G.R. No.

135706 October 1, 2004

SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners,

vs.
PHILIPPINE VETERANS BANK, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City, Branch 24,
dated April 17, 1998,1 and the order denying petitioner’s motion for reconsideration dated August 25, 1998,
raising pure questions of law.2

The following facts are uncontroverted:

On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine Veterans
Bank in the amount of ₱135,000.00, evidenced by a promissory note, due and demandable on February
27, 1981, and secured by a Real Estate Mortgage executed on their lot together with the improvements
thereon.

On March 23, 1985, the respondent bank went bankrupt and was placed under receivership/liquidation
by the Central Bank from April 25, 1985 until August 1992.3

On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for "accounts receivable
in the total amount of ₱6,345.00 as of August 15, 1984,"4 which pertains to the insurance premiums advanced
by respondent bank over the mortgaged property of petitioners.5

On August 23, 1995, more than fourteen years from the time the loan became due and demandable, respondent
bank filed a petition for extrajudicial foreclosure of mortgage of petitioners’ property.6 On October 18, 1995,
the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone
bidder.

On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-judicial
foreclosure and the subsequent sale thereof to respondent bank null and void.7

In the pre-trial conference, the parties agreed to limit the issue to whether or not the period within which the
bank was placed under receivership and liquidation was a fortuitous event which suspended the running of the
ten-year prescriptive period in bringing actions.8

On April 17, 1998, the RTC rendered its decision, the fallo of which reads:

WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for lack of
merit. Likewise the compulsory counterclaim of defendant is dismissed for being unmeritorious.9

It reasoned that:

…defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. The
defendant bank was given authority by the Central Bank to operate as a private commercial bank and
became fully operational only on August 3, 1992. From April 1985 until July 1992, defendant bank was
restrained from doing its business. Doing business as construed by Justice Laurel in 222 SCRA 131
refers to:

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 "….a continuity of commercial dealings and arrangements and contemplates to that extent, the
performance of acts or words or the exercise of some of the functions normally incident to and
in progressive prosecution of the purpose and object of its organization."

The defendant bank’s right to foreclose the mortgaged property prescribes in ten (10) years but such
period was interrupted when it was placed under receivership. Article 1154 of the New Civil Code to
this effect provides:

"The period during which the obligee was prevented by a fortuitous event from enforcing his
right is not reckoned against him."

In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court said.

"Having arrived at the conclusion that a foreclosure is part of a bank’s activity which could not have
been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we
are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on
account of the prohibition imposed by the Monetary Board against petitioner from transacting business,
until the directive of the Board was nullified in 1981. Indeed, the period during which the obligee was
prevented by a caso fortuito from enforcing his right is not reckoned against him. (Art. 1154, NCC)
When prescription is interrupted, all the benefits acquired so far from the possession cease and when
prescription starts anew, it will be entirely a new one. This concept should not be equated with
suspension where the past period is included in the computation being added to the period after the
prescription is presumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines 1991 ed. pp. 18-19), consequently, when the closure of the petitioner was set aside in 1981,
the period of ten years within which to foreclose under Art. 1142 of the N.C.C. began to run and,
therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage carried with
it the mistaken notion that petitioner’s own suit for foreclosure has prescribed."

Even assuming that the liquidation of defendant bank did not affect its right to foreclose the plaintiffs’
mortgaged property, the questioned extrajudicial foreclosure was well within the ten (10) year
prescriptive period. It is noteworthy to mention at this point in time, that defendant bank through
authorized Deputy Francisco Go made the first extrajudicial demand to the plaintiffs on August 1985.
Then on March 24, 1995 defendant bank through its officer-in-charge Llanto made the second
extrajudicial demand. And we all know that a written extrajudicial demand wipes out the period that has
already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)10

Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998.11 Thus, the present
petition for review where petitioners claim that the RTC erred:

…IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER
RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED
THE RUNNING OF THE PRESCRIPTIVE PERIOD.

II

…IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT

ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED.

III

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 …IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS HEREIN
ASSAILED DECISION.12

Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the bank
on October 18, 1995, which was fourteen years from the date the obligation became due on February 27, 1981,
said foreclosure and the subsequent sale at public auction should be set aside and declared null and void ab
initio since they are already barred by prescription; the court a quo erred in sustaining the respondent’s theory
that its having been placed under receivership by the Central Bank between April 1985 and August 1992 was a
fortuitous event that interrupted the running of the prescriptive period;13 the court a quo’s reliance on the case
of Provident Savings Bank vs. Court of Appeals14 is misplaced since they have different sets of facts; in the
present case, a liquidator was duly appointed for respondent bank and there was no judgment or court order that
would legally or physically hinder or prohibit it from foreclosing petitioners’ property; despite the absence of
such legal or physical hindrance, respondent bank’s receiver or liquidator failed to foreclose petitioners’
property and therefore such inaction should bind respondent bank;15 foreclosure of mortgages is part of the
receiver’s/liquidator’s duty of administering the bank’s assets for the benefit of its depositors and creditors,
thus, the ten-year prescriptive period which started on February 27, 1981, was not interrupted by the time during
which the respondent bank was placed under receivership; and the Monetary Board’s prohibition from doing
business should not be construed as barring any and all business dealings and transactions by the bank,
otherwise, the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as amended by Executive
Order No. 65 would be rendered nugatory.16 Said provision reads:

Section 29. Proceedings upon Insolvency – Whenever, upon examination by the head of the appropriate
supervising or examining department or his examiners or agents into the condition of any bank or non-
bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition
of the same is one of insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to
inform the Monetary Board of the facts. The Board may, upon finding the statements of the department
head to be true, forbid the institution to do business in the Philippines and designate the official of the
Central Bank or a person of recognized competence in banking or finance, as receiver to immediately
take charge its assets and liabilities, as expeditiously as possible, collect and gather all the assets and
administer the same for the benefit of its creditors, and represent the bank personally or through counsel
as he may retain in all actions or proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the
name of the bank.

Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after the ten-year
prescriptive period, thus it cannot be deemed to have revived a period that has already elapsed; it is also not one
of the instances enumerated by Art. 1115 of the Civil Code when prescription is interrupted;17 and the August
23, 1985 letter by Francisco Go demanding ₱6,345.00, refers to the insurance premium on the house of
petitioners, advanced by respondent bank, thus such demand letter referred to another obligation and could not
have the effect of interrupting the running of the prescriptive period in favor of herein petitioners insofar as
foreclosure of the mortgage is concerned.18

Petitioners then prayed that respondent bank be ordered to pay them ₱100,000.00 as moral damages,
₱50,000.00 as exemplary damages and ₱100,000.00 as attorney’s fees.19

Respondent for its part asserts that: the period within which it was placed under receivership and liquidation
was a fortuitous event that interrupted the running of the prescriptive period for the foreclosure of petitioners’
mortgaged property; within such period, it was specifically restrained and immobilized from doing business
which includes foreclosure proceedings; the extra-judicial demand it made on March 24, 1995 wiped out the
period that has already lapsed and started anew the prescriptive period; respondent through its authorized
deputy Francisco Go made the first extra-judicial demand on the petitioners on August 23, 1985; while it is true
that the first demand letter of August 1985 pertained to the insurance premium advanced by it over the

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mortgaged property of petitioners, the same however formed part of the latter’s total loan obligation with
respondent under the mortgage instrument and therefore constitutes a valid extra-judicial demand made within
the prescriptive period.20

In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that insured the
mortgaged property thus it should not pass the obligation to petitioners through the letter dated August 1985.21

To resolve this petition, two questions need to be answered: (1) Whether or not the period within which the
respondent bank was placed under receivership and liquidation proceedings may be considered a fortuitous
event which interrupted the running of the prescriptive period in bringing actions; and (2) Whether or not the
demand letter sent by respondent bank’s representative on August 23, 1985 is sufficient to interrupt the running
of the prescriptive period.

Anent the first issue, we answer in the negative.

One characteristic of a fortuitous event, in a legal sense and consequently in relations to contract, is that its
occurrence must be such as to render it impossible for a party to fulfill his obligation in a normal manner.22

Respondent’s claims that because of a fortuitous event, it was not able to exercise its right to foreclose the
mortgage on petitioners’ property; and that since it was banned from pursuing its business and was placed under
receivership from April 25, 1985 until August 1992, it could not foreclose the mortgage on petitioners’ property
within such period since foreclosure is embraced in the phrase "doing business," are without merit.

While it is true that foreclosure falls within the broad definition of "doing business," that is:

…a continuity of commercial dealings and arrangements and contemplates to that extent, the
performance of acts or words or the exercise of some of the functions normally incident to and in
progressive prosecution of the purpose and object of its organization.23

it should not be considered included, however, in the acts prohibited whenever banks are "prohibited from
doing business" during receivership and liquidation proceedings.

This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the
Philippines24 where we explained that:

Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that
when a bank is forbidden to do business in the Philippines and placed under receivership, the person
designated as receiver shall immediately take charge of the bank’s assets and liabilities, as
expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its
creditors, and represent the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution,exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name of the bank.25

This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the
assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the
detriment of the creditors of the bank.26

When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary
Board, determines whether to proceed with the liquidation or reorganization of the financially distressed bank.
A receiver, who concurrently represents the bank, then takes control and possession of its assets for the benefit
of the bank’s creditors. A liquidator meanwhile assumes the role of the receiver upon the determination by the
Monetary Board that the bank can no longer resume business. His task is to dispose of all the assets of the bank

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and effect partial payments of the bank’s obligations in accordance with legal priority. In both receivership and
liquidation proceedings, the bank retains its juridical personality notwithstanding the closure of its business and
may even be sued as its corporate existence is assumed by the receiver or liquidator. The receiver or liquidator
meanwhile acts not only for the benefit of the bank, but for its creditors as well.27

In Provident Savings Bank vs. Court of Appeals,28 we further stated that:

When a bank is prohibited from continuing to do business by the Central Bank and a receiver is
appointed for such bank, that bank would not be able to do new business, i.e., to grant new loans or to
accept new deposits. However, the receiver of the bank is in fact obliged to collect debts owing to
the bank, which debts form part of the assets of the bank. The receiver must assemble the assets
and pay the obligation of the bank under receivership, and take steps to prevent dissipation of
such assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the
bank, and in connection therewith, to foreclose mortgages securing such debts.29 (Emphasis
supplied.)

