (emphasis supplied)
WHEREFORE, the petition is hereby GRANTED. The October 27, 2005 order of
the Regional Trial Court of Manila, Branch 47, in Civil Case No. 03-107319 is SET
ASIDE. The August 11, 2005 motion to dismiss of Glasgow Credit and Collection
Services, Inc. is DENIED. And the complaint for forfeiture of the Republic of the
Philippines, represented by the Anti-Money Laundering Council, is REINSTATED.
The case is hereby REMANDED to the Regional Trial Court of Manila, Branch 47
which shall forthwith proceed with the case pursuant to the provisions of A.M.
No. 05-11-04-SC. Pending final determination of the case, the November 23,
2005 temporary restraining order issued by this Court is hereby MAINTAINED.
SO ORDERED.
G.R. No. 174629 February 14, 2008
REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY
LAUNDERING COUNCIL (AMLC), vs. HON. ANTONIO M. EUGENIO, JR., AS
PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and
LILIA CHENG,
The present petition for certiorari and prohibition under Rule 65 assails the
orders and resolutions issued by two different courts in two different cases. The
courts and cases in question are the Regional Trial Court of Manila, Branch 24,
which heard SP Case No. 06-1142001 and the Court of Appeals, Tenth Division,
which heared CA-G.R. SP No. 95198.2 Both cases arose as part of the aftermath
of the ruling of this Court in Agan v. PIATCO3 nullifying the concession agreement
awarded to the Philippine International Airport Terminal Corporation (PIATCO)
over the Ninoy Aquino International Airport – International Passenger Terminal
3 (NAIA 3) Project.
I.
Following the promulgation of Agan, a series of investigations concerning the
award of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman
and the Compliance and Investigation Staff (CIS) of petitioner Anti-Money
Laundering Council (AMLC). On 24 May 2005, the Office of the Solicitor General
(OSG) wrote the AMLC requesting the latter’s assistance "in obtaining more
evidence to completely reveal the financial trail of corruption surrounding the
[NAIA 3] Project," and also noting that petitioner Republic of the Philippines
was presently defending itself in two international arbitration cases filed in
relation to the NAIA 3 Project.4 The CIS conducted an intelligence database
search on the financial transactions of certain individuals involved in the award,
including respondent Pantaleon Alvarez (Alvarez) who had been the Chairman
of the PBAC Technical Committee, NAIA-IPT3 Project.5 By this time, Alvarez had
already been charged by the Ombudsman with violation of Section 3(j) of R.A.
No. 3019.6 The search revealed that Alvarez maintained eight (8) bank accounts
with six (6) different banks.7
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On 27 June 2005, the AMLC issued Resolution No. 75, Series of 2005,8 whereby
the Council resolved to authorize the Executive Director of the AMLC "to sign
and verify an application to inquire into and/or examine the [deposits] or
investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and
Cheng Yong, and their related web of accounts wherever these may be found,
as defined under Rule 10.4 of the Revised Implementing Rules and
Regulations;" and to authorize the AMLC Secretariat "to conduct an inquiry into
subject accounts once the Regional Trial Court grants the application to inquire
into and/or examine the bank accounts" of those four individuals.9 The
resolution enumerated the particular bank accounts of Alvarez, Wilfredo
Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong which were to
be the subject of the inquiry.10 The rationale for the said resolution was
founded on the cited findings of the CIS that amounts were transferred from a
Hong Kong bank account owned by Jetstream Pacific Ltd. Account to bank
accounts in the Philippines maintained by Liongson and Cheng Yong.11 The
Resolution also noted that "[b]y awarding the contract to PIATCO despite its
lack of financial capacity, Pantaleon Alvarez caused undue injury to the
government by giving PIATCO unwarranted benefits, advantage, or preference
in the discharge of his official administrative functions through manifest
partiality, evident bad faith, or gross inexcusable negligence, in violation of
Section 3(e) of Republic Act No. 3019."12
Under the authority granted by the Resolution, the AMLC filed an application
to inquire into or examine the deposits or investments of Alvarez, Trinidad,
Liongson and Cheng Yong before the RTC of Makati, Branch 138, presided by
Judge (now Court of Appeals Justice) Sixto Marella, Jr. The application was
docketed as AMLC No. 05-005.13 The Makati RTC heard the testimony of the
Deputy Director of the AMLC, Richard David C. Funk II, and received the
documentary evidence of the AMLC.14 Thereafter, on 4 July 2005, the Makati
RTC rendered an Order (Makati RTC bank inquiry order) granting the AMLC the
authority to inquire and examine the subject bank accounts of Alvarez, Trinidad,
Liongson and Cheng Yong, the trial court being satisfied that there existed
"[p]robable cause [to] believe that the deposits in various bank accounts,
details of which appear in paragraph 1 of the Application, are related to the
offense of violation of Anti-Graft and Corrupt Practices Act now the subject of
criminal prosecution before the Sandiganbayan as attested to by the
Informations, Exhibits C, D, E, F, and G."15 Pursuant to the Makati RTC bank
inquiry order, the CIS proceeded to inquire and examine the deposits,
investments and related web accounts of the four.16
Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis
Villa-Ignacio, wrote a letter dated 2 November 2005, requesting the AMLC to
investigate the accounts of Alvarez, PIATCO, and several other entities involved
in the nullified contract. The letter adverted to probable cause to believe that
the bank accounts "were used in the commission of unlawful activities that
were committed" in relation to the criminal cases then pending before the
Sandiganbayan.17 Attached to the letter was a memorandum "on why the
investigation of the [accounts] is necessary in the prosecution of the above
criminal cases before the Sandiganbayan."18
In response to the letter of the Special Prosecutor, the AMLC promulgated on
9 December 2005 Resolution No. 121 Series of 2005,19 which authorized the
executive director of the AMLC to inquire into and examine the accounts
named in the letter, including one maintained by Alvarez with DBS Bank and
two other accounts in the name of Cheng Yong with Metrobank. The Resolution
characterized the memorandum attached to the Special Prosecutor’s letter as
"extensively justif[ying] the existence of probable cause that the bank accounts
of the persons and entities mentioned in the letter are related to the unlawful
activity of violation of Sections 3(g) and 3(e) of Rep. Act No. 3019, as
amended."20
Following the December 2005 AMLC Resolution, the Republic, through the
AMLC, filed an application21 before the Manila RTC to inquire into and/or
examine thirteen (13) accounts and two (2) related web of accounts alleged as
having been used to facilitate corruption in the NAIA 3 Project. Among said
accounts were the DBS Bank account of Alvarez and the Metrobank accounts
of Cheng Yong. The case was raffled to Manila RTC, Branch 24, presided by
respondent Judge Antonio Eugenio, Jr., and docketed as SP Case No. 06-
114200.
On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank inquiry
order) granting the Ex Parte Application expressing therein "[that] the
allegations in said application to be impressed with merit, and in conformity
with Section 11 of R.A. No. 9160, as amended, otherwise known as the Anti-
Money Laundering Act (AMLA) of 2001 and Rules 11.1 and 11.2 of the Revised
Implementing Rules and Regulations."22 Authority was thus granted to the
AMLC to inquire into the bank accounts listed therein.
On 25 January 2006, Alvarez, through counsel, entered his appearance23 before
the Manila RTC in SP Case No. 06-114200 and filed an Urgent Motion to Stay
Enforcement of Order of January 12, 2006.24 Alvarez alleged that he fortuitously
learned of the bank inquiry order, which was issued following an ex parte
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
application, and he argued that nothing in R.A. No. 9160 authorized the AMLC
to seek the authority to inquire into bank accounts ex parte.25 The day after
Alvarez filed his motion, 26 January 2006, the Manila RTC issued an Order26
staying the enforcement of its bank inquiry order and giving the Republic five
(5) days to respond to Alvarez’s motion.
The Republic filed an Omnibus Motion for Reconsideration27 of the 26 January
2006 Manila RTC Order and likewise sought to strike out Alvarez’s motion that
led to the issuance of said order. For his part, Alvarez filed a Reply and Motion
to Dismiss28 the application for bank inquiry order. On 2 May 2006, the Manila
RTC issued an Omnibus Order29 granting the Republic’s Motion for
Reconsideration, denying Alvarez’s motion to dismiss and reinstating "in full
force and effect" the Order dated 12 January 2006. In the omnibus order, the
Manila RTC reiterated that the material allegations in the application for bank
inquiry order filed by the Republic stood as "the probable cause for the
investigation and examination of the bank accounts and investments of the
respondents."30
Alvarez filed on 10 May 2006 an Urgent Motion31 expressing his apprehension
that the AMLC would immediately enforce the omnibus order and would
thereby render the motion for reconsideration he intended to file as moot and
academic; thus he sought that the Republic be refrained from enforcing the
omnibus order in the meantime. Acting on this motion, the Manila RTC, on 11
May 2006, issued an Order32 requiring the OSG to file a comment/opposition
and reminding the parties that judgments and orders become final and
executory upon the expiration of fifteen (15) days from receipt thereof, as it is
the period within which a motion for reconsideration could be filed. Alvarez
filed his Motion for Reconsideration33 of the omnibus order on 15 May 2006,
but the motion was denied by the Manila RTC in an Order34 dated 5 July 2006.
On 11 July 2006, Alvarez filed an Urgent Motion and Manifestation35 wherein
he manifested having received reliable information that the AMLC was about
to implement the Manila RTC bank inquiry order even though he was intending
to appeal from it. On the premise that only a final and executory judgment or
order could be executed or implemented, Alvarez sought that the AMLC be
immediately ordered to refrain from enforcing the Manila RTC bank inquiry
order.
On 12 July 2006, the Manila RTC, acting on Alvarez’s latest motion, issued an
Order36 directing the AMLC "to refrain from enforcing the order dated January
12, 2006 until the expiration of the period to appeal, without any appeal having
been filed." On the same day, Alvarez filed a Notice of Appeal37 with the Manila
RTC.
On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for Clarification.38
Therein, he alleged having learned that the AMLC had began to inquire into the
bank accounts of the other persons mentioned in the application for bank
inquiry order filed by the Republic.39 Considering that the Manila RTC bank
inquiry order was issued ex parte, without notice to those other persons,
Alvarez prayed that the AMLC be ordered to refrain from inquiring into any of
the other bank deposits and alleged web of accounts enumerated in AMLC’s
application with the RTC; and that the AMLC be directed to refrain from using,
disclosing or publishing in any proceeding or venue any information or
document obtained in violation of the 11 May 2006 RTC Order.40
On 25 July 2006, or one day after Alvarez filed his motion, the Manila RTC issued
an Order41 wherein it clarified that "the Ex Parte Order of this Court dated
January 12, 2006 can not be implemented against the deposits or accounts of
any of the persons enumerated in the AMLC Application until the appeal of
movant Alvarez is finally resolved, otherwise, the appeal would be rendered
moot and academic or even nugatory."42 In addition, the AMLC was ordered
"not to disclose or publish any information or document found or obtained in
[v]iolation of the May 11, 2006 Order of this Court."43 The Manila RTC reasoned
that the other persons mentioned in AMLC’s application were not served with
the court’s 12 January 2006 Order. This 25 July 2006 Manila RTC Order is the
first of the four rulings being assailed through this petition.
In response, the Republic filed an Urgent Omnibus Motion for
Reconsideration44 dated 27 July 2006, urging that it be allowed to immediately
enforce the bank inquiry order against Alvarez and that Alvarez’s notice of
appeal be expunged from the records since appeal from an order of inquiry is
disallowed under the Anti money Laundering Act (AMLA).
Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition
for Certiorari, Prohibition and Mandamus with Application for TRO and/or Writ
of Preliminary Injunction45 dated 10 July 2006, directed against the Republic of
the Philippines through the AMLC, Manila RTC Judge Eugenio, Jr. and Makati
RTC Judge Marella, Jr.. She identified herself as the wife of Cheng Yong46 with
whom she jointly owns a conjugal bank account with Citibank that is covered
by the Makati RTC bank inquiry order, and two conjugal bank accounts with
Metrobank that are covered by the Manila RTC bank inquiry order. Lilia Cheng
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imputed grave abuse of discretion on the part of the Makati and Manila RTCs
in granting AMLC’s ex parte applications for a bank inquiry order, arguing
among others that the ex parte applications violated her constitutional right to
due process, that the bank inquiry order under the AMLA can only be granted
in connection with violations of the AMLA and that the AMLA can not apply to
bank accounts opened and transactions entered into prior to the effectivity of
the AMLA or to bank accounts located outside the Philippines.47
On 1 August 2006, the Court of Appeals, acting on Lilia Cheng’s petition, issued
a Temporary Restraining Order48 enjoining the Manila and Makati trial courts
from implementing, enforcing or executing the respective bank inquiry orders
previously issued, and the AMLC from enforcing and implementing such orders.
On even date, the Manila RTC issued an Order49 resolving to hold in abeyance
the resolution of the urgent omnibus motion for reconsideration then pending
before it until the resolution of Lilia Cheng’s petition for certiorari with the
Court of Appeals. The Court of Appeals Resolution directing the issuance of the
temporary restraining order is the second of the four rulings assailed in the
present petition.
The third assailed ruling50 was issued on 15 August 2006 by the Manila RTC,
acting on the Urgent Motion for Clarification51 dated 14 August 2006 filed by
Alvarez. It appears that the 1 August 2006 Manila RTC Order had amended its
previous 25 July 2006 Order by deleting the last paragraph which stated that
the AMLC "should not disclose or publish any information or document found
or obtained in violation of the May 11, 2006 Order of this Court."52 In this new
motion, Alvarez argued that the deletion of that paragraph would allow the
AMLC to implement the bank inquiry orders and publish whatever information
it might obtain thereupon even before the final orders of the Manila RTC could
become final and executory.53 In the 15 August 2006 Order, the Manila RTC
reiterated that the bank inquiry order it had issued could not be implemented
or enforced by the AMLC or any of its representatives until the appeal
therefrom was finally resolved and that any enforcement thereof would be
unauthorized.54
The present Consolidated Petition55 for certiorari and prohibition under Rule 65
was filed on 2 October 2006, assailing the two Orders of the Manila RTC dated
25 July and 15 August 2006 and the Temporary Restraining Order dated 1
August 2006 of the Court of Appeals. Through an Urgent Manifestation and
Motion56 dated 9 October 2006, petitioner informed the Court that on 22
September 2006, the Court of Appeals hearing Lilia Cheng’s petition had
granted a writ of preliminary injunction in her favor.57 Thereafter, petitioner
sought as well the nullification of the 22 September 2006 Resolution of the
Court of Appeals, thereby constituting the fourth ruling assailed in the instant
petition.58
The Court had initially granted a Temporary Restraining Order59 dated 6
October 2006 and later on a Supplemental Temporary Restraining Order60
dated 13 October 2006 in petitioner’s favor, enjoining the implementation of
the assailed rulings of the Manila RTC and the Court of Appeals. However, on
respondents’ motion, the Court, through a Resolution61 dated 11 December
2006, suspended the implementation of the restraining orders it had earlier
issued.
Oral arguments were held on 17 January 2007. The Court consolidated the
issues for argument as follows:
1. Did the RTC-Manila, in issuing the Orders dated 25 July 2006 and
15 August 2006 which deferred the implementation of its Order
dated 12 January 2006, and the Court of Appeals, in issuing its
Resolution dated 1 August 2006, which ordered the status quo in
relation to the 1 July 2005 Order of the RTC-Makati and the 12
January 2006 Order of the RTC-Manila, both of which authorized the
examination of bank accounts under Section 11 of Rep. Act No. 9160
(AMLA), commit grave abuse of discretion?
(a) Is an application for an order authorizing inquiry into
or examination of bank accounts or investments under
Section 11 of the AMLA ex-parte in nature or one which
requires notice and hearing?
(b) What legal procedures and standards should be
observed in the conduct of the proceedings for the
issuance of said order?
(c) Is such order susceptible to legal challenges and
judicial review?
2. Is it proper for this Court at this time and in this case to inquire
into and pass upon the validity of the 1 July 2005 Order of the RTC-
Makati and the 12 January 2006 Order of the RTC-Manila,
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considering the pendency of CA G.R. SP No. 95-198 (Lilia Cheng v.
Republic) wherein the validity of both orders was challenged?62
After the oral arguments, the parties were directed to file their respective
memoranda, which they did,63 and the petition was thereafter deemed
submitted for resolution.
II.
Petitioner’s general advocacy is that the bank inquiry orders issued by the
Manila and Makati RTCs are valid and immediately enforceable whereas the
assailed rulings, which effectively stayed the enforcement of the Manila and
Makati RTCs bank inquiry orders, are sullied with grave abuse of discretion.
These conclusions flow from the posture that a bank inquiry order, issued upon
a finding of probable cause, may be issued ex parte and, once issued, is
immediately executory. Petitioner further argues that the information obtained
following the bank inquiry is necessarily beneficial, if not indispensable, to the
AMLC in discharging its awesome responsibility regarding the effective
implementation of the AMLA and that any restraint in the disclosure of such
information to appropriate agencies or other judicial fora would render
meaningless the relief supplied by the bank inquiry order.
Petitioner raises particular arguments questioning Lilia Cheng’s right to seek
injunctive relief before the Court of Appeals, noting that not one of the bank
inquiry orders is directed against her. Her "cryptic assertion" that she is the wife
of Cheng Yong cannot, according to petitioner, "metamorphose into the
requisite legal standing to seek redress for an imagined injury or to maintain an
action in behalf of another." In the same breath, petitioner argues that Alvarez
cannot assert any violation of the right to financial privacy in behalf of other
persons whose bank accounts are being inquired into, particularly those other
persons named in the Makati RTC bank inquiry order who did not take any step
to oppose such orders before the courts.
Ostensibly, the proximate question before the Court is whether a bank inquiry
order issued in accordance with Section 10 of the AMLA may be stayed by
injunction. Yet in arguing that it does, petitioner relies on what it posits as the
final and immediately executory character of the bank inquiry orders issued by
the Manila and Makati RTCs. Implicit in that position is the notion that the
inquiry orders are valid, and such notion is susceptible to review and validation
based on what appears on the face of the orders and the applications which
triggered their issuance, as well as the provisions of the AMLA governing the
issuance of such orders. Indeed, to test the viability of petitioner’s argument,
the Court will have to be satisfied that the subject inquiry orders are valid in the
first place. However, even from a cursory examination of the applications for
inquiry order and the orders themselves, it is evident that the orders are not in
accordance with law.
III.
A brief overview of the AMLA is called for.
Money laundering has been generally defined by the International Criminal
Police Organization (Interpol) `as "any act or attempted act to conceal or
disguise the identity of illegally obtained proceeds so that they appear to have
originated from legitimate sources."64 Even before the passage of the AMLA,
the problem was addressed by the Philippine government through the issuance
of various circulars by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative
proscription was necessary, especially with the inclusion of the Philippines in
the Financial Action Task Force’s list of non-cooperative countries and
territories in the fight against money laundering.65 The original AMLA, Republic
Act (R.A.) No. 9160, was passed in 2001. It was amended by R.A. No. 9194 in
2003.
Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the
proceeds of an unlawful activity as [defined in the law] are transacted, thereby
making them appear to have originated from legitimate sources."66 The section
further provides the three modes through which the crime of money
laundering is committed. Section 7 creates the AMLC and defines its powers,
which generally relate to the enforcement of the AMLA provisions and the
initiation of legal actions authorized in the AMLA such as civil forefeiture
proceedings and complaints for the prosecution of money laundering
offenses.67
In addition to providing for the definition and penalties for the crime of money
laundering, the AMLA also authorizes certain provisional remedies that would
aid the AMLC in the enforcement of the AMLA. These are the "freeze order"
authorized under Section 10, and the "bank inquiry order" authorized under
Section 11.
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Respondents posit that a bank inquiry order under Section 11 may be obtained
only upon the pre-existence of a money laundering offense case already filed
before the courts.68 The conclusion is based on the phrase "upon order of any
competent court in cases of violation of this Act," the word "cases" generally
understood as referring to actual cases pending with the courts.