It is true that we also held in said case that the period during which the bank was placed under receivership was
deemed fuerza mayor which validly interrupted the prescriptive period.30 This is being invoked by the
respondent and was used as basis by the trial court in its decision. Contrary to the position of the respondent and
court a quohowever, such ruling does not find application in the case at bar.

A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which is an exception to
the general rule, due to the peculiar circumstances of Provident Savings Bank at the time. In said case, we stated
that:

Having arrived at the conclusion that a foreclosure is part of a bank’s business activity which could not
have been pursued by the receiver then because of the circumstances discussed in the Central
Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza
mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from
transacting business, until the directive of the Board was nullified in 1981.31 (Emphasis supplied.)

Further examination of the Central Bank case reveals that the circumstances of Provident Savings Bank at the
time were peculiar because after the Monetary Board issued MB Resolution No. 1766 on September 15, 1972,
prohibiting it from doing business in the Philippines, the bank’s majority stockholders immediately went to the
Court of First Instance of Manila, which prompted the trial court to issue its judgment dated February 20, 1974,
declaring null and void the resolution and ordering the Central Bank to desist from liquidating Provident. The
decision was appealed to and affirmed by this Court in 1981. Thus, the Superintendent of Banks, which was
instructed to take charge of the assets of the bank in the name of the Monetary Board, had no power to act as a
receiver of the bank and carry out the obligations specified in Sec. 29 of the Central Bank Act.32

In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary
Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the
Central Bank Act on insolvency of banks.33

Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent to deter its
receiver and liquidator from performing their obligations under the law. Thus, the ruling laid down in
the Provident case cannot apply in the case at bar.

There is also no truth to respondent’s claim that it could not continue doing business from the period of April
1985 to August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent was
even able to send petitioners a demand letter, through Francisco Go, on August 23, 1985 for "accounts
receivable in the total amount of ₱6,345.00 as of August 15, 1984" for the insurance premiums advanced by

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respondent bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid
insurance premiums and not foreclose the mortgage during the time it was "prohibited from doing business"
was not adequately explained by respondent.

Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.34 As we held
in Philippine Veterans Bank vs. NLRC,35 a labor case which also involved respondent bank,

… all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioner’s
corporate existence. Petitioner cannot disclaim liability by arguing that the non-payment of MOLINA’s
just wages was committed by the liquidators during the liquidation period.36

However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect
the assets of such bank and to safeguard its assets.37

Having reached the conclusion that the period within which respondent bank was placed under receivership and
liquidation proceedings does not constitute a fortuitous event which interrupted the prescriptive period in
bringing actions, we now turn to the second issue on whether or not the extra-judicial demand made by
respondent bank, through Francisco Go, on August 23, 1985 for the amount of ₱6,345.00, which pertained to
the insurance premiums advanced by the bank over the mortgaged property, constitutes a valid extra-judicial
demand which interrupted the running of the prescriptive period. Again, we answer this question in the
negative.

Prescription of actions is interrupted when they are filed before the court, when there is a written extra-judicial
demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.38

Respondent’s claim that while its first demand letter dated August 23, 1985 pertained to the insurance premium
it advanced over the mortgaged property of petitioners, the same formed part of the latter’s total loan obligation
with respondent under the mortgage instrument, and therefore, constitutes a valid extra-judicial demand which
interrupted the running of the prescriptive period, is not plausible.

The real estate mortgage signed by the petitioners expressly states that:

This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit
accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in the amount of
ONE HUNDRED THIRTY FIVE THOUSAND (₱135,000.00) PESOS ONLY Philippine Currency in
favor of the herein Mortgagee.39

The promissory note, executed by the petitioners, also states that:

…FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE
PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF
ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00), PHILIPPINE CURRENCY
WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS
DATE UNTIL FULLY PAID.40

Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in the
amount of ₱135,000.00, we have no reason to hold that the insurance premiums, in the amount of ₱6,345.00,
which was the subject of the August 1985 demand letter, should be considered as pertaining to the entire
obligation of petitioners.

In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,41 we held that the notices of foreclosure sent
by the mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial demands, which

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may validly interrupt the running of the prescriptive period, where it does not appear from the records that the
notes are covered by the mortgage contract.42

In this case, it is clear that the advanced payment of the insurance premiums is not part of the mortgage contract
and the promissory note signed by petitioners. They pertain only to the amount of ₱135,000.00 which is the
principal loan of petitioners plus interest. The arguments of respondent bank on this point must therefore fail.

As to petitioners’ claim for damages, however, we find no sufficient basis to award the same. For moral
damages to be awarded, the claimant must satisfactorily prove the existence of the factual basis of the damage
and its causal relation to defendant’s acts.43 Exemplary damages meanwhile, which are imposed as a deterrent
against or as a negative incentive to curb socially deleterious actions, may be awarded only after the claimant
has proven that he is entitled to moral, temperate or compensatory damages.44 Finally, as to attorney’s fees, it is
demanded that there be factual, legal and equitable justification for its award.45 Since the bases for these claims
were not adequately proven by the petitioners, we find no reason to grant the same.

WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17, 1998, and the
order denying petitioners’ motion for reconsideration dated August 25, 1998 are hereby REVERSED and SET
ASIDE. The extra-judicial foreclosure of the real estate mortgage on October 18, 1995, is hereby declared null
and void and respondent is ordered to return to petitioners their owner’s duplicate certificate of title.

Costs against respondent.

SO ORDERED.

Puno, Callejo, Sr., Tinga, and Chico-Nazario*, JJ., concur.

DIGEST

Facts:

Petitioner spouses contracted a monetary loan with herein respondent bank secured by a REM executed on their
lot. Respondent bank then went bankrupt and was placed under receivership/liquidation by the Central Bank.
Sometime after, respondent bank sent a demand letter for the amount of the insurance premiums advanced by it
over the mortgaged property of petitioners. More than 14 years from the time the loan became due and
demandable, respondent bank moved for the extrajudicial foreclosure of the mortgaged property and was sold to
it as being the lone bidder. Petitioners moved to declare the foreclosure null and void contending that the
respondent bank being placed under receivership did not interrupt the running of the prescriptive period. RTC
ruled in favor of respondents.

Issues:

(1) Whether or not foreclosure of mortgage is included in the acts prohibited during
receivership/liquidation proceedings.
(2) Whether or not the period within which the respondent bank was placed under receivership and
liquidation proceedings interrupted the running of the prescriptive period in bringing actions.

Ruling: NO.

(1) While it is true that foreclosure falls within the broad definition of “doing business,” it should not be
considered included, however, in the acts prohibited whenever banks are “prohibited from doing

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 business” during receivership and liquidation proceedings. This is consistent with the purpose of
receivership proceedings, i.e., to receive collectibles and preserve the assets of the bank in substitution
of its former management and prevent the dissipation of its assets to the detriment of the creditors of the
bank.

There is also no truth to respondent’s claim that it could not continue doing business from the time it
was under receivership. As correctly pointed out by petitioner, respondent was even able to send
petitioners a demand letter, through Francisco Go, for the insurance premiums advanced by respondent
bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid insurance
premiums and not foreclose the mortgage during the time it was “prohibited from doing business” was
not adequately explained by respondent.

(2) A close scrutiny of the Provident case shows that the Court arrived at said conclusion, which is an
exception to the general rule, due to the peculiar circumstances of Provident Savings Bank at the
time. The Superintendent of Banks, which was instructed to take charge of the assets of the bank in the
name of the Monetary Board, had no power to act as a receiver of the bank and carry out the obligations
specified in Sec. 29 of the Central Bank Act.

In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the
Monetary Board of the Central Bank pursuant to Section 29 of the Central Bank Act on insolvency of
banks. Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent
to deter its receiver and liquidator from performing their obligations under the law. Thus, the ruling laid
down in the Provident case cannot apply in the case at bar.

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G.R. No. 141297 October 8, 2001

DOMINGO R. MANALO, petitioner,

vs.
COURT OF APPEALS (Special Twelfth Division) and PAIC SAVINGS AND MORTGAGE
BANK, respondents.

PUNO, J.:

This petition for certiorari seeks the review of the Decision of the Court of Appeals in C.A.-G.R. SP. No. 50341
promulgated December 23, 1999, which affirmed an Order issued by the Regional Trial Court, Branch 112,
Pasay City, in Civil Case No. 9011 dated December 9, 1998.

On July 19, 1983, S. Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained
a loan of three million pesos (P3,000,000.00) and one million pesos (P1,000,000.00) from the respondent PAIC
Savings and Mortgage Bank and the Philippine American Investments Corporation (PAIC), respectively. To
secure payment of both debts, Vargas executed in favor of the respondent and PAIC a Joint First
Mortgage1 over two parcels of land registered under her name. One of the lots, located in Pasay City with an
area of nine hundred nineteen square meters (919 sq. m.) and covered by TCT No. 6076, is the subject of the
present case. Section 2 of the mortgage contract states that "the properties mortgaged therein shall include all
buildings and improvements existing on the mortgaged property at the time of the execution of the mortgage
contract and thereafter."2

S. Villanueva Enterprises defaulted in paying the amortizations due. Despite repeated demands from the
respondent, it failed to settle its loan obligation. Accordingly, respondent instituted extrajudicial foreclosure
proceedings over the mortgaged lots. On August 22, 1984, the Pasay City property was sold at a public auction
to the respondent itself, after tendering the highest bid. The respondent then caused the annotation of the
corresponding Sheriff's Certificate of Sale3 on the title of the land on December 4, 1984. After the lapse of one
year, or the statutory period extended by law to a mortgagor to exercise his/her right of redemption, title was
consolidated in respondent's name for failure of Vargas to redeem.