We are unconvinced by this proposition, and agree instead with the then
Solicitor General who conceded that the use of the phrase "in cases of" was
unfortunate, yet submitted that it should be interpreted to mean "in the event
there are violations" of the AMLA, and not that there are already cases pending
in court concerning such violations.69 If the contrary position is adopted, then
the bank inquiry order would be limited in purpose as a tool in aid of litigation
of live cases, and wholly inutile as a means for the government to ascertain
whether there is sufficient evidence to sustain an intended prosecution of the
account holder for violation of the AMLA. Should that be the situation, in all
likelihood the AMLC would be virtually deprived of its character as a discovery
tool, and thus would become less circumspect in filing complaints against
suspect account holders. After all, under such set-up the preferred strategy
would be to allow or even encourage the indiscriminate filing of complaints
under the AMLA with the hope or expectation that the evidence of money
laundering would somehow surface during the trial. Since the AMLC could not
make use of the bank inquiry order to determine whether there is evidentiary
basis to prosecute the suspected malefactors, not filing any case at all would
not be an alternative. Such unwholesome set-up should not come to pass. Thus
Section 11 cannot be interpreted in a way that would emasculate the remedy
it has established and encourage the unfounded initiation of complaints for
money laundering.
Still, even if the bank inquiry order may be availed of without need of a pre-
existing case under the AMLA, it does not follow that such order may be availed
of ex parte. There are several reasons why the AMLA does not generally
sanction ex parte applications and issuances of the bank inquiry order.
IV. It is evident that Section 11 does not specifically authorize, as a general rule,
the issuance ex parte of the bank inquiry order. We quote the provision in full:
SEC. 11. Authority to Inquire into Bank Deposits. ― Notwithstanding
the provisions of Republic Act No. 1405, as amended, Republic Act
No. 6426, as amended, Republic Act No. 8791, and other laws, the
AMLC may inquire into or examine any particular deposit or
investment with any banking institution or non bank financial
institution upon order of any competent court in cases of violation
of this Act, when it has been established that there is probable cause
that the deposits or investments are related to an unlawful activity as
defined in Section 3(i) hereof or a money laundering offense under
Section 4 hereof, except that no court order shall be required in cases
involving unlawful activities defined in Sections 3(i)1, (2) and (12).
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas
(BSP) may inquire into or examine any deposit of investment with
any banking institution or non bank financial institution when the
examination is made in the course of a periodic or special
examination, in accordance with the rules of examination of the
BSP.70 (Emphasis supplied)
Of course, Section 11 also allows the AMLC to inquire into bank accounts
without having to obtain a judicial order in cases where there is probable cause
that the deposits or investments are related to kidnapping for ransom,71 certain
violations of the Comprehensive Dangerous Drugs Act of 2002,72 hijacking and
other violations under R.A. No. 6235, destructive arson and murder. Since such
special circumstances do not apply in this case, there is no need for us to pass
comment on this proviso. Suffice it to say, the proviso contemplates a situation
distinct from that which presently confronts us, and for purposes of the
succeeding discussion, our reference to Section 11 of the AMLA excludes said
proviso.
In the instances where a court order is required for the issuance of the bank
inquiry order, nothing in Section 11 specifically authorizes that such court order
may be issued ex parte. It might be argued that this silence does not preclude
the ex parte issuance of the bank inquiry order since the same is not prohibited
under Section 11. Yet this argument falls when the immediately preceding
provision, Section 10, is examined.
SEC. 10. Freezing of Monetary Instrument or Property. ― The Court
of Appeals, upon application ex parte by the AMLC and after
determination that probable cause exists that any monetary
instrument or property is in any way related to an unlawful activity
as defined in Section 3(i) hereof, may issue a freeze order which shall
be effective immediately. The freeze order shall be for a period of
twenty (20) days unless extended by the court.73
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Although oriented towards different purposes, the freeze order under Section
10 and the bank inquiry order under Section 11 are similar in that they are
extraordinary provisional reliefs which the AMLC may avail of to effectively
combat and prosecute money laundering offenses. Crucially, Section 10 uses
specific language to authorize an ex parte application for the provisional relief
therein, a circumstance absent in Section 11. If indeed the legislature had
intended to authorize ex parte proceedings for the issuance of the bank inquiry
order, then it could have easily expressed such intent in the law, as it did with
the freeze order under Section 10.
Even more tellingly, the current language of Sections 10 and 11 of the AMLA
was crafted at the same time, through the passage of R.A. No. 9194. Prior to
the amendatory law, it was the AMLC, not the Court of Appeals, which had
authority to issue a freeze order, whereas a bank inquiry order always then
required, without exception, an order from a competent court.74 It was through
the same enactment that ex parte proceedings were introduced for the first
time into the AMLA, in the case of the freeze order which now can only be
issued by the Court of Appeals. It certainly would have been convenient,
through the same amendatory law, to allow a similar ex parte procedure in the
case of a bank inquiry order had Congress been so minded. Yet nothing in the
provision itself, or even the available legislative record, explicitly points to an ex
parte judicial procedure in the application for a bank inquiry order, unlike in the
case of the freeze order.
That the AMLA does not contemplate ex parte proceedings in applications for
bank inquiry orders is confirmed by the present implementing rules and
regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With
respect to freeze orders under Section 10, the implementing rules do expressly
provide that the applications for freeze orders be filed ex parte,75 but no similar
clearance is granted in the case of inquiry orders under Section 11.76 These
implementing rules were promulgated by the Bangko Sentral ng Pilipinas, the
Insurance Commission and the Securities and Exchange Commission,77 and if it
was the true belief of these institutions that inquiry orders could be issued ex
parte similar to freeze orders, language to that effect would have been
incorporated in the said Rules. This is stressed not because the implementing
rules could authorize ex parte applications for inquiry orders despite the
absence of statutory basis, but rather because the framers of the law had no
intention to allow such ex parte applications.
Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC78
to enforce the provisions of the AMLA specifically authorize ex parte
applications with respect to freeze orders under Section 1079 but make no
similar authorization with respect to bank inquiry orders under Section 11.
The Court could divine the sense in allowing ex parte proceedings under Section
10 and in proscribing the same under Section 11. A freeze order under Section
10 on the one hand is aimed at preserving monetary instruments or property
in any way deemed related to unlawful activities as defined in Section 3(i) of
the AMLA. The owner of such monetary instruments or property would thus be
inhibited from utilizing the same for the duration of the freeze order. To make
such freeze order anteceded by a judicial proceeding with notice to the account
holder would allow for or lead to the dissipation of such funds even before the
order could be issued.
On the other hand, a bank inquiry order under Section 11 does not necessitate
any form of physical seizure of property of the account holder. What the bank
inquiry order authorizes is the examination of the particular deposits or
investments in banking institutions or non-bank financial institutions. The
monetary instruments or property deposited with such banks or financial
institutions are not seized in a physical sense, but are examined on particular
details such as the account holder’s record of deposits and transactions. Unlike
the assets subject of the freeze order, the records to be inspected under a bank
inquiry order cannot be physically seized or hidden by the account holder. Said
records are in the possession of the bank and therefore cannot be destroyed at
the instance of the account holder alone as that would require the
extraordinary cooperation and devotion of the bank.
Interestingly, petitioner’s memorandum does not attempt to demonstrate
before the Court that the bank inquiry order under Section 11 may be issued ex
parte, although the petition itself did devote some space for that argument.
The petition argues that the bank inquiry order is "a special and peculiar
remedy, drastic in its name, and made necessary because of a public necessity…
[t]hus, by its very nature, the application for an order or inquiry must
necessarily, be ex parte." This argument is insufficient justification in light of the
clear disinclination of Congress to allow the issuance ex parte of bank inquiry
orders under Section 11, in contrast to the legislature’s clear inclination to allow
the ex parte grant of freeze orders under Section 10.
Without doubt, a requirement that the application for a bank inquiry order be
done with notice to the account holder will alert the latter that there is a plan
to inspect his bank account on the belief that the funds therein are involved in
an unlawful activity or money laundering offense.80 Still, the account holder so
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alerted will in fact be unable to do anything to conceal or cleanse his bank
account records of suspicious or anomalous transactions, at least not without
the whole-hearted cooperation of the bank, which inherently has no vested
interest to aid the account holder in such manner.
V. The necessary implication of this finding that Section 11 of the AMLA does
not generally authorize the issuance ex parte of the bank inquiry order would
be that such orders cannot be issued unless notice is given to the owners of the
account, allowing them the opportunity to contest the issuance of the order.
Without such a consequence, the legislated distinction between ex parte
proceedings under Section 10 and those which are not ex parte under Section
11 would be lost and rendered useless.
There certainly is fertile ground to contest the issuance of an ex parte order.
Section 11 itself requires that it be established that "there is probable cause
that the deposits or investments are related to unlawful activities," and it
obviously is the court which stands as arbiter whether there is indeed such
probable cause. The process of inquiring into the existence of probable cause
would involve the function of determination reposed on the trial court.
Determination clearly implies a function of adjudication on the part of the trial
court, and not a mechanical application of a standard pre-determination by
some other body. The word "determination" implies deliberation and is, in
normal legal contemplation, equivalent to "the decision of a court of justice."81
The court receiving the application for inquiry order cannot simply take the
AMLC’s word that probable cause exists that the deposits or investments are
related to an unlawful activity. It will have to exercise its
own determinative function in order to be convinced of such fact. The account
holder would be certainly capable of contesting such probable cause if given
the opportunity to be apprised of the pending application to inquire into his
account; hence a notice requirement would not be an empty spectacle. It may
be so that the process of obtaining the inquiry order may become more
cumbersome or prolonged because of the notice requirement, yet we fail to
see any unreasonable burden cast by such circumstance. After all, as earlier
stated, requiring notice to the account holder should not, in any way,
compromise the integrity of the bank records subject of the inquiry which
remain in the possession and control of the bank.
Petitioner argues that a bank inquiry order necessitates a finding of probable
cause, a characteristic similar to a search warrant which is applied to and heard
ex parte. We have examined the supposed analogy between a search warrant
and a bank inquiry order yet we remain to be unconvinced by petitioner.