On October 29, 1986, the Central Bank of the Philippines filed a Petition4 for assistance in the liquidation of the
respondent with the Regional Trial Court. The petition was given due course in an Order 5 dated May 19, 1987.

It appears that from the years 1986 to 1991, Vargas negotiated with the respondent (through its then liquidator,
the Central Bank) for the repurchase of the foreclosed property. The negotiations, however, fizzled out as
Vargas cannot afford the repurchase price fixed by the respondent based on the appraised value of the land at
that time. On October 4, 1991, Vargas filed a case for annulment of mortgage and extrajudicial foreclosure sale
before Branch 116 of the Pasay City Regional Trial Court. On July 22, 1993, the court rendered a
decision6 dismissing the complaint and upholding the validity of the mortgage and foreclosure sale. On appeal,
the appellate court upheld the assailed judgment and declared the said mortgage and foreclosure proceedings to
be in accord with law.7 This decision of the Court of Appeals subsequently became final and executory when
we summarily dismissed Vargas' Petition for Review on Certiorari for having been filed beyond the
reglementary period.8

In the meantime, on June 22, 1992, respondent petitioned the Regional Trial Court, Branch 112, of Pasay City,
herein court a quo, for the issuance of a writ of possession for the subject property in Civil Case No. 9011. This
is in view of the consolidation of its ownership over the same as mentioned earlier. Vargas and S. Villanueva
Enterprises, Inc. filed their opposition thereto. After which, trial ensued.

During the pendency of Civil Case No. 9011 (for the issuance of a writ of possession), Vargas, on December
23, 1992, executed a Deed of Absolute Sale9 selling, transferring, and conveying ownership of the disputed lot

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in favor of a certain Armando Angsico. Notwithstanding this sale, Vargas, still representing herself to be the
lawful owner of the property, leased the same to petitioner Domingo R. Manalo on August 25, 1994. Pertinent
provisions of the lease agreement10 state:

"3. (a) The lease is for a period of ten year lease (sic), involving 450 square meters, a portion of the
above 919 square meter property.

x x x (d) The LESSEE has to introduce into the said 450 square meter premises improvements thereon
(sic) consisting of one story building to house a Karaoke Music Restaurant Business, which
improvements constructed thereof (sic), upon the termination of the lease contract, by said LESSEE be
surrendered in favor of the LESSOR (sic).''11

Later, on June 29, 1997, Armando Angsico, as buyer of the property, assigned his rights therein to petitioner.12

On April 21, 1998, the court a quo granted the petition for the issuance of the Writ of Possession.13 The writ
was subsequently issued on April 24, 1998, the pertinent portion of which reads:14

"NOW THEREFORE you are hereby commanded that you cause oppositors THERESE
VILLANUEVA VARGAS and S. VILLANUEVA ENTERPRISES, INC. and any and all persons
claiming rights or title under them, to forthwith vacate and surrender the possession of subject premises
in question known as that parcel of land and improvements covered by TCT No. 6076 of the Registry of
Deeds of Pasay City; you are hereby further ordered to take possession and deliver to the petitioner
PAIC SAVINGS AND MORTGAGE BANK the subject parcel of land and improvements."

Shortly, on May 8, 1998, S. Villanueva Enterprises and Vargas moved for its quashal.15 Thereafter on June 25,
1998, petitioner, on the strength of the lease contract and Deed of Assignment made in his favor, submitted a
Permission to File an Ex-parte Motion to Intervene.16 It bears mentioning, however, that before petitioner
sought intervention in the present case, he had separately instituted a Complaint for Mandamus, docketed as
Civil Case No. 98-0868 before another branch17 of the Pasay City RTC to compel PAIC Bank to allow him to
repurchase the subject property.

On October 7, 1998, the court a quo denied the Motion to Quash and Motion to Intervene filed respectively by
Vargas and petitioner.18 A Motion for Reconsideration and a Supplemental Motion for Reconsideration were
filed by the petitioner which, however, were similarly denied on December 9, 1998.

Petitioner then sought relief with the Court of Appeals, filing therein a Petition for Certiorari. While this was
awaiting resolution, he entered into another lease agreement,19 this time with the respondent, represented by its
liquidator, over the same 450 sq. m. portion of the lot. The contract fixed a period of one month beginning
January 28, 1999, renewable for another month at the exclusive option of the lessor, respondent PAIC Bank.

On December 23, 1999, the appellate court rendered the impugned Decision, dismissing the petition, thus:

"All told, WE find the Order, subject of the instant Petition for Certiorari and Prohibition, to be not
without rational bases and we observe that the court a quo, in issuing its questioned Order, committed
no grave abuse of discretion amounting to lack of jurisdiction.

WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED and the assailed
December 9, 1998 Order is AFFIRMED in all respects.

SO ORDERED."20

Hence, this appeal, where petitioner raises and argues the following legal issues:

10 | P a g e
 "I. Whether or not public respondent acted without or in excess of its jurisdiction and/or was patently in
error when it affirmed the denial of petitioner's motion for intervention, despite the fact that he has a
legal interest, being a lessee and an assignee of the property subject matter of this case.

II. Whether or not the public respondent committed grave abuse of discretion when it held that what are
required to be instituted before the liquidation court are those claims against the insolvent banks only
considering that the private respondent bank is legally dead due to insolvency and considering further
that there is already a liquidation court (Regional Trial Court of Makati, Branch 57, docketed as Spec.
Pro. No. M-1280) which is exclusively vested with jurisdiction to hear all matters and incidents on
liquidation pursuant to Section 29, Republic Act No. 265, otherwise known as The Central Bank Act, as
amended.

III. Whether or not the public respondent committed grave abuse of discretion and/or was patently in
error in affirming the ruling of the trial court, totally disregarding the arguments raised in petitioner's
supplemental motion for reconsideration only through a minute order and without taking into
consideration the fact that there is a pending action in another court (RTC, Pasay City, Branch 231 )
which presents a prejudicial question to the case at bar.

IV. Whether or not the petitioner is estopped from questioning private respondent's ownership when it
entered into a contract of lease involving the property in question."21

We will first resolve the jurisdictional and procedural questions raised by the petitioner.

I.

Petitioner postulates that the lower court should have dismissed respondent's "Ex-Parte Petition for Issuance of
Writ of Possession" in Civil Case No. P-9011 for want of jurisdiction over the subject matter of the claim. The
power to hear the same, he insists, exclusively vests with the Liquidation Court pursuant to Section 29 of
Republic Act No. 265, otherwise known as The Central Bank Act.22 He then cites our decision in Valenzuela v.
Court of Appeals,23where we held that "if there is a judicial liquidation of an insolvent bank, all claims against
the bank should be filed in the liquidation proceeding." For going to another court, the respondent, he accuses,
is guilty of forum shopping.

These contentions can not pass judicial muster. The pertinent portion of Section 29 states:

"x x x The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in
the Regional Trial Court reciting the proceedings which have been taken and praying the assistance of
the court in the liquidation of such institution. The court shall have jurisdiction in the same proceedings
to assist in the adjudication of disputed claims against the bank or non-bank financial intermediary
performing quasi-banking functions and the enforcement of individual liabilities of the stockholders and
do all that is necessary to preserve the assets of such institution and to implement the liquidation plan
approved by the Monetary Board, x x x"24 (emphasis supplied.)

Petitioner apparently failed to appreciate the correct meaning and import of the above-quoted law. The legal
provision only finds operation in cases where there are claims against an insolvent bank. In fine, the exclusive
jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. It does not
cover the reverse situation where it is the bank which files a claim against another person or legal entity.

This interpretation of Section 29 becomes more obvious in the light of its intent. The requirement that all claims
against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent
multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the
liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness.25 The

11 | P a g e
lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims
against the insolvent bank and that the liquidation court should assist the Superintendents of Banks and regulate
his operations.26

It then ought to follow that petitioner's reliance on Section 29 and the Valenzuela case is misplaced. The
Petition for the Issuance of a Writ of Possession in Civil Case No. 9011 is not in the nature of a disputed claim
against the bank. On the contrary, it is an action instituted by the respondent bank itself for the preservation of
its asset and protection of its property. It was filed upon the instance of the respondent's liquidator in order to
take possession of a tract of land over which it has ownership claims.

To be sure, the liquidator took the proper course of action when it applied for a writ in the Pasay City RTC. Act
3135,27 entitled An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed To Real
Estate Mortgages, mandates that jurisdiction over a Petition for Writ of Possession lies with the court of the
province, city, or municipality where the property subject thereof is situated. This is sanctioned by Section 7 of
the said Act, thus:

"SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the Court
of First Instance of the province or place where the property or any part thereof is situated, to give him
possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of
the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was
made without violating the mortgage or without complying with the requirements of this Act x x
x"28 (emphasis supplied)

Since the land subject of this controversy is located in Pasay City, then the city's RTC should rightly take
cognizance of the case, to the exclusion of other courts.

Anent petitioner's auxiliary contention that respondent should be held guilty of forum shopping for not filing the
case in the liquidation court, suffice it to state here that the doctrine only ponders situations where two (or more)
cases are pending before different tribunals.29 Well to point, we have laid down the yardstick to determine
whether a party violated the rule against forum shopping as where the elements of litis pendentia are present or
where a final judgment in one case will amount to res judicata in the other.30 Inasmuch as the case at bar is the
only one filed by the respondent for the issuance of a writ of possession over the subject property, there is no
occasion for the doctrine to apply.

Petitioner next casts doubt on the capacity of the respondent to continue litigating the petition for the issuance
of the writ. He asserts that, being under liquidation, respondent bank is already a "dead" corporation that cannot
maintain the suit in the RTC. Hence, no writ may be issued in its favor.

The argument is devoid of merit. A bank which had been ordered closed by the monetary board retains its
juridical personality which can sue and be sued through its liquidator. The only limitation being that the
prosecution or defense of the action must be done through the liquidator.31 Otherwise, no suit for or against an
insolvent entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them
through a mere technicality.32

That the law allows a bank under liquidation to participate in an action can be clearly inferred from the
third paragraph of the same Section 29 of The Central Bank Act earlier quoted, which authorizes or
empowers a liquidator to institute actions, thus: "x x x and he (liquidator) may in the name of the bank
or non-bank financial intermediary performing quasi-banking functions and with the assistance of
counsel as he may retain, institute such actions as may be necessary in the appropriate court to collect
and recover accounts and assets of such institution or defend any action filed against the
institution."33 (emphasis supplied.)

12 | P a g e
It is therefore beyond dispute that respondent was legally capacitated to petition the court a quo for the issuance
of the writ.

II.

Petitioner likewise proffers one other procedural obstacle, which is the pendency of Civil Case No. 98-0868 in
Branch 231 of Pasay City RTC. The said action is the complaint he filed against the respondent for the latter to
receive and accept the redemption price of eighteen million pesos for the subject property. He argues that the
primary issue therein constitutes a prejudicial question in relation to the present case in that if the Court therein
will grant petitioner's prayer, then this will necessarily negate the possessory writ issued by the court a quo.

Again, we are not persuaded. A prejudicial question is one which arises in a case the resolution of which is a
logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal.34 It
generally comes into play in a situation where a civil action and a criminal action are both pending and there
exists in the former an issue which must be preemptively resolved before the criminal action may proceed,
because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the
guilt or innocence of the accused in the criminal case. The rationale behind the principle of prejudicial question
is to avoid two conflicting decisions.35

Here, aside from the fact that Civil Case No. 98-0868 and the present one are both civil in nature and therefore
no prejudicial question can arise from the existence of the two actions,36 it is apparent that the former action was
instituted merely to frustrate the Court's ruling in the case at bar granting the respondent the right to possess the
subject property. It is but a canny and preemptive maneuver on the part of the petitioner to delay, if not prevent,
the execution of a judgment adverse to his interests. It bears stressing that the complaint for mandamus was
filed only on May 7, 1998, sixteen days after the lower court granted respondent's petition and thirteen days
after it issued the writ. It cannot then possibly prejudice a decided case.

At any rate, it taxes our imagination why the questions raised in Case No. 98-0868 must be considered
determinative of Case No. 9011. The basic issue in the former is whether the respondent, as the purchaser in the
extra-judicial foreclosure proceedings, may be compelled to have the property repurchased or resold to a
mortgagor's successor-in-interest (petitioner): while that in the latter is merely whether the respondent, as the
purchaser in the extrajudicial foreclosure proceedings, is entitled to a writ of possession after the statutory
period for redemption has expired. The two cases, assuming both are pending, can proceed separately and take
their own direction independent of each other.

III.

Having disposed of the jurisdictional and procedural issues, we now come to the merits of the case. Petitioner
seeks intervention in this case by virtue of the lease agreement and the deed of assignment executed in his favor
by the mortgagor (Vargas) and an alleged buyer (Angsico) of the land, respectively. He posits that as a lessee
and assignee in possession of the foreclosed real estate, he automatically acquires interest over the subject
matter of the litigation. This interest is coupled with the fact that he introduced improvements thereon,
consisting of a one-storey building which houses a karaoke-music restaurant, allegedly to the tune of fifteen
million pesos (P15,000,000.00). Enforcing the writ, he adds, without hearing his side would be an injustice to
him.

Intervention is a remedy by which a third party, not originally impleaded in the proceeding, becomes a litigant
therein to enable him to protect or preserve a right or interest which may be affected by such proceeding. 37 The
pertinent provision is stated in Section 1, Rule 19 of the 1997 Rules of Civil Procedure, thus:

"SECTION 1. Who may intervene. — A person who has a legal interest in the matter in litigation, or in
the success of either of the parties, or an interest against both, or is so situated as to be adversely

13 | P a g e
 affected by a distribution or other disposition of property in the custody of the court or of an officer
thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether
or not the intervention will unduly delay or prejudice the adjudication of the rights of the original
parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding." 38

Intervention is not a matter of right but may be permitted by the courts only when the statutory conditions for
the right to intervene is shown.39 Thus, the allowance or disallowance of a motion to intervene is addressed to
the sound discretion of the court.40 In determining the propriety of letting a party intervene in a case, the tribunal
should not limit itself to inquiring whether "a person (1) has a legal interest in the matter in litigation; (2) or in
the success of either of the parties; (3) or an interest against both; (4) or when is so situated as to be adversely
affected by a distribution or other disposition of property in the custody of the court or of an officer
thereof."41 Just as important, as we have stated in Big Country Ranch Corporation v. Court of Appeals,42 is the
function to consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights
of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding.

The period within which a person may intervene is also restricted. Section 2, Rule 19 of the 1997 Rules of Civil
Procedure requires:

"SECTION 2. Time to intervene. — The motion to intervene may be filed at any time before the
rendition of judgment by the trial court, x x x"

After the lapse of this period, it will not be warranted anymore. This is because, basically, intervention is not an
independent action but is ancillary and supplemental to an existing litigation.43

Taking into account these fundamental precepts, we rule that the petitioner may not properly intervene in the
case at bar. His insistence to participate in the proceeding is an unfortunate case of too little, too late.

In the first place, petitioner's Ex-parte Permission to File a Motion to Intervene was submitted to the RTC only
on June 25, 1998. At that stage, the lower court had already granted respondent's petition for the writ in an
Order dated April 21, 1998. It had issued the Writ of Possession on April 24, 1998. Petitioner's motion then was
clearly out of time, having been filed only at the execution stage. For that reason alone, it must meet the
consequence of denial. While it is true that on May 8, 1998, Vargas and S. Villanueva Enterprises moved to
quash the writ, that did not in any way affect the nature of the RTC's Order as an adjudication on the merits.
The issuance of the Order is in essence a rendition of judgment within the purview of Section 2, Rule 19.

Allowing petitioner to intervene, furthermore, will serve no other purpose but to unduly delay the execution of
the writ, to the prejudice of the respondent. This cannot be countenanced considering that after the consolidation
of title in the buyer's name, for failure of the mortgagor to redeem, the writ of possession becomes a matter of
right.44 Its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function.45 As such, the
court neither exercises its official discretion nor judgment.46 If only to stress the writ's ministerial character, we
have, in previous cases, disallowed injunction to prohibit its issuance,47 just as we have held that issuance of the
same may not be stayed by a pending action for annulment of mortgage or the foreclosure itself.48

Even if he anchors his intervention on the purported interest he has over the land and the improvements thereon,
petitioner, still, should not be allowed to do so. He admits that he is a mere lessee and assignee. Whatever
possessory rights he holds only emanate from that of Vargas, from whom he leased the lot, and from whom his
assignor/predecessor-in-interest bought it. Therein lies the precariousness of his title. Petitioner cannot validly
predicate his supposed interest over the property in litigation on that of Vargas, for the simple reason that as
early as December 4, 1985, the latter has already been stripped of all her rights over the land when she, as
mortgagor, failed to redeem it. A mortgagor has only one year within which to redeem her foreclosed real
estate.49 After that period, she loses all her interests over it. This is in consonance with Section 78 of the General
Banking Act, 50 viz.:

14 | P a g e
 "x x x In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate
which is security for any loan granted before the passage of this Act or the provisions of this Act, the
mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially,
for the full or partial payment of an obligation to any bank, banking or credit institution, within the
purview of this Act shall have the right, within one year after the sale of the real estate mortgage as a
result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed
by the court in the order or execution x x x"51(emphasis supplied.)

Being herself bereft of valid title and rights, Vargas can not legitimately convey any to some other person. She
could not have lawfully sold the land to Angsico nor leased it to petitioner for her own account. It is axiomatic
that one can not transmit what one does not have.52 It ought to follow that petitioner could not have acquired
any right or interest from Vargas.

Withal, all is not lost for the petitioner. He can still fully protect his rights in Civil Case No. 98-0868 or the
complaint for mandamus he filed before Branch 231 of the Pasay City RTC. There, he can ventilate his side to a
fuller extent as that would be the more appropriate venue for elucidating whatever legal basis he alleges in
compelling the respondent to sell to him the currently disputed land.

IV.

This brings us to petitioner's final point. He briefly asserts that his act of entering into a lease contract with the
respondent should not affect his right to redeem the subject property.

The possible legal implication of the lease on the petitioner's act of trying to redeem the disputed lot is a
question which, in our opinion, can best be resolved in the mandamus complaint. Whether the agreement must
be construed as a waiver on his part of exercising his purported right of redemption is an issue best left for the
court therein to decide. Whether by acknowledging the legality of the respondent's claim and title over the land
at the time of the execution of the contract, he likewise perpetually barred himself from redeeming the same is a
matter which can be addressed most aptly in that pending action. Hence, there is presently no need for us to
squarely rule on this ultimate point.

IN VIEW WHEREOF, finding no cogent reason to disturb the assailed Decision, the instant petition is hereby
DENIED.

SO ORDERED.

Davide, Jr., C.J., Pardo, and Ynares-Santiago, JJ., concur.

Kapunan, J., on official leave.

15 | P a g e
 DIGEST

Facts:

Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan of three
million pesos and one million pesos from the respondent PAIC Savings and Mortgage Bank and the Philippine
American Investments Corporation (PAIC), respectively. To secure payment of both debts, Vargas executed in
favor of the respondent and PAIC a joint first mortgage over two parcels of land registered under her name. One
of the lots is the subject of the present case. S. Villanueva Enterprises failed to settle its loan obligation.

Accordingly, respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots and acquired
the same as the highest bidder. After the lapse of one year, title was consolidated in respondent’s name for
failure of Vargas to redeem. The Central Bank of the Philippines filed a petition for assistance in the liquidation
of the respondent PAIC with the Regional Trial Court. After a few years, respondent petitioned the Regional
Trial Court of Pasay City for the issuance of a writ of possession for the subject property. However, during the
pendency of civil case for the issuance of a writ of possession, Vargas executed a deed of absolute sale selling,
transferring, and conveying ownership of the disputed lot in favor of a certain Armando Angsico.
Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the property, leased the
same to petitioner Domingo R. Manalo. Later, Armando Angsico, as buyer of the property, assigned his rights
therein to petitioner. The court subsequently issued the writ of possession but Villanueva Enterprises and
Vargas moved for its quashal. Petitioner, on the strength of the lease contract and deed of assignment made in
his favor, submitted a permission to file an ex-parte motion to intervene. Both motions were denied by the
court. Court of Appeals upheld the order of the lower court. Hence this petition.