The Constitution and the Rules of Court prescribe particular requirements
attaching to search warrants that are not imposed by the AMLA with respect to
bank inquiry orders. A constitutional warrant requires that the judge personally
examine under oath or affirmation the complainant and the witnesses he may
produce,82 such examination being in the form of searching questions and
answers.83 Those are impositions which the legislative did not specifically
prescribe as to the bank inquiry order under the AMLA, and we cannot find
sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a
bank inquiry order is not a search warrant or warrant of arrest as it
contemplates a direct object but not the seizure of persons or property.
Even as the Constitution and the Rules of Court impose a high procedural
standard for the determination of probable cause for the issuance of search
warrants which Congress chose not to prescribe for the bank inquiry order
under the AMLA, Congress nonetheless disallowed ex parte applications for the
inquiry order. We can discern that in exchange for these procedural standards
normally applied to search warrants, Congress chose instead to legislate a right
to notice and a right to be heard— characteristics of judicial proceedings which
are not ex parte. Absent any demonstrable constitutional infirmity, there is no
reason for us to dispute such legislative policy choices.
VI.
The Court’s construction of Section 11 of the AMLA is undoubtedly influenced
by right to privacy considerations. If sustained, petitioner’s argument that a
bank account may be inspected by the government following an ex parte
proceeding about which the depositor would know nothing would have
significant implications on the right to privacy, a right innately cherished by all
notwithstanding the legally recognized exceptions thereto. The notion that the
government could be so empowered is cause for concern of any individual who
values the right to privacy which, after all, embodies even the right to be "let
alone," the most comprehensive of rights and the right most valued by civilized
people.84
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One might assume that the constitutional dimension of the right to privacy, as
applied to bank deposits, warrants our present inquiry. We decline to do so.
Admittedly, that question has proved controversial in American jurisprudence.
Notably, the United States Supreme Court in U.S. v. Miller85 held that there was
no legitimate expectation of privacy as to the bank records of a depositor.86
Moreover, the text of our Constitution has not bothered with the triviality of
allocating specific rights peculiar to bank deposits.
However, sufficient for our purposes, we can assert there is a right to privacy
governing bank accounts in the Philippines, and that such right finds application
to the case at bar. The source of such right is statutory, expressed as it is in R.A.
No. 1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy
is enshrined in Section 2 of that law, to wit:
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. (Emphasis supplied)
Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a
basic state policy in the Philippines.87 Subsequent laws, including the AMLA,
may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank
deposits still lies as the general rule. It falls within the zones of privacy
recognized by our laws.88 The framers of the 1987 Constitution likewise
recognized that bank accounts are not covered by either the right to
information89 under Section 7, Article III or under the requirement of full public
disclosure90 under Section 28, Article II.91 Unless the Bank Secrecy Act is
repealed or
amended, the legal order is obliged to conserve the absolutely confidential
nature of Philippine bank deposits.
Any exception to the rule of absolute confidentiality must be specifically
legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions
whereby these bank accounts may be examined by "any person, government
official, bureau or office"; namely when: (1) upon written permission of the
depositor; (2) in cases of impeachment; (3) the examination of bank accounts
is upon order of a competent court in cases of bribery or dereliction of duty of
public officials; and (4) the money deposited or invested is the subject matter
of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt
Practices Act, has been recognized by this Court as constituting an additional
exception to the rule of absolute confidentiality,92 and there have been other
similar recognitions as well.93
The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11,
the AMLC may inquire into a bank account upon order of any competent court
in cases of violation of the AMLA, it having been established that there is
probable cause that the deposits or investments are related to unlawful
activities as defined in Section 3(i) of the law, or a money laundering offense
under Section 4 thereof. Further, in instances where there is probable cause
that the deposits or investments are related to kidnapping for ransom,94 certain
violations of the Comprehensive Dangerous Drugs Act of 2002,95 hijacking and
other violations under R.A. No. 6235, destructive arson and murder, then there
is no need for the AMLC to obtain a court order before it could inquire into such
accounts. It cannot be successfully argued the proceedings relating to the bank
inquiry order under Section 11 of the AMLA is a "litigation" encompassed in one
of the exceptions to the Bank Secrecy Act which is when "the money deposited
or invested is the subject matter of the litigation." The orientation of the bank
inquiry order is simply to serve as a provisional relief or remedy. As earlier
stated, the application for such does not entail a full-blown trial.
Nevertheless, just because the AMLA establishes additional exceptions to the
Bank Secrecy Act it does not mean that the later law has dispensed with the
general principle established in the older law that "[a]ll deposits of whatever
nature with banks or banking institutions in the Philippines x x x are hereby
considered as of an absolutely confidential nature."96 Indeed, by force of
statute, all bank deposits are absolutely confidential, and that nature is
unaltered even by the legislated exceptions referred to above. There is disfavor
towards construing these exceptions in such a manner that would authorize
unlimited discretion on the part of the government or of any party seeking to
enforce those exceptions and inquire into bank deposits. If there are 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. Such a stance would persist unless Congress passes a law
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reversing the general state policy of preserving the absolutely confidential
nature of Philippine bank accounts.
The presence of this statutory right to privacy addresses at least one of the
arguments raised by petitioner, that Lilia Cheng had no personality to assail the
inquiry orders before the Court of Appeals because she was not the subject of
said orders. AMLC Resolution No. 75, which served as the basis in the successful
application for the Makati inquiry order, expressly adverts to Citibank Account
No. 88576248 "owned by Cheng Yong and/or Lilia G. Cheng with Citibank
N.A.,"97 whereas Lilia Cheng’s petition before the Court of Appeals is
accompanied by a certification from Metrobank that Account Nos. 300852436-
0 and 700149801-7, both of which are among the subjects of the Manila inquiry
order, are accounts in the name of "Yong Cheng or Lilia Cheng."98 Petitioner
does not specifically deny that Lilia Cheng holds rights of ownership over the
three said accounts, laying focus instead on the fact that she was not named as
a subject of either the Makati or Manila RTC inquiry orders. We are reasonably
convinced that Lilia Cheng has sufficiently demonstrated her joint ownership of
the three accounts, and such conclusion leads us to acknowledge that she has
the standing to assail via certiorari the inquiry orders authorizing the
examination of her bank accounts as the orders interfere with her statutory
right to maintain the secrecy of said accounts.
While petitioner would premise that the inquiry into Lilia Cheng’s accounts
finds root in Section 11 of the AMLA, it cannot be denied that the authority to
inquire under Section 11 is only exceptional in character, contrary as it is to the
general rule preserving the secrecy of bank deposits. Even though she may not
have been the subject of the inquiry orders, her bank accounts nevertheless
were, and she thus has the standing to vindicate the right to secrecy that
attaches to said accounts and their owners. This statutory right to privacy will
not prevent the courts from authorizing the inquiry anyway upon the fulfillment
of the requirements set forth under Section 11 of the AMLA or Section 2 of the
Bank Secrecy Act; at the same time, the owner of the accounts have the right
to challenge whether the requirements were indeed complied with.
VII. There is a final point of concern which needs to be addressed. Lilia Cheng
argues that the AMLA, being a substantive penal statute, has no retroactive
effect and the bank inquiry order could not apply to deposits or investments
opened prior to the effectivity of Rep. Act No. 9164, or on 17 October 2001.
Thus, she concludes, her subject bank accounts, opened between 1989 to
1990, could not be the subject of the bank inquiry order lest there be a violation
of the constitutional prohibition against ex post facto laws.
No ex post facto law may be enacted,99 and no law may be construed in such
fashion as to permit a criminal prosecution offensive to the ex post facto clause.
As applied to the AMLA, it is plain that no person may be prosecuted under the
penal provisions of the AMLA for acts committed prior to the enactment of the
law on 17 October 2001. As much was understood by the lawmakers since they
deliberated upon the AMLA, and indeed there is no serious dispute on that
point.
Does the proscription against ex post facto laws apply to the interpretation of
Section 11, a provision which does not provide for a penal sanction but which
merely authorizes the inspection of suspect accounts and deposits? The answer
is in the affirmative. In this jurisdiction, we have defined an ex post facto law as
one which either:
(1) makes criminal an act done before the passage of the law and
which was innocent when done, and punishes such an act;
(2) aggravates a crime, or makes it greater than it was, when
committed;
(3) changes the punishment and inflicts a greater punishment than
the law annexed to the crime when committed;
(4) alters the legal rules of evidence, and authorizes conviction upon
less or different testimony than the law required at the time of the
commission of the offense;
(5) assuming to regulate civil rights and remedies only, in effect
imposes penalty or deprivation of a right for something which when
done was lawful; and
(6) deprives a person accused of a crime of some lawful protection to
which he has become entitled, such as the protection of a former
conviction or acquittal, or a proclamation of amnesty. (Emphasis
supplied)100
Prior to the enactment of the AMLA, the fact that bank accounts or deposits
were involved in activities later on enumerated in Section 3 of the law did not,
by itself, remove such accounts from the shelter of absolute confidentiality.
Prior to the AMLA, in order that bank accounts could be examined, there was
need to secure either the written permission of the depositor or a court order
authorizing such examination, assuming that they were involved in cases of
bribery or dereliction of duty of public officials, or in a case where the money
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deposited or invested was itself the subject matter of the litigation. The passage
of the AMLA stripped another layer off the rule on absolute confidentiality that
provided a measure of lawful protection to the account holder. For that reason,
the application of the bank inquiry order as a means of inquiring into records
of transactions entered into prior to the passage of the AMLA would be
constitutionally infirm, offensive as it is to the ex post facto clause.
Still, we must note that the position submitted by Lilia Cheng is much broader
than what we are willing to affirm. She argues that the proscription against ex
post facto laws goes as far as to prohibit any inquiry into deposits or
investments included in bank accounts opened prior to the effectivity of the
AMLA even if the suspect transactions were entered into when the law had
already taken effect. The Court recognizes that if this argument were to be
affirmed, it would create a horrible loophole in the AMLA that would in turn
supply the means to fearlessly engage in money laundering in the Philippines;
all that the criminal has to do is to make sure that the money laundering activity
is facilitated through a bank account opened prior to 2001. Lilia Cheng admits
that "actual money launderers could utilize the ex post facto provision of the
Constitution as a shield" but that the remedy lay with Congress to amend the
law. We can hardly presume that Congress intended to enact a self-defeating
law in the first place, and the courts are inhibited from such a construction by
the cardinal rule that "a law should be interpreted with a view to upholding
rather than destroying it."101
Besides, nowhere in the legislative record cited by Lilia Cheng does it appear
that there was an unequivocal intent to exempt from the bank inquiry order all
bank accounts opened prior to the passage of the AMLA. There is a cited
exchange between Representatives Ronaldo Zamora and Jaime Lopez where
the latter confirmed to the former that "deposits are supposed to be exempted
from scrutiny or monitoring if they are already in place as of the time the law is
enacted."102 That statement does indicate that transactions already in place
when the AMLA was passed are indeed exempt from scrutiny through a bank
inquiry order, but it cannot yield any interpretation that records of transactions
undertaken after the enactment of the AMLA are similarly exempt. Due to the
absence of cited authority from the legislative record that unqualifiedly
supports respondent Lilia Cheng’s thesis, there is no cause for us to sustain her
interpretation of the AMLA, fatal as it is to the anima of that law.
IX. We are well aware that Lilia Cheng’s petition presently pending before the
Court of Appeals likewise assails the validity of the subject bank inquiry orders
and precisely seeks the annulment of said orders. Our current declarations may
indeed have the effect of preempting that0 petition. Still, in order for this Court
to rule on the petition at bar which insists on the enforceability of the said bank
inquiry orders, it is necessary for us to consider and rule on the same question
which after all is a pure question of law.
WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs.
SO ORDERED
G.R. Nos. 164368-69 April 2, 2009
PEOPLE OF THE PHILIPPINES, Petitioner, vs. JOSEPH EJERCITO ESTRADA and
THE HONORABLE SPECIAL DIVISION OF THE SANDIGANBAYAN,
Respondents.
The People of the Philippines (the People) filed this Petition for Review on
Certiorari1 to seek the reversal of the Sandiganbayan’s Joint Resolution dated
July 12, 2004, granting respondent Joseph Ejercito Estrada’s (Estrada) demurrer
to evidence in Crim. Case No. 26565.2
FACTS: On April 4, 2001, an Information for plunder (docketed as Crim. Case
No. 26558) was filed with the Sandiganbayan against respondent Estrada,
among other accused. A separate Information for illegal use of alias, docketed
as Crim. Case No. 26565, was likewise filed against Estrada. The Amended
Information in Crim. Case No. 26565 reads:
That on or about 04 February 2000, or sometime prior or subsequent thereto,
in the City of Manila, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, being then President of the Republic of the
Philippines, without having been duly authorized, judicially or administratively,
taking advantage of his position and committing the offense in relation to
office, i.e., in order to CONCEAL THE ill-gotten wealth HE ACQUIRED during his
tenure and his true identity as THE President of the Republic of the Philippines,
did then and there, willfully, unlawfully and criminally REPRESENT HIMSELF AS
‘JOSE VELARDE’ IN SEVERAL TRANSACTIONS AND use and employ the SAID alias
"Jose Velarde" which IS neither his registered name at birth nor his baptismal
name, in signing documents with Equitable PCI Bank and/or other corporate
entities.
CONTRARY TO LAW.
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Crim. Case Nos. 26565 and 26558 were subsequently consolidated for joint
trial. Still another Information, this time for perjury and docketed as Crim. Case
No. 26905, was filed with the Sandiganbayan against Estrada. This was later
consolidated, too, with Crim. Cases No. 26558 and 26565. Estrada was
subsequently arrested on the basis of a warrant of arrest that the
Sandiganbayan issued.
On January 11, 2005, we ordered the creation of a Special Division in the
Sandiganbayan to try, hear, and decide the charges of plunder and related
cases (illegal use of alias and perjury) against respondent Estrada.3 At the trial,
the People presented testimonial and documentary evidence to prove the
allegations of the Informations for plunder, illegal use of alias, and perjury. The
People’s evidence for the illegal alias charge, as summarized by the
Sandiganbayan, consisted of:
A. The testimonies of Philippine Commercial and Industrial Bank
(PCIB) officers Clarissa G. Ocampo (Ocampo) and Atty. Manuel
Curato (Curato) who commonly declared that on February 4, 2000,
Estrada opened a numbered trust account (Trust Account C-163)
with PCIB and signed as "Jose Velarde" in the account opening
documents; both Ocampo and Curato also testified that Aprodicio
Lacquian and Fernando Chua were present on that occasion;
B. (1) The testimony of PCIB-Greenhills Branch Manager Teresa
Barcelan, who declared that a certain Baby Ortaliza (Ortaliza)
transacted several times with her; that Ortaliza deposited several
checks in PCIB Savings Account No. 0160-62502-5 under the
account name "Jose Velarde" on the following dates (as evidenced
by deposit receipts duly marked in evidence):
a. 20 October 1999 (Exh. "MMMMM")
b. 8 November 1999 (Exh. "LLLLL")
c. 22 November 1999 (Exh. "NNNNN")
d. 24 November 1999 (Exh. "OOOOO")
e. 25 November 1999 (Exh. "PPPPP")
f. 20 December 1999 (Exh. "QQQQQ")
g. 21 December 1999 (Exh. "RRRRR")
h. 29 December 1999 (Exh. "SSSSS")
i. 4 January 2000 (Exh. "TTTTT")
j. 10 May 2000 (Exh. "UUUUU")
k. 6 June 2000 (Exh. "VVVVV")
l. 25 July 2000 (Exh. "WWWWW")
(2) Documents duly identified by witnesses showing that Lucena
Ortaliza was employed in the Office of the Vice President and, later
on, in the Office of the President when Estrada occupied these
positions and when deposits were made to the Jose Velarde Savings
Account No. 0160-62502-5.
The People filed its Formal Offer of Exhibits in the consolidated cases, which
the Sandiganbayan admitted into evidence in a Resolution dated October 13,
2003.4 The accused separately moved to reconsider the Sandiganbayan
Resolution;5 the People, on the other hand, filed its Consolidated
Comment/Opposition to the motions.6 The Sandiganbayan denied the motions
in its Resolution dated November 17, 2003.7
After the People rested in all three cases, the defense moved to be allowed to
file a demurrer to evidence in these cases.8 In its Joint Resolution dated March
10, 2004,9 the Sandiganbayan only granted the defense leave to file demurrers
in Crim. Case Nos. 26565 (illegal use of alias) and 26905 (perjury).
Estrada filed separate Demurrers to Evidence for Crim. Case Nos. 26565 and
26905.10 His demurrer to evidence for Crim. Case No. 26565 (illegal use of alias)
was anchored on the following grounds11:
1. Of the thirty-five (35) witnesses presented by the prosecution,
only two (2) witnesses, Ms. Clarissa Ocampo and Atty. Manuel
Curato, testified that on one occasion (4 February 2000), they saw
movant use the name "Jose Velarde";
2. The use of numbered accounts and the like was legal and was
prohibited only in late 2001 as can be gleaned from Bangko Sentral
Circular No. 302, series of 2001, dated 11 October 2001;
3. There is no proof of public and habitual use of alias as the
documents offered by the prosecution are banking documents
which, by their nature, are confidential and cannot be revealed
without following proper procedures; and
4. The use of alias is absorbed in plunder.
The People opposed the demurrers through a Consolidated Opposition that
presented the following arguments:12
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1. That the use of fictitious names in bank transaction was not
expressly prohibited until BSP No. 302 is of no moment considering
that as early as Commonwealth Act No. 142, the use of alias was
already prohibited. Movant is being prosecuted for violation of C.A.
No. 142 and not BSP Circular No. 302;
2. Movant’s reliance on Ursua vs. Court of Appeals (256 SCRA 147
[1996]) is misplaced;
3. Assuming arguendo that C.A. No. 142, as amended, requires
publication of the alias and the habitual use thereof, the
prosecution has presented more than sufficient evidence in this
regard to convict movant for illegal use of alias; and
4. Contrary to the submission of movant, the instant case of illegal
use of alias is not absorbed in plunder.
Estrada replied to the Consolidated Opposition through a Consolidated Reply
Opposition.
THE ASSAILED SANDIGANBAYAN’S RULING
The Sandiganbayan issued on July 12, 2004 the Resolution now assailed in this
petition. The salient points of the assailed resolution are:
First – the coverage of Estrada’s indictment. The Sandiganbayan found that the
only relevant evidence for the indictment are those relating to what is
described in the Information – i.e., the testimonies and documents on the
opening of Trust Account C-163 on February 4, 2000. The Sandiganbayan
reasoned out that the use of the disjunctive "or" between "on or about 04
February 2000" and "sometime prior or subsequent thereto" means that the
act/s allegedly committed on February 4, 2000 could have actually taken place
prior to or subsequent thereto; the use of the conjunctive was simply the
prosecution’s procedural tool to guard against any variance between the date
stated in the Information and that proved during the trial in a situation in which
time was not a material ingredient of the offense; it does not mean and cannot
be read as a roving commission that includes acts and/or events separate and
distinct from those that took place on the single date "on or about 04 February
2000 or sometime prior or subsequent thereto." The Sandiganbayan ruled that
the use of the disjunctive "or" prevented it from interpreting the Information
any other way.
Second – the People’s failure to present evidence that proved Estrada’s
commission of the offense. The Sandiganbayan found that the People failed to
present evidence that Estrada committed the crime punished under
Commonwealth Act No. 142, as amended by Republic Act (R.A.) No. 6085 (CA
142), as interpreted by the Supreme Court in Ursua v. Court of Appeals.13 It
ruled that there is an illegal use of alias within the context of CA 142 only if the
use of the alias is public and habitual. In Estrada’s case, the Sandiganbayan
noted, the application of the principles was not as simple because of the
complications resulting from the nature of the transaction involved – the alias
was used in connection with the opening of a numbered trust account made
during the effectivity of R.A. No. 1405, as amended,14 and prior to the
enactment of Republic R.A. No. 9160.15
Estrada did not publicly use the alias "Jose Velarde":
a. Estrada’s use of the alias "Jose Velarde" in his dealings with
Dichavez and Ortaliza after February 4, 2000 is not relevant in light
of the conclusion that the acts imputed to Estrada under the
Information were the act/s committed on February 4, 2000 only.