Issue:

Whether or not the jurisdiction for the issuance of the writ of possession filed by the respondent bank is vested
solely on the liquidation court.

Held:

No. The exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the
bank. It does not cover the reverse situation where it is the bank which files a claim against another person or
legal entity.

Although the law provides that all claims against the insolvent bank should be filed in the liquidation
proceeding, such legal provision only finds operation in cases where there are claims against an insolvent bank.
In fine, the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the
bank. It does not cover the reverse situation where it is the bank which files a claim against another person or
legal entity. Moreover, a bank which had been ordered closed by the monetary board retains its juridical
personality which can sue and be sued through its liquidator. The only limitation being that the prosecution or
defense of the action must be done through the liquidator. Otherwise, no suit for or against an insolvent entity
would prosper. In such situation, banks in liquidation would lose what justly belongs to them through a mere
technicality.

16 | P a g e
G.R. No. 128996 February 15, 2002

CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P. BRAWNER, petitioners,
vs.
COURT OF APPEALS, DEPARTMENT OF JUSTICE, AZIZ RAJKOTWALA, WILLIAM
FERGUSON, JOVEN REYES, and VIC LIM, respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for review on certiorari, seeking the reversal of the Decision1 dated July 8, 1996 of the
former Fifteenth Division2 of the Court of Appeals in CA-G.R. SP No. 37577 as well as its Resolution3 dated
April 16, 1997 denying petitioners’ motion for reconsideration. The appellate court, in its Decision, sustained a
resolution of the Department of Justice ordering the withdrawal of informations for violation of Republic Act
No. 1405 against private respondents.

The facts are:

On September 21, 1993, Citibank filed a complaint for violation of section 31,4 in relation to section 1445 of the
Corporation Code against two (2) of its officers, Dante L. Santos and Marilou Genuino. Attached to the
complaint was an affidavit6 executed by private respondent Vic Lim, a vice-president of Citibank. Pertinent
portions of his affidavit are quoted hereunder:

2.1 Sometime this year, the higher management of Citibank, N.A. assigned me to assist in the investigation of
certain anomalous/highly irregular activities of the Treasurer of the Global Consumer Group of the bank,
namely, Dante L. Santos and the Asst. Vice President in the office of Mr. Dante L. Santos, namely Ms. Marilou
(also called Malou) Genuino. Ms. Marilou Genuino apart from being an Assistant Vice President in the office of
Mr. Dante L. Santos also performed the duties of an Account Officer. An Account Officer in the office of Mr.
Dante L. Santos personally attends to clients of the bank in the effort to persuade clients to place and keep their
monies in the products of Citibank, NA., such as peso and dollar deposits, mortgage backed securities and
money placements, among others.

xxx xxx xxx

4.1 The investigation in which I was asked to participate was undertaken because the bank had found
records/evidence showing that Mr. Dante L. Santos and Ms. Malou Genuino, contrary to their disclosures and
the aforementioned bank policy, appeared to have been actively engaged in business endeavors that were in
conflict with the business of the bank. It was found that with the use of two (2) companies in which they have
personal financial interest, namely Torrance Development Corporation and Global Pacific Corporation, they
managed or caused existing bank clients/depositors to divert their money from Citibank, N.A., such as those
placed in peso and dollar deposits and money placements, to products offered by other companies that were
commanding higher rate of yields. This was done by first transferring bank clients’ monies to Torrance and
Global which in turn placed the monies of the bank clients in securities, shares of stock and other certificates of
third parties. It also appeared that out of these transactions, Mr. Dante L. Santos and Ms. Marilou Genuino
derived substantial financial gains.

5.1 In the course of the investigation, I was able to determine that the bank clients which Mr. Santos and Ms.
Genuino helped/caused to divert their deposits/money placements with Citibank, NA. to Torrance and Global
(their family corporations) for subsequent investment in securities, shares of stocks and debt papers in other
companies were as follows:

17 | P a g e
 xxx

b) Carmen Intengan

xxx

d) Rosario Neri

xxx

i) Rita Brawner

All the above persons/parties have long standing accounts with Citibank, N.A. in savings/dollar deposits and/or
in trust accounts and/or money placements.

As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and Genuino.
Some of the documents pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri,
and Rita P. Brawner, as follows:

a) Annex "A-6"7 - an "Application for Money Transfer" in the amount of US $140,000.00, executed by
Intengan in favor of Citibank $ S/A No. 24367796, to be debited from her Account No. 22543341;

b) Annex "A-7"8 - a "Money Transfer Slip" in the amount of US $45,996.30, executed by Brawner in
favor of Citibank $ S/A No. 24367796, to be debited from her Account No. 22543236; and

c) Annex "A-9"9 - an "Application for Money Transfer" in the amount of US $100,000.00, executed by
Neri in favor of Citibank $ S/A No. 24367796, to be debited from her Account No. 24501018.

In turn, private respondent Joven Reyes, vice-president/business manager of the Global Consumer Banking
Group of Citibank, admits to having authorized Lim to state the names of the clients involved and to attach the
pertinent bank records, including those of petitioners’.10 He states that private respondents Aziz Rajkotwala and
William Ferguson, Citibank, N.A. Global Consumer Banking Country Business Manager and Country
Corporate Officer, respectively, had no hand in the disclosure, and that he did so upon the advice of counsel.

In his memorandum, the Solicitor General described the scheme as having been conducted in this manner:

First step: Santos and/or Genuino would tell the bank client that they knew of financial products of other
companies that were yielding higher rates of interests in which the bank client can place his money. Acting on
this information, the bank client would then authorize the transfer of his funds from his Citibank account to the
Citibank account of either Torrance or Global.

The transfer of the Citibank client’s deposits was done through the accomplishment of either an Application For
Manager’s Checks or a Term Investment Application in favor of Global or Torrance that was prepared/filed by
Genuino herself.

Upon approval of the Application for Manager’s Checks or Term Investment Application, the funds of the bank
client covered thereof were then deposited in the Citibank accounts of Torrance and/or Global.

Second step: Once the said fund transfers had been effected, Global and/or Torrance would then issue its/ their
checks drawn against its/their Citibank accounts in favor of the other companies whose financial products, such
as securities, shares of stocks and other certificates, were offering higher yields.

18 | P a g e
Third step: On maturity date(s) of the placements made by Torrance and/or Global in the other companies,
using the monies of the Citibank client, the other companies would then. return the placements to Global and/or
Torrance with the corresponding interests earned.

Fourth step: Upon receipt by Global and/or Torrance of the remittances from the other companies, Global
and/or Torrance would then issue its/their own checks drawn against their Citibank accounts in favor of Santos
and Genuino.

The amounts covered by the checks represent the shares of Santos and Genuino in the margins Global and/or
Torrance had realized out of the placements [using the diverted monies of the Citibank clients] made with the
other companies.

Fifth step: At the same time, Global and/or Torrance would also issue its/their check(s) drawn against its/their
Citibank accounts in favor of the bank client.

The check(s) cover the principal amount (or parts thereof) which the Citibank client had previously transferred,
with the help of Santos and/or Genuino, from his Citibank account to the Citibank account(s) of Global and/or
Torrance for placement in the other companies, plus the interests or earnings his placements in other companies
had made less the spreads made by Global, Torrance, Santos and Genuino.

The complaints which were docketed as I.S. Nos. 93-9969, 93-10058 and 94-1215 were subsequently amended
to include a charge of estafa under Article 315, paragraph 1(b)11 of the Revised Penal Code.

As an incident to the foregoing, petitioners filed respective motions for the exclusion and physical withdrawal
of their bank records that were attached to Lim’s affidavit.

In due time, Lim and Reyes filed their respective counter-affidavits.12 In separate Memoranda dated March 8,
1994 and March 15, 1994 2nd Assistant Provincial Prosecutor Hermino T. Ubana, Sr. recommended the
dismissal of petitioners’ complaints. The recommendation was overruled by Provincial Prosecutor Mauro M.
Castro who, in a Resolution dated August 18, 1994,13 directed the filing of informations against private
respondents for alleged violation of Republic Act No. 1405, otherwise known as the Bank Secrecy Law.

Private respondents’ counsel then filed an appeal before the Department of Justice (DOJ). On November 17,
1994, then DOJ Secretary Franklin M. Drilon issued a Resolution14 ordering, inter alia, the withdrawal of the
aforesaid informations against private respondents. Petitioners’ motion for reconsideration15 was denied by DOJ
Acting Secretary Demetrio G. Demetria in a Resolution dated March 6, 1995.16

Initially, petitioners sought the reversal of the DOJ resolutions via a petition for certiorari and mandamus filed
with this Court, docketed as G.R. No. 119999-120001. However, the former First Division of this Court, in a
Resolution dated June 5, 1995,17 referred the matter to the Court of the Appeals, on the basis of the latter
tribunal’s concurrent jurisdiction to issue the extraordinary writs therein prayed for. The petition was docketed
as CA-G.R. SP No. 37577 in the Court of Appeals.

On July 8, 1996, the Court of Appeals rendered judgment dismissing the petition in CA-G.R. SP No. 37577 and
declared therein, as follows:

Clearly, the disclosure of petitioners’ deposits was necessary to establish the allegation that Santos and Genuino
had violated Section 31 of the Corporation Code in acquiring "any interest adverse to the corporation in respect
of any matter which has been reposed in him in confidence." To substantiate the alleged scheme of Santos and
Genuino, private respondents had to present the records of the monies which were manipulated by the two
officers which included the bank records of herein petitioners.