Additionally, the phrase, "Estrada did … represent himself as ‘Jose
Velarde’ in several transactions," standing alone, violates Estrada’s
right to be informed of the nature and the cause of the accusation,
because it is very general and vague. This phrase is qualified and
explained by the succeeding phrase – "and use and employ the said
alias ‘Jose Velarde’" – which "is neither his registered name at birth
nor his baptismal name, in signing documents with Equitable PCI
Bank and/or other corporate entities." Thus, Estrada’s
representations before persons other than those mentioned in the
Information are immaterial; Ortaliza and Dichavez do not fall within
the "Equitable PCI Bank and/or other corporate entities" specified
in the Information. Estrada’s representations with Ortaliza and
Dichavez are not therefore covered by the indictment.
b. The Sandiganbayan rejected the application of the principle in the
law of libel that mere communication to a third person is publicity;
it reasoned out that that the definition of publicity is not limited to
the way it is defined under the law on libel; additionally, the
application of the libel law definition is onerous to the accused and
is precluded by the ruling in Ursua that CA No. 142, as a penal
statute, should be construed strictly against the State and favorably
for the accused. It ruled that the definition under the law on libel,
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even if it applies, considers a communication to a third person
covered by the privileged communication rule to be non-actionable.
Estrada’s use of the alias in front of Ocampo and Curato is one such
privileged communication under R.A. No. 1405, as amended. The
Sandiganbayan said:
Movant’s act of signing "Jose Velarde" in bank documents being
absolutely confidential, the witnessing thereof by bank officers who
were likewise sworn to secrecy by the same law cannot be
considered as ‘public’ as to fall within the ambit of CA 142 as
amended. On account of the absolute confidentiality of the
transaction, it cannot be said that movant intended to be known by
this name in addition to his real name. Confidentiality and secrecy
negate publicity. Ursua instructs:
Hence, the use of a fictitious name or a different name belonging to
another person in a single instance without any sign or indication
that the user intends to be known by this name in addition to his
real name from that day forth does not fall within the prohibition in
C.A. No. 142 as amended.
c. The Sandiganbayan further found that the intention not to be
publicly known by the name "Jose Velarde" is shown by the nature
of a numbered account – a perfectly valid banking transaction at the
time Trust Account C-163 was opened. The opening, too, of a
numbered trust account, the Sandiganbayan further ruled, did not
impose on Estrada the obligation to disclose his real identity – the
obligation R.A. No. 6713 imposes is to file under oath a statement
of assets and liabilities.16 Reading CA No. 142, R.A. No. 1405 and R.A.
No. 6713 together, Estrada had the absolute obligation to disclose
his assets including the amount of his bank deposits, but he was
under no obligation at all to disclose the other particulars of the
bank account (such as the name he used to open it).
Third – the effect of the enactment of R.A. No. 9160.17 The Sandiganbayan said
that the absolute prohibition in R.A. No. 9160 against the use of anonymous
accounts, accounts under fictitious names, and all other similar accounts, is a
legislative acknowledgment that a gaping hole previously existed in our laws
that allowed depositors to hide their true identities. The Sandiganbayan noted
that the prohibition was lifted from Bangko Sentral ng Pilipinas (BSP) Circular
No. 251 dated July 7, 2000 – another confirmation that the opening of a
numbered trust account was perfectly legal when it was opened on February 4,
2000.
The Sandiganbayan ruled that the provisions of CA No. 142, as interpreted in
Ursua, must necessarily be harmonized with the provisions of R.A. No.1405 and
R.A. No. 9160 under the principle that every statute should be construed in a
way that will harmonize it with existing laws. A reasonable scrutiny, the
Sandiganbayan said, of all these laws in relation to the present case, led it to
conclude that the use of an alias within the context of a bank transaction
(specifically, the opening of a numbered account made before bank officers) is
protected by the secrecy provisions of R.A. No. 1405, and is thus outside the
coverage of CA No. 142 until the passage into law of R.A. No. 9160.
THE PETITION
The People filed this petition raising the following issues:
1. Whether the court a quo gravely erred and abused its discretion
in dismissing Crim. Case No. 26565 and in holding that the use by
respondent Joseph Estrada of his alias "Jose Velarde" was not public
despite the presence of Messrs. Aprodicio Laquian and Fernando
Chua on 4 February 2000;
2. Whether the court a quo gravely erred and abused its discretion
in dismissing Crim. Case No. 26565 and in holding that the use by
respondent Joseph Estrada of his alias "Jose Velarde" was allowable
under banking rules, despite the clear prohibition under
Commonwealth Act No. 142;
3. Whether the court a quo gravely erred and abused its discretion
in dismissing Crim. Case No. 26565 and in applying R.A. No. 1405 as
an exception to the illegal use of alias punishable under
Commonwealth Act No. 142;
4. Whether the alleged harmonization and application made by the
court a quo of R.A. No.1405 and Commonwealth Act No. 142 were
proper;
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
5. Whether the court a quo gravely erred and abused its discretion
in limiting the coverage of the amended Information in Crim. Case
No. 26565 to the use of the alias "Jose Velarde" by respondent
Joseph Estrada on February 4, 2000;
6. Whether the court a quo gravely erred and abused its discretion
in departing from its earlier final finding on the non-applicability of
Ursua v. Court of Appeals and forcing its application to the instant
case.
THE COURT’S RULING
The petition has no merit.
The Law on Illegal Use of Alias and the Ursua Ruling
Sections 1 and 2 of CA No. 142, as amended, read:
Section 1. Except as a pseudonym solely for literary, cinema, television, radio
or other entertainment purposes and in athletic events where the use of
pseudonym is a normally accepted practice, no person shall use any name
different from the one with which he was registered at birth in the office of the
local civil registry or with which he was baptized for the first time, or in case of
an alien, with which he was registered in the bureau of immigration upon entry;
or such substitute name as may have been authorized by a competent court:
Provided, That persons whose births have not been registered in any local civil
registry and who have not been baptized, have one year from the approval of
this act within which to register their names in the civil registry of their
residence. The name shall comprise the patronymic name and one or two
surnames.
Section 2. Any person desiring to use an alias shall apply for authority therefor
in proceedings like those legally provided to obtain judicial authority for a
change of name and no person shall be allowed to secure such judicial authority
for more than one alias. The petition for an alias shall set forth the person's
baptismal and family name and the name recorded in the civil registry, if
different, his immigrant's name, if an alien, and his pseudonym, if he has such
names other than his original or real name, specifying the reason or reasons for
the desired alias. The judicial authority for the use of alias, the Christian name
and the alien immigrant's name shall be recorded in the proper local civil
registry, and no person shall use any name or names other than his original or
real name unless the same is or are duly recorded in the proper local civil
registry.
How this law is violated has been answered by the Ursua definition of an alias
– "a name or names used by a person or intended to be used by him publicly
and habitually usually in business transactions in addition to his real name by
which he is registered at birth or baptized the first time or substitute name
authorized by a competent authority." There must be, in the words of Ursua, a
"sign or indication that the user intends to be known by this name (the alias) in
addition to his real name from that day forth … [for the use of alias to] fall within
the prohibition contained in C.A. No. 142 as amended."18
Ursua further relates the historical background and rationale that led to the
enactment of CA No. 142, as follows:
The enactment of C.A. No. 142 was made primarily to curb the common
practice among the Chinese of adopting scores of different names and aliases
which created tremendous confusion in the field of trade. Such a practice
almost bordered on the crime of using fictitious names which for obvious
reasons could not be successfully maintained against the Chinese who, rightly
or wrongly, claimed they possessed a thousand and one names. C.A. No. 142
thus penalized the act of using an alias name, unless such alias was duly
authorized by proper judicial proceedings and recorded in the civil register.19
Following the doctrine of stare decisis,20 we are guided by the Ursua ruling on
how the crime punished under CA No. 142 may be committed. Close adherence
to this ruling, in other words, is unavoidable in the application of and the
determination of criminal liability under CA No. 142.
Among the many grounds the People invokes to avoid the application of the
Ursua ruling proceeds from Estrada’s position in the government; at the time
of the commission of the offense, he was the President of the Republic who is
required by law to disclose his true name. We do not find this argument
sufficient to justify a distinction between a man on the street, on one hand, and
the President of the Republic, on the other, for purposes of applying CA No.
142. In the first place, the law does not make any distinction, expressly or
impliedly, that would justify a differential treatment. CA No. 142 as applied to
Estrada, in fact allows him to use his cinema or screen name of Joseph Estrada,
which name he has used even when he was already the President of the
Philippines. Even the petitioner has acquiesced to the use of the screen name
of the accused, as shown by the title of the present petition. Additionally, any
distinction we make based on the People’s claim unduly prejudices Estrada; this
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is proscribed by the Ursua dictum that CA No. 142, as a penal statute, should
be construed strictly against the State and in favor of the accused.21 The mode
of violating CA No. 142 is therefore the same whoever the accused may be.
The People also calls our attention to an earlier Sandiganbayan ruling
(Resolution dated February 6, 2002) denying Estrada’s motion to quash the
Information. This earlier Resolution effectively rejected the application of Ursua
under the following tenor:
The use of the term "alias" in the Amended Information in itself serves to bring
this case outside the ambit of the ruling in the case of Ursua v. Court of Appeals
(256 SCRA 147 [1996]), on which the accused heavily relies in his motion to
quash. The term "alias" means "otherwise known as" (Webster Third New
International Dictionary, 1993 ed., p. 53). The charge of using an "alias" logically
implies that another name has been used publicly and habitually. Otherwise,
he will not be known by such name. In any case, the amended information
adverts to "several transactions" and signing of documents with the Equitable
PCI Bank and/or other corporate entities where the above-mentioned alias was
allegedly employed by the accused.
The facts alleged in the information are distinctly different from facts
established in the Ursua case where another name was used by the accused in
a single instance without any sign or indication that that [sic] he intended to be
known from that day by this name in addition to his real name.22
The People argues that the Sandiganbayan gravely abused its discretion in
applying Ursua notwithstanding this earlier final ruling on its non-applicability
– a ruling that binds the parties in the present case. The People thus claims that
the Sandiganbayan erred to the point of gravely abusing its discretion when it
resurrected the application of Ursua, resulting in the reversal of its earlier final
ruling.