19 | P a g e
Although petitioners were not the parties involved in IS. No. 93-8469, their accounts were relevant to the
complete prosecution of the case against Santos and Genuino and the respondent DOJ properly ruled that the
disclosure of the same falls under the last exception of R.A. No. 1405. That ruling is consistent with the
principle laid down in the case of Mellon Bank, N.A. vs. Magsino (190 SCRA 633) where the Supreme Court
allowed the testimonies on the bank deposits of someone not a party to the case as it found that said bank
deposits were material or relevant to the allegations in the complaint. Significantly, therefore, as long as the
bank deposits are material to the case, although not necessarily the direct subject matter thereof, a disclosure of
the same is proper and falls within the scope of the exceptions provided for by R.A. No. 1405.

xxx xxx xxx

Moreover, the language of the law itself is clear and cannot be subject to different interpretations. A reading of
the provision itself would readily reveal that the exception "or in cases where the money deposited or invested
is the subject matter of the litigation" is not qualified by the phrase "upon order of competent Court" which
refers only to cases of bribery or dereliction of duty of public officials.

Petitioners’ motion for reconsideration was similarly denied in a Resolution dated April 16, 1997. Appeal was
made in due time to this Court.

The instant petition was actually denied by the former Third Division of this Court in a Resolution18 dated July
16, 1997, on the ground that petitioners had failed to show that a reversible error had been committed. On
motion, however, the petition was reinstated19 and eventually given due course.20

In assailing the appellate court’s findings, petitioners assert that the disclosure of their bank records was
unwarranted and illegal for the following reasons:

I.

IN BLATANT VIOLATION OF R.A. NO. 1405, PRIVATE RESPONDENTS ILLEGALLY MADE

DISCLOSURES OF PETITIONERS’ CONFIDENTIAL BANK DEPOSITS FOR THEIR SELFISH ENDS IN
PROSECUTING THEIR COMPLAINT IN IS. NO. 93-8469 THAT DID NOT INVOLVE PETITIONERS.

II.

PRIVATE RESPONDENTS’ DISCLOSURES DO NOT FALL UNDER THE FOURTH EXCEPTION OF

R.A. NO. 1405 (i.e., "in cases where the money deposited or invested is the subject matter of the litigation"),
NOR UNDER ANY OTHER EXCEPTION:

(1)

PETITIONERS’ DEPOSITS ARE NOT INVOLVED IN ANY LITIGATION BETWEEN

PETITIONERS AND RESPONDENTS. THERE IS NO LITIGATION BETWEEN THE PARTIES,
MUCH LESS ONE INVOLVING PETITIONERS’ DEPOSITS AS THE SUBJECT MATTER
THEREOF.

(2)

EVEN ASSUMING ARGUENDO THAT THERE IS A LITIGATION INVOLVING PETITIONERS’

DEPOSITS AS THE SUBJECT MATTER THEREOF, PRIVATE RESPONDENTS’ DISCLOSURES
OF PETITIONERS’ DEPOSITS ARE NEVERTHELESS ILLEGAL FOR WANT OF THE
REQUISITE COURT ORDER, IN VIOLATION OF R.A. NO. 1405.

20 | P a g e
 III.

THEREFORE, PETITIONERS ARE ENTITLED TO PROSECUTE PRIVATE RESPONDENTS FOR

VIOLATIONS OF R.A. NO. 1405 FOR HAVING ILLEGALLY DISCLOSED PETITIONERS’
CONFIDENTIAL BANK DEPOSITS AND RECORDS IN IS. NO. 93-8469.

Apart from the reversal of the decision and resolution of the appellate court as well as the resolutions of the
Department of Justice, petitioners pray that the latter agency be directed to issue a resolution ordering the
Provincial Prosecutor of Rizal to file the corresponding informations for violation of Republic Act No. 1405
against private respondents.

The petition is not meritorious.

Actually, this case should have been studied more carefully by all concerned. The finest legal minds in the
country - from the parties’ respective counsel, the Provincial Prosecutor, the Department of Justice, the Solicitor
General, and the Court of Appeals - all appear to have overlooked a single fact which dictates the outcome of
the entire controversy. A circumspect review of the record shows us the reason. The accounts in question are
U.S. dollar deposits; consequently, the applicable law is not Republic Act No. 1405 but Republic Act (RA) No.
6426, known as the "Foreign Currency Deposit Act of the Philippines," section 8 of which provides:

Sec. 8. Secrecy of Foreign Currency Deposits.- All foreign currency deposits authorized under this Act, as
amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon
the written permission of the depositor, in no instance shall such foreign currency deposits be examined,
inquired or looked into by any person, government official bureau or office whether judicial or administrative
or legislative or any other entity whether public or private: Provided, however, that said foreign currency
deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever.21 (italics supplied)

Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is,
disclosure is allowed only upon the written permission of the depositor. Incidentally, the acts of private
respondents complained of happened before the enactment on September 29, 2001 of R.A. No. 9160 otherwise
known as the Anti-Money Laundering Act of 2001.

A case for violation of Republic Act No. 6426 should have been the proper case brought against private
respondents. Private respondents Lim and Reyes admitted that they had disclosed details of petitioners’ dollar
deposits without the latter’s written permission. It does not matter if that such disclosure was necessary to
establish Citibank’s case against Dante L. Santos and Marilou Genuino. Lim’s act of disclosing details of
petitioners’ bank records regarding their foreign currency deposits, with the authority of Reyes, would appear to
belong to that species of criminal acts punishable by special laws, called malum prohibitum. In this regard, it
has been held that:

While it is true that, as a rule and on principles of abstract justice, men are not and should not be held criminally
responsible for acts committed by them without guilty knowledge and criminal or at least evil intent xxx, the
courts have always recognized the power of the legislature, on grounds of public policy and compelled by
necessity, "the great master of things," to forbid in a limited class of cases the doing of certain acts, and to make
their commission criminal without regard to the intent of the doer. xxx In such cases no judicial authority has
the power to require, in the enforcement of the law, such knowledge or motive to be shown. As was said in the
case of State vs. McBrayer xxx:

‘It is a mistaken notion that positive, willful intent, as distinguished from a mere intent, to violate the criminal
law, is an essential ingredient in every criminal offense, and that where there is the absence of such intent there

21 | P a g e
is no offense; this is especially so as to statutory offenses. When the statute plainly forbids an act to be done,
and it is done by some person, the law implies conclusively the guilty intent, although the offender was honestly
mistaken as to the meaning of the law he violates. When the language is plain and positive, and the offense is
not made to depend upon the positive, willful intent and purpose, nothing is left to interpretation.’ 22

Ordinarily, the dismissal of the instant petition would have been without prejudice to the filing of the proper
charges against private respondents. The matter would have ended here were it not for the intervention of time,
specifically the lapse thereof. So as not to unduly prolong the settlement of the case, we are constrained to rule
on a material issue even though it was not raised by the parties. We refer to the issue of prescription.

Republic Act No. 6426 being a special law, the provisions of Act No. 3326,23 as amended by Act No. 3763, are
applicable:

SECTION 1. Violations penalized by special acts shall, unless otherwise provided in such acts, prescribe in
accordance with the following rules: (a) after a year for offences punished only by a fine or by imprisonment for
not more than one month, or both: (b) after four years for those punished by imprisonment for more than one
month, but less than two years; (c) after eight years for those punished by imprisonment for two years or more,
but less than six years; and (d) after twelve years for any other offence punished by imprisonment for six years
or more, except the crime of treason, which shall prescribe after twenty years: Provided, however, That all
offences against any law or part of law administered by the Bureau of Internal Revenue shall prescribe after five
years. Violations penalized by municipal ordinances shall prescribe after two months.

Violations of the regulations or conditions of certificates of public convenience issued by the Public Service
Commission shall prescribe after two months.

SEC. 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if the
same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its
investigation and punishment.

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

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

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

It may well be argued that the foregoing disquisition would leave petitioners with no remedy in law. We point
out, however, that the confidentiality of foreign currency deposits mandated by Republic Act No. 6426, as
amended by Presidential Decree No. 1246, came into effect as far back as 1977. Hence, ignorance thereof
cannot be pretended. On one hand, the existence of laws is a matter of mandatory judicial notice; 32 on the
other, ignorantia legis non excusat.33 Even during the pendency of this appeal, nothing prevented the petitioners
from filing a complaint charging the correct offense against private respondents. This was not done, as everyone

22 | P a g e
involved was content to submit the case on the basis of an alleged violation of Republic Act No. 1405 (Bank
Secrecy Law), however, incorrectly invoked.34

WHEREFORE, the petition is hereby DENIED. No pronouncement as to costs.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

DIGEST

Facts:

Citibank filed a complaint for violation of the Corporation Code against 2 of its officers. The complaint was
attached with the affidavit of Vic Lim, VP of Citibank, who was then instructed by the higher management of
the bank to investigate the anomalous/highly irregular activities of the said officers. As evidence, Lim annexed
bank records purporting to establish the deception practiced by the officers. Some of the documents pertained to
the dollar deposits of petitioners. As an incident to the foregoing, petitioners filed respective motions for the
exclusion and physical withdrawal of their bank records that were attached to Lim’s affidavit. The filing of
Informations against private respondents was recommended for alleged violation of Republic Act No. 1405.
Private respondents appealed before the DOJ which ruled in their favor. Resort to the Court, referred the matter
to the CA which then held that the disclosure was proper and falls under the exception under R.A. No. 1405.

Issue:

Whether or not the disclosure falls under the exception under R.A. No. 1405.

Ruling: NO.

Actually, this case should have been studied more carefully by all concerned. The finest legal minds in the
country – from the parties’ respective counsel, the Provincial Prosecutor, the Department of Justice, the
Solicitor General, and the Court of Appeals – all appear to have overlooked a single fact which dictates the
outcome of the entire controversy. A circumspect review of the record shows us the reason. The accounts in
question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No. 1405 but Republic
Act (RA) No. 6426, known as the “Foreign Currency Deposit Act of the Philippines.”

Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is,
disclosure is allowed only upon the written permission of the depositor. Incidentally, the acts of private
respondents complained of happened before the enactment on September 29, 2001 of R.A. No. 9160 otherwise
known as the Anti-Money Laundering Act of 2001.

A case for violation of Republic Act No. 6426 should have been the proper case brought against private
respondents. Private respondents Lim and Reyes admitted that they had disclosed details of petitioners’ dollar
deposits without the latter’s written permission. It does not matter if that such disclosure was necessary to
establish Citibank’s case against Dante L. Santos and Marilou Genuino. Lim’s act of disclosing details of
petitioners’ bank records regarding their foreign currency deposits, with the authority of Reyes, would appear to
belong to that species of criminal acts punishable by special laws, called malum prohibitum.

23 | P a g e
*The decision however was still unfavorable to the petitioners since there is an issue as to prescription. The
action to assail the disclosure of herein private respondents for them to be liable for violating RA 6426 had
already prescribed.

24 | P a g e
G.R. No. 140687 December 18, 2006

CHINA BANKING CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and JOSE "JOSEPH" GOTIANUY as substituted by
ELIZABETH GOTIANUY LO, respondents.

DECISION

CHICO-NAZARIO, J.:

A Complaint for recovery of sums of money and annulment of sales of real properties and shares of stock
docketed as CEB-21445 was filed by Jose "Joseph" Gotianuy against his son-in-law, George Dee, and his
daughter, Mary Margaret Dee, before the Regional Trial Court (RTC) of Cebu City, Branch 58.

Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US dollar
deposits with Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret
Dee received these amounts from Citibank N.A. through checks which she allegedly deposited at China
Banking Corporation (China Bank). He likewise accused his son-in-law, George Dee, husband of his daughter,
Mary Margaret, of transferring his real properties and shares of stock in George Dee's name without any
consideration. Jose Gotianuy, died during the pendency of the case before the trial court.1 He was substituted by
his daughter, Elizabeth Gotianuy Lo. The latter presented the US Dollar checks withdrawn by Mary Margaret
Dee from his US dollar placement with Citibank. The details of the said checks are:

1) CITIBANK CHECK NO. 69003194405412 dated September 29 1997 in the amount of US$5,937.52
payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;

2) CITIBANK CHECK NO. 69003194405296 dated September 29 1997 in the amount of US$7,197.59
payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;

3) CITIBANK CHECK NO. 69003194405414 dated September 29 1997 in the amount of US$1,198.94
payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;

4) CITIBANK CHECK NO. 69003194405413 dated September 29 1997 in the amount of US$989.04
payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;

5) CITIBANK CHECK NO. 69003194405297 dated October 01 1997 in the amount of US$766,011.97
payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; and

6) CITIBANK CHECK NO. 69003194405339 dated October 09 1997 in the amount of US$83,053.10
payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET.2

Upon motion of Elizabeth Gotianuy Lo, the trial court3 issued a subpoena to Cristota Labios and Isabel Yap,
employees of China Bank, to testify on the case. The Order of the trial court dated 23 February 1999, states:

25 | P a g e
 Issue a subpoena ad testificandum requiring MS. ISABEL YAP and CRISTOTA LABIOS of China
Banking Corporation, Cebu Main Branch, corner Magallanes and D. Jakosalem Sts., Cebu City, to
appear in person and to testify in the hearing of the above entitled case on March 1, 1999 at 8:30 in the
morning, with regards to Citibank Checks (Exhs. "AAA" to "AAA-5") and other matters material and
relevant to the issues of this case.4

China Bank moved for a reconsideration. Resolving the motion, the trial court issued an Order dated 16 April
1999 and held:

The Court is of the view that as the foreign currency fund (Exhs. "AAA" to "AAA-5") is deposited with
the movant China Banking Corporation, Cebu Main Branch, Cebu City, the disclosure only as to the
name or in whose name the said fund is deposited is not violative of the law. Justice will be better
served if the name or names of the depositor of said fund shall be disclosed because such a disclosure is
material and important to the issues between the parties in the case at bar.

Premises considered, the motion for reconsideration is denied partly and granted partly, in the sense that
Isabel Yap and/or Cristuta Labios are directed to appear before this Court and to testify at the trial of
this case on April 20, 1999, May 6 & 7, 1999 at 10:00 o'clock in the morning and only for the purpose
of disclosing in whose name or names is the foreign currency fund (Exhs. "AAA" to "AAA-5")
deposited with the movant Bank and not to other matters material and relevant to the issues in the case
at bar.5

From this Order, China Bank filed a Petition for Certiorari6 with the Court of Appeals. In a Decision7 dated 29
October 1999, the Court of Appeals denied the petition of China Bank and affirmed the Order of the RTC.

In justifying its conclusion, the Court of Appeals ratiocinated:

From the foregoing, it is pristinely clear the law specifically encompasses only the money or funds in
foreign currency deposited in a bank. Thus, the coverage of the law extends only to the foreign currency
deposit in the CBC account where Mary Margaret Dee deposited the Citibank checks in question and
nothing more.

It has to be pointed out that the April 16, 1999 Order of the court of origin modified its previous
February 23, 1999 Order such that the CBC representatives are directed solely to divulge "in whose
name or names is the foreign currency fund (Exhs. "AAA" to "AAA-5") deposited with the movant
bank." It precluded inquiry on "other materials and relevant to the issues in the case at bar." We find
that the directive of the court below does not contravene the plain language of RA 6426 as amended by
P.D. No. 1246.

The contention of petitioner that the [prescription] on absolute confidentiality under the law in question
covers even the name of the depositor and is beyond the compulsive process of the courts is palpably
untenable as the law protects only the deposits itself but not the name of the depositor. To uphold the
theory of petitioner CBC is reading into the statute "something that is not within the manifest intention
of the legislature as gathered from the statute itself, for to depart from the meaning expressed by the
words, is to alter the statute, to legislate and not to interpret, and judicial legislation should be
avoided. Maledicta expositio quae corrumpit textum – It is a dangerous construction which is against
the words. Expressing the same principle is the maxim: Ubi lex non distinguit nec nos distinguere
debemos, which simply means that where the law does not distinguish, we should not make any
distinction." (Gonzaga, Statutes and their Construction, p. 75.)8

From the Decision of the Court of Appeals, China Bank elevated the case to this Court based on the following
issues:

26 | P a g e
 I

THE HONORABLE COURT OF APPEALS HAS INTERPRETED THE PROVISION OF SECTION

8 OF R.A. 6426, AS AMENDED, OTHERWISE KNOWN AS THE FOREIGN CURRENCY
DEPOSIT ACT, IN A MANNER CONTRARY TO THE LEGISLATIVE PURPOSE, THAT IS, TO
PROVIDE ABSOLUTE CONFIDENTIALITY OF WHATEVER INFORMATION RELATIVE TO
THE FOREIGN CURRENCY DEPOSIT.

II

PRIVATE RESPONDENT IS NOT THE OWNER OF THE QUESTIONED FOREIGN CURRENCY

DEPOSIT. THUS, HE CANNOT INVOKE THE AID OF THE COURT IN COMPELLING THE
DISCLOSURE OF SOMEONE ELSE'S FOREIGN CURRENCY DEPOSIT ON THE FLIMSY
PRETEXT THAT THE CHECKS (IN FOREIGN CURRENCY) HE HAD ISSUED MAY HAVE
ENDED UP THEREIN.

III

PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF SEC. 8, R.A. 6426, IN BEHALF OF
THE FOREIGN CURRENCY DEPOSITOR, OWING TO ITS SOLEMN OBLIGATION TO ITS
CLIENT TO EXERCISE EXTRAORDINARY DILIGENCE IN THE HANDLING OF THE
ACCOUNT.9

As amended by Presidential Decree No. 1246, the law reads:

SEC. 8. Secrecy of Foreign Currency Deposits. – All foreign currency deposits authorized under this
Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under
Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential
nature and, except upon the written permission of the depositor, in no instance shall such foreign
currency deposits be examined, inquired or looked into by any person, government official, bureau or
office whether judicial or administrative or legislative or any other entity whether public or
private: Provided, however, that said foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246,
prom. Nov. 21, 1977) (Emphasis supplied.)

Under the above provision, the law provides that all foreign currency deposits authorized under Republic Act
No. 6426, as amended by Sec. 8, Presidential Decree No. 1246, Presidential Decree No. 1035, as well as foreign
currency deposits authorized under Presidential Decree No. 1034 are considered absolutely confidential in
nature and may not be inquired into. There is only one exception to the secrecy of foreign currency deposits,
that is, disclosure is allowed upon the written permission of the depositor.

This much was pronounced in the case of Intengan v. Court of Appeals,10 where it was held that the only
exception to the secrecy of foreign currency deposits is in the case of a written permission of the depositor.

It must be remembered that under the whereas clause of Presidential Decree No. 1246 which amended Sec. 8 of
Republic Act No. 6426, the Foreign Currency Deposit System including the Offshore Banking System under
Presidential Decree 1034 were intended to draw deposits from foreign lenders and investors, and we quote:

Whereas, in order to assure the development and speedy growth of the Foreign Currency Deposit
System and the Offshore Banking System in the Philippines, certain incentives were provided for under
the two Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on

27 | P a g e
 the interest income of depositors who are nonresidents and are not engaged in trade or business in the
Philippines;

Whereas, making absolute the protective cloak of confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing the vested rights of depositors would better
encourage the inflow of foreign currency deposits into the banking institutions authorized to accept
such deposits in the Philippines thereby placing such institutions more in a position to properly channel
the same to loans and investments in the Philippines, thus directly contributing to the economic
development of the country.

As to the deposit in foreign currencies entitled to be protected under the confidentiality rule, Presidential Decree
No. 1034,11 defines deposits to mean funds in foreign currencies which are accepted and held by an offshore
banking unit in the regular course of business, with the obligation to return an equivalent amount to the owner
thereof, with or without interest.12

It is in this light that the court in the case of Salvacion v. Central Bank of the Philippines,13 allowed the inquiry
of the foreign currency deposit in question mainly due to the peculiar circumstances of the case such that a strict
interpretation of the letter of the law would result to rank injustice. Therein, Greg Bartelli y Northcott, an
American tourist, was charged with criminal cases for serious illegal detention and rape committed against then
12 year-old Karen Salvacion. A separate civil case for damages with preliminary attachment was filed against
Greg Bartelli. The trial court issued an Order granting the Salvacions' application for the issuance of a writ of
preliminary attachment. A notice of garnishment was then served on China Bank where Bartelli held a dollar
account. China Bank refused, invoking the secrecy of bank deposits. The Supreme Court ruled: "In fine, the
application of the law depends on the extent of its justice x x x It would be unthinkable, that the questioned law
exempting foreign currency deposits from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever would be used as a device by an
accused x x x for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent.14

With the foregoing, we are now tasked to determine the single material issue of whether or not petitioner China
Bank is correct in its submission that the Citibank dollar checks with both Jose Gotianuy and/or Mary Margaret
Dee as payees, deposited with China Bank, may not be looked into under the law on secrecy of foreign currency
deposits. As a corollary issue, sought to be resolved is whether Jose Gotianuy may be considered a depositor
who is entitled to seek an inquiry over the said deposits.

The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor of Mary Margaret Dee.
It reasoned that since Jose Gotianuy is the named co-payee of the latter in the subject checks, which checks
were deposited in China Bank, then, Jose Gotianuy is likewise a depositor thereof. On that basis, no written
consent from Mary Margaret Dee is necessitated.

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

The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are co-payees of various
Citibank checks;15 (2) Mary Margaret Dee withdrew these checks from Citibank;16 (3) Mary Margaret Dee
admitted in her Answer to the Request for Admissions by the Adverse Party sent to her by Jose Gotianuy17 that
she withdrew the funds from Citibank upon the instruction of her father Jose Gotianuy and that the funds
belonged exclusively to the latter; (4) these checks were endorsed by Mary Margaret Dee at the dorsal portion;
and (5) Jose Gotianuy discovered that these checks were deposited with China Bank as shown by the stamp of
China Bank at the dorsal side of the checks.

Thus, with this, there is no issue as to the source of the funds. Mary Margaret Dee declared the source to be Jose
Gotianuy. There is likewise no dispute that these funds in the form of Citibank US dollar Checks are now
deposited with China Bank.

28 | P a g e
As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose
Gotianuy has the right to inquire into the said deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of business, to
be placed to his credit and subject to his check or the beneficiary of the funds held by the bank as trustee. 18

On this score, the observations of the Court of Appeals are worth reiterating:

Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency account
with Citibank, NA. The monies subject of said checks originally came from the late Jose Gotianuy, the
owner of the account. Thus, he also has legal rights and interests in the CBC account where said monies
were deposited. More importantly, the Citibank checks (Exhibits "AAA" to "AAA-5") readily
demonstrate (sic) that the late Jose Gotianuy is one of the payees of said checks. Being a co-payee
thereof, then he or his estate can be considered as a co-depositor of said checks. Ergo, since the late
Jose Gotianuy is a co-depositor of the CBC account, then his request for the assailed subpoena is
tantamount to an express permission of a depositor for the disclosure of the name of the account holder.
The April 16, 1999 Order perforce must be sustained.19(Emphasis supplied.)

One more point. It must be remembered that in the complaint of Jose Gotianuy, he alleged that his US dollar
deposits with Citibank were illegally taken from him. On the other hand, China Bank employee Cristuta Labios
testified that Mary Margaret Dee came to China Bank and deposited the money of Jose Gotianuy in Citibank
US dollar checks to the dollar account of her sister Adrienne Chu.20 This fortifies our conclusion that an inquiry
into the said deposit at China Bank is justified. At the very least, Jose Gotianuy as the owner of these funds is
entitled to a hearing on the whereabouts of these funds.

All things considered and in view of the distinctive circumstances attendant to the present case, we are
constrained to render a limited pro hac vice ruling.21 Clearly it was not the intent of the legislature when it
enacted the law on secrecy on foreign currency deposits to perpetuate injustice. This Court is of the view that
the allowance of the inquiry would be in accord with the rudiments of fair play,22 the upholding of fairness in
our judicial system and would be an avoidance of delay and time-wasteful and circuitous way of administering
justice.23

WHEREFORE, premises considered, the Petition is DENIED. The Decision of the Court of Appeals dated 29
October 1999 affirming the Order of the RTC, Branch 58, Cebu City dated 16 April 1999 is AFFIRMED and
this case is ordered REMANDED to the trial court for continuation of hearing with utmost dispatch consistent
with the above disquisition. No costs.

SO ORDERED.

Ynares-Santiago, (Working Chairperson), Austria-Martinez, and Callejo Sr., JJ., concur.

Panganiban, C.J., Retired as of December 7, 2006.

29 | P a g e
 DIGEST

FACTS

A complaint for recovery of sums of money and annulment of sales of real properties and shares of
stock was filed by Jose Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee.
Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US dollar
deposits with Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret
Dee received these amounts from Citibank N.A. through checks which she allegedly deposited at China
Banking Corporation (China Bank).

Jose Gotianuy died during the pendency of the case before the trial court. He was substituted by his
other daughter, Elizabeth Gotianuy Lo. The latter presented six US Dollar checks withdrawn by Mary Margaret
Dee from Jose Gotianuy’s US dollar placement with Citibank. In the course of the trial, the lower court ordered
two employees of petitioner China Bank to testify and disclose in whose name the dollar fund was deposited.
The CA affirmed the trial court’s order; thus, China Bank appealed to the Supreme Court.

ISSUE

May the Citibank dollar checks with Jose Gotianuy and/or Mary Margaret Dee as payees, which were
deposited with petitioner China Bank, be looked into notwithstanding the law on secrecy of foreign currency
deposits? Corollarily, may Jose Gotianuy be considered a depositor who is entitled to seek an inquiry over the
said foreign currency deposits?

THE RULING

[The Supreme Court DENIED the petition, AFFIRMED the decision of the CA pro hac vice,
and REMANDED the case to the trial court for continuation of hearing with utmost dispatch consistent with
this ruling.]

YES, the Citibank dollar checks with Jose Gotianuy and/or Mary Margaret Dee as payees, which
were deposited with petitioner China Bank, may be looked into notwithstanding the law on secrecy of foreign
currency deposits.

Sec. 8 of R.A. 6426, the Foreign Currency Deposit Act, provides that all authorized foreign currency
deposits are considered absolutely confidential in natureand may not be inquired into. Under the same
provision, there is only one exception to this rule, that is, when disclosure is allowed upon the written
permission of the depositor.

In this case, Jose Gotianuy was considered by the Court as a co-depositor of Mary Margaret Dee. The
Court reasoned that since Jose Gotianuy is the named co-payee of Mary Margaret Dee in the subject checks,
which were deposited in China Bank, then Jose Gotianuy is likewise a depositor thereof. On that basis, no
written consent from Mary Margaret Dee is necessary for the examination of the foreign currency deposits. As
the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose
Gotianuy has the right to inquire into the said deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of
business, to be placed to his credit and subject to his check or the beneficiary of the funds held by the bank as
trustee. On this score, the observations of the Court of Appeals are worth reiterating:

Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency account
with Citibank, NA. The monies subject of said checks originally came from the late Jose Gotianuy, the owner of
the account. Thus, he also has legal rights and interests in the CBC account where said monies were

30 | P a g e
deposited. More importantly, the Citibank checks (Exhibits "AAA" to "AAA-5") readily demonstrate (sic) that
the late Jose Gotianuy is one of the payees of said checks. Being a co-payee thereof, then he or his estate can be
considered as a co-depositor of said checks. Ergo, since the late Jose Gotianuy is a co-depositor of the CBC
account, then his request for the assailed subpoena is tantamount to an express permission of a depositor for the
disclosure of the name of the account holder. The April 16, 1999 Order perforce must be sustained. (Emphasis
supplied.)

In the complaint of Jose Gotianuy, he alleged that his US dollar deposits with Citibank were illegally
taken from him. On the other hand, China Bank employee Cristuta Labios testified that Mary Margaret Dee
came to China Bank and deposited the money of Jose Gotianuy in Citibank US dollar checks to the dollar
account of her sister Adrienne Chu. This fortifies the Court’s conclusion that an inquiry into the said deposit at
China Bank is justified. At the very least, Jose Gotianuy as the owner of these funds is entitled to a hearing on
the whereabouts of these funds.

All things considered and in view of the distinctive circumstances attendant to the present case, the
Court was constrained to render a limited pro hac vice ruling. Clearly it was not the intent of the legislature
when it enacted the law on secrecy on foreign currency deposits to perpetuate injustice. This Court is of the
view that the allowance of the inquiry would be in accord with the rudiments of fair play, the upholding of
fairness in our judicial system and would be an avoidance of delay and time-wasteful and circuitous way of
administering justice.

31 | P a g e
G.R. No. 135882 June 27, 2001

LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION BANK OF THE PHILIPPINES,
petitioner,
vs.
HONORABLE ANIANO A. DESIERTO, in his capacity as OMBUDSMAN, ANGEL C. MAYOR-ALGO,
JR., MARY ANN CORPUZ-MANALAC AND JOSE T. DE JESUS, JR., in their capacity as Chairman and
Members of the Panel, respectively, respondents.

PARDO, J.:

In the petition at bar, petitioner seeks to --

a. Annul and set aside, for having been issued without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack of jurisdiction, respondents' order dated September 7, 1998 in OMB-0-97-
0411, In Re: Motion to Cite Lourdes T. Marquez for indirect contempt, received by counsel of
September 9,1998, and their order dated October 14,1998, denying Marquez's motion for
reconsideration dated September 10, 1998, received by counsel on October 20, 1998.

b. Prohibit respondents from implementing their order dated October 14, 1998, in proceeding with the
hearing of the motion to cite Marquez for indirect contempt, through the issuance by this Court of a
temporary restraining order and/or preliminary injunction.1

The antecedent facts are as follows:

Sometime in May 1998, petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto dated
April 29, 1998, to produce several bank documents for purposes of inspection in camera relative to various
accounts maintained at Union Bank of the Philippines, Julia Vargas Branch, where petitioner is the branch
manager. The accounts to be inspected are Account Nos. 