We find no merit in this argument for two reasons. First, the cited
Sandiganbayan resolution is a mere interlocutory order – a ruling denying a
motion to quash23 – that cannot be given the attributes of finality and
immutability that are generally accorded to judgments or orders that finally
dispose of the whole, of or particular matters in, a case.24 The Sandiganbayan
resolution is a mere interlocutory order because its effects would only be
provisional in character, and would still require the issuing court to undertake
substantial proceedings in order to put the controversy to rest.25 It is basic
remedial law that an interlocutory order is always under the control of the court
and may be modified or rescinded upon sufficient grounds shown at any time
before final judgment.26 Perez v. Court of Appeals,27 albeit a civil case,
instructively teaches that an interlocutory order carries no res adjudicata
effects. Says Perez:
The Decision in CA-G.R. No. 10415 having resolved only an interlocutory matter,
the principle of res judicata cannot be applied in this case. There can be no res
judicata where the previous order in question was not an order or judgment
determinative of an issue of fact pending before the court but was only an
interlocutory order because it required the parties to perform certain acts for
final adjudication. In this case, the lifting of the restraining order paved the way
for the possession of the fishpond on the part of petitioners and/or their
representatives pending the resolution of the main action for injunction. In
other words, the main issue of whether or not private respondent may be
considered a sublessee or a transferee of the lease entitled to possess the
fishpond under the circumstances of the case had yet to be resolved when the
restraining order was lifted.28
Second, in the earlier motion to quash, the Sandiganbayan solely looked at the
allegations of the Information to determine the sufficiency of these allegations
and did not consider any evidence aliunde. This is far different from the present
demurrer to evidence where the Sandiganbayan had a fuller view of the
prosecution’s case, and was faced with the issue of whether the prosecution’s
evidence was sufficient to prove the allegations of the Information. Under
these differing views, the Sandiganbayan may arrive at a different conclusion
on the application of Ursua, the leading case in the application of CA 142, and
the change in ruling is not per se indicative of grave abuse of discretion. That
there is no error of law is strengthened by our consideration of the
Sandiganbayan ruling on the application of Ursua.
In an exercise of caution given Ursua’s jurisprudential binding effect, the People
also argues in its petition that Estrada’s case is different from Ursua’s for the
following reasons: (1) respondent Estrada used and intended to continually use
the alias "Jose Velarde" in addition to the name "Joseph Estrada"; (2) Estrada’s
use of the alias was not isolated or limited to a single transaction; and (3) the
use of the alias "Jose Velarde" was designed to cause and did cause "confusion
and fraud in business transactions" which the anti-alias law and its related
statutes seek to prevent. The People also argues that the evidence it presented
more than satisfied the requirements of CA No. 142, as amended, and Ursua,
as it was also shown or established that Estrada’s use of the alias was public.
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In light of our above conclusions and based on the parties’ expressed positions,
we shall now examine within the Ursua framework the assailed Sandiganbayan
Resolution granting the demurrer to evidence. The prosecution has the burden
of proof to show that the evidence it presented with the Sandiganbayan
satisfied the Ursua requirements, particularly on the matter of publicity and
habituality in the use of an alias.
What is the coverage of the indictment?
The People argues that the Sandiganbayan gravely erred and abused its
discretion in limiting the coverage of the amended Information in Crim. Case
No. 26565 to Estrada’s use of the alias "Jose Velarde" on February 4, 2000. It
posits that there was a main transaction – one that took place on February 4,
2000 – but there were other transactions covered by the phrase "prior to or
subsequent thereto; the Information specifically referred to "several
transactions" … "with Equitable PCI Bank and/or other corporate entities." To
the People, the restrictive finding – that the phrase "prior to or subsequent
thereto" is absorbed by the phrase "on or about 04 February 2000" – drastically
amends the succeeding main allegations on the constitutive criminal acts by
removing the plurality of both the transactions involved and the documents
signed with various entities; there is the undeniable essential relationship
between the allegations of the multiplicity of transactions, on one hand, and
the additional antecedent of "prior to or subsequent thereto," on the other. It
argues that the Sandiganbayan reduced the phrase "prior to or subsequent
thereto" into a useless appendage, providing Estrada with a convenient and
totally unwarranted escape route.
The People further argues that the allegation of time is the least exacting in
satisfying the constitutional requirement that the accused has to be informed
of the accusation against him. Section 6 of Rule 110 of the Revised Rules of
Court provides that an allegation of the approximate date of the commission of
the offense will suffice, while Section 11 of the same Rule provides that it is not
necessary to state in the complaint or information the precise date the offense
was committed except when it is a material ingredient of the crime. This
liberality allegedly shaped the time-tested rule that when the "time" given in
the complaint is not of the essence of the offense, the time of the commission
of the offense does not need to be proven as alleged, and that the complaint
will be sustained if the proof shows that the offense was committed at any time
within the period of the statute of limitations and before the commencement
of the action (citing People v. Bugayong [299 SCRA 528, 537] that in turn cited
US v. Smith [3 Phil. 20, 22]). Since allegations of date of the commission of an
offense are liberally interpreted, the People posits that the Sandiganbayan
gravely abused its discretion in disregarding the additional clause "prior to or
subsequent thereto"; under the liberality principle, the allegations of the acts
constitutive of the offense finally determine the sufficiency of the allegations
of time. The People thus claims that no surprise could have taken place that
would prevent Estrada from properly defending himself; the information fully
notified him that he was being accused of using the alias Jose Velarde in more
than just one instance.
We see no merit in these arguments.
At its core, the issue is constitutional in nature – the right of Estrada to be
informed of the nature and cause of the accusation against him. Under the
provisions of the Rules of Court implementing this constitutional right, a
complaint or information is sufficient if it states the name of the accused; the
designation of the offense given by the statute; the acts or omissions
complained of as constituting the offense in the name of the offended party;
the approximate date of the commission of the offense; and the place where
the offense was committed.29 As to the cause of accusation, the acts or
omissions complained of as constituting the offense and the qualifying and
aggravating circumstances must be stated in ordinary and concise language and
not necessarily in the language used in the statute, but in terms sufficient to
enable a person of common understanding to know the offense charged and
the qualifying and aggravating circumstances, and for the court to pronounce
judgment.30 The date of the commission of the offense need not be precisely
stated in the complaint or information except when the precise date is a
material ingredient of the offense. The offense may be alleged to have been
committed on a date as near as possible to the actual date of its commission.31
The information must at all times embody the essential elements of the crime
charged by setting forth the facts and circumstances that bear on the culpability
and liability of the accused so that he can properly prepare for and undertake
his defense.32 In short, the allegations in the complaint or information, as
written, must fully inform or acquaint the accused – the primary reader of and
the party directly affected by the complaint or information – of the charge/s
laid.
The heretofore cited Information states that "… on or about 04 February 2000,
or sometime prior or subsequent thereto, in the City of Manila, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused [did]
… willfully, unlawfully and criminally REPRESENT HIMSELF AS ‘JOSE VELARDE’ IN
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SEVERAL TRANSACTIONS AND use and employ the SAID alias "Jose Velarde"
which IS neither his registered name at birth nor his baptismal name, in signing
documents with Equitable PCI Bank and/or other corporate entities."
We fully agree with the disputed Sandiganbayan’s reading of the Information,
as this was how the accused might have similarly read and understood the
allegations in the Information and, on this basis, prepared his defense. Broken
down into its component parts, the allegation of time in the Information plainly
states that (1) ON February 4, 2000; (2) OR before February 4, 2000; (3) OR
sometime prior or subsequent to February 4, 2000, in the City of Manila,
Estrada represented himself as "Jose Velarde" in several transactions in signing
documents with Equitable PCI Bank and/or other corporate entities.
Under this analysis, the several transactions involving the signing of documents
with Equitable PCI Bank and/or other corporate entities all had their reference
to February 4, 2000; they were all made on or about or prior or subsequent to
that date, thus plainly implying that all these transactions took place only on
February 4, 2000 or on another single date sometime before or after February
4, 2000. To be sure, the Information could have simply said "on or about
February 4, 2000" to capture all the alternative approximate dates, so that the
phrase "sometime prior or subsequent thereto" would effectively be a
surplusage that has no meaning separately from the "on or about" already
expressed. This consequent uselessness of the "prior or subsequent thereto"
phrase cannot be denied, but it is a direct and necessary consequence of the
use of the "OR" between the two phrases and the "THERETO" that referred back
to February 4, 2000 in the second phrase. Of course, the reading would have
been very different (and would have been clearly in accord with the People’s
present interpretation) had the Information simply used "AND" instead of "OR"
to separate the phrases; the intent to refer to various transactions occurring on
various dates and occasions all proximate to February 4, 2000 could not be
disputed. Unfortunately for the People, the imprecision in the use of "OR" is
the reality the case has to live with. To act contrary to this reality would violate
Estrada’s right to be informed of the nature and cause of accusation against
him; the multiple transactions on several separate days that the People claims
would result in surprise and denial of an opportunity to prepare for Estrada,
who has a right to rely on the single day mentioned in the Information.
Separately from the constitutional dimension of the allegation of time in the
Information, another issue that the allegation of time and our above conclusion
raise relates to what act or acts, constituting a violation of the offense charged,
were actually alleged in the Information.1avvphi1
The conclusion we arrived at necessarily impacts on the People’s case, as it
deals a fatal blow on the People’s claim that Estrada habitually used the Jose
Velarde alias. For, to our mind, the repeated use of an alias within a single day
cannot be deemed "habitual," as it does not amount to a customary practice or
use. This reason alone dictates the dismissal of the petition under CA No. 142
and the terms of Ursua.
The issues of publicity, numbered accounts, and the application of CA No. 142,
R.A. No. 1405, and R.A. No. 9160.
We shall jointly discuss these interrelated issues.
The People claims that even on the assumption that Ocampo and Curato are
bank officers sworn to secrecy under the law, the presence of two other
persons who are not bank officers – Aprodicio Laquian and Fernando Chua –
when Estrada’s signed the bank documents as "Jose Velarde" amounted to a
"public" use of an alias that violates CA No. 142.
On the issue of numbered accounts, the People argues that to premise the
validity of Estrada’s prosecution for violation of CA No. 142 on a mere banking
practice is gravely erroneous, improper, and constitutes grave abuse of
discretion; no banking law provision allowing the use of aliases in the opening
of bank accounts existed; at most, it was allowed by mere convention or
industry practice, but not by a statute enacted by the legislature. Additionally,
that Estrada’s prosecution was supposedly based on BSP Circular No. 302 dated
October 11, 2001 is wrong and misleading, as Estrada stands charged with
violation of CA No. 142, penalized since 1936, and not with a violation of a mere
BSP Circular. That the use of alias in bank transactions prior to BSP Circular No.
302 is allowed is inconsequential because as early as CA No. 142, the use of an
alias (except for certain purposes which do not include banking) was already
prohibited. Nothing in CA No. 142 exempted the use of aliases in banking
transactions, since the law did not distinguish or limit its application; it was
therefore grave error for the Sandiganbayan to have done so. Lastly on this
point, bank regulations being mere issuances cannot amend, modify or prevail
over the effective, subsisting and enforceable provision of CA No. 142.
On the issue of the applicability of R.A. No. 1405 and its relationship with CA
No. 142, that since nothing in CA No. 142 excuses the use of an alias, the
Sandiganbayan gravely abused its discretion when it ruled that R.A. No. 1405 is
an exception to CA No. 142’s coverage. Harmonization of laws, the People
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA
posits, is allowed only if the laws intended to be harmonized refer to the same
subject matter, or are at least related with one another. The three laws which
the Sandiganbayan tried to harmonize are not remotely related to one another;
they each deal with a different subject matter, prohibits a different act, governs
a different conduct, and covers a different class of persons,33 and there was no
need to force their application to one another. Harmonization of laws, the
People adds, presupposes the existence of conflict or incongruence between
or among the provisions of various laws, a situation not obtaining in the present
case.
The People posits, too, that R.A. No. 1405 does not apply to trust transactions,
such as Trust Account No. C-163, as it applies only to traditional deposits
(simple loans). A trust account, according to the People, may not be considered
a deposit because it does not create the juridical relation of creditor and
debtor; trust and deposit operations are treated separately and are different in
legal contemplation; trust operation is separate and distinct from banking and
requires a grant of separate authority, and trust funds are not covered by
deposit insurance under the Philippine Deposit Insurance Corporation law (R.A.
No. 3591, as amended).
The People further argues that the Sandiganbayan’s conclusion that the
transaction or communication was privileged in nature was erroneous – a
congruent interpretation of CA No. 142 and R.A. No. 1405 shows that a person
who signs in a public or private transaction a name or alias, other than his
original name or the alias he is authorized to use, shall be held liable for
violation of CA No. 142, while the bank employees are bound by the
confidentiality of bank transactions except in the circumstances enumerated in
R.A. No. 1405. At most, the People argues, the prohibition in R.A. No. 1405
covers bank employees and officers only, and not Estrada; the law does not
prohibit Estrada from disclosing and making public his use of an alias to other
people, including Ocampo and Curato, as he did when he made a public exhibit
and use of the alias before Messrs. Lacquian and Chua.
Finally, the People argues that the Sandiganbayan ruling that the use of an alias
before bank officers does not violate CA No. 142 effectively encourages the
commission of wrongdoing and the concealment of ill-gotten wealth under
pseudonyms; it sustains an anomalous and prejudicial policy that uses the law
to silence bank officials and employees from reporting the commission of
crimes. The People contends that the law – R.A. No. 1405 – was not intended
by the Legislature to be used as a subterfuge or camouflage for the commission
of crimes and cannot be so interpreted; the law can only be interpreted,
understood and applied so that right and justice would prevail.
We see no merit in these arguments.
We agree, albeit for a different reason, with the Sandiganbayan position that
the rule in the law of libel – that mere communication to a third person is
publicity – does not apply to violations of CA No. 142. Our close reading of Ursua
– particularly, the requirement that there be intention by the user to be
culpable and the historical reasons we cited above – tells us that the required
publicity in the use of alias is more than mere communication to a third person;
the use of the alias, to be considered public, must be made openly, or in an
open manner or place, or to cause it to become generally known. In order to
be held liable for a violation of CA No. 142, the user of the alias must have held
himself out as a person who shall publicly be known under that other name. In
other words, the intent to publicly use the alias must be manifest.
To our mind, the presence of Lacquian and Chua when Estrada signed as Jose
Velarde and opened Trust Account No. C-163 does not necessarily indicate his
intention to be publicly known henceforth as Jose Velarde. In relation to
Estrada, Lacquian and Chua were not part of the public who had no access to
Estrada’s privacy and to the confidential matters that transpired in Malacañan
where he sat as President; Lacquian was the Chief of Staff with whom he shared
matters of the highest and strictest confidence, while Chua was a lawyer-friend
bound by his oath of office and ties of friendship to keep and maintain the
privacy and secrecy of his affairs. Thus, Estrada could not be said to have
intended his signing as Jose Velarde to be for public consumption by the fact
alone that Lacquian and Chua were also inside the room at that time. The same
holds true for Estrada’s alleged representations with Ortaliza and Dichavez,
assuming the evidence for these representations to be admissible. All of
Estrada’s representations to these people were made in privacy and in secrecy,
with no iota of intention of publicity.
The nature, too, of the transaction on which the indictment rests, affords
Estrada a reasonable expectation of privacy, as the alleged criminal act related
to the opening of a trust account – a transaction that R.A. No. 1405 considers
absolutely confidential in nature.34 We previously rejected, in Ejercito v.
Sandiganbayan,35 the People’s nitpicking argument on the alleged dichotomy
between bank deposits and trust transactions, when we said:
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The contention that trust accounts are not covered by the term "deposits," as
used in R.A. 1405, by the mere fact that they do not entail a creditor-debtor
relationship between the trustor and the bank, does not lie. An examination of
the law shows that the term "deposits" used therein is to be understood
broadly and not limited only to accounts which give rise to a creditor-debtor
relationship between the depositor and the bank.
The policy behind the law is laid down in Section 1:
SECTION 1. It is hereby declared to be the policy of the Government to give
encouragement to the people to deposit their money in banking institutions
and to discourage private hoarding so that the same may be properly utilized
by banks in authorized loans to assist in the economic development of the
country. (Underscoring supplied)
If the money deposited under an account may be used by bank for authorized
loans to third persons, then such account, regardless of whether it creates a
creditor-debtor relationship between the depositor and the bank, falls under
the category of accounts which the law precisely seeks to protect for the
purpose of boosting the economic development of the country.
Trust Account No. 858 is, without doubt, one such account. The Trust
Agreement between petitioner and Urban Bank provides that the trust account
covers "deposit, placement or investment of funds" by Urban Bank for and in
behalf of petitioner. The money deposited under Trust Account No. 858, was,
therefore, intended not merely to remain with the bank but to be invested by
it elsewhere. To hold that this type of account is not protected by R.A. 1405
would encourage private hoarding of funds that could otherwise be invested
by bank in other ventures, contrary to the policy behind the law.
Section 2 of the same law in fact even more clearly shows that the term
"deposits" was intended to be understood broadly:
SECTION 2. All deposits of whatever nature with bank 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. (Emphasis and underscoring supplied)1avvphi1
The phrase "of whatever nature" proscribes any restrictive interpretation of
"deposits." Moreover, it is clear from the immediately quoted provision that,
generally, the law applies not only to money which is deposited but also to
those which are invested. This further shows that the law was not intended to
apply only to "deposits" in the strict sense of the word.lawphil.net Otherwise,
there would have been no need to add the phrase "or invested.
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.36
We have consistently ruled that bank deposits under R.A. No. 1405 (the Secrecy
of Bank Deposits Law) are statutorily protected or recognized zones of
privacy.37 Given the private nature of Estrada’s act of signing the documents as
"Jose Velarde" related to the opening of the trust account, the People cannot
claim that there was already a public use of alias when Ocampo and Curato
witnessed the signing. We need not even consider here the impact of the
obligations imposed by R.A. No.1405 on the bank officers; what is essentially
significant is the privacy situation that is necessarily implied in these kinds of
transactions. This statutorily guaranteed privacy and secrecy effectively negate
a conclusion that the transaction was done publicly or with the intent to use
the alias publicly.
The enactment of R.A. No.9160, on the other hand, is a significant development
only because it clearly manifests that prior to its enactment, numbered
accounts or anonymous accounts were permitted banking transactions,
whether they be allowed by law or by a mere banking regulation. To be sure,
an indictment against Estrada using this relatively recent law cannot be
maintained without violating the constitutional prohibition on the enactment
and use of ex post facto laws.38
We hasten to add that this holistic application and interpretation of these
various laws is not an attempt to harmonize these laws. A finding of commission
of the offense punished under CA No. 142 must necessarily rest on the evidence
of the requisites for culpability, as amplified in Ursua. The application of R.A.
No. 1405 is significant only because Estrada’s use of the alias was pursuant to
a transaction that the law considers private or, at the very least, where the law
guarantees a reasonable expectation of privacy to the parties to the
transactions; it is at this point that R.A. No. 1405 tangentially interfaces with an
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 BANKING LAW (ATTY. FONTANILLA) / SMSANTOALLA 2019-2020

indictment under CA 142. In this light, there is no actual frontal clash between
CA No. 142 and R.A. No. 1405 that requires harmonization. Each operates
within its own sphere, but must necessarily be read together when these
spheres interface with one another. Finally, R.A. No. 9160, as a law of recent
vintage in relation to the indictment against Estrada, cannot be a source or an
influencing factor in his indictment.

In finding the absence of the requisite publicity, we simply looked at the totality
of the circumstances obtaining in Estrada’s use of the alias "Jose Velarde" vis-
à-vis the Ursua requisites. We do not decide here whether Estrada’s use of an
alias when he occupied the highest executive position in the land was valid and
legal; we simply determined, as the Sandiganbayan did, whether he may be
made liable for the offense charged based on the evidence the People
presented. As with any other accused, his guilt must be based on the evidence
and proof beyond reasonable doubt that a finding of criminal liability requires.
If the People fails to discharge this burden, as they did fail in this case, the rule
of law requires that we so declare. We do so now in this review and accordingly
find no reversible error of law in the assailed Sandiganbayan ruling.

WHEREFORE, premises considered, we DENY the petition for lack of merit.

SO ORDERED.

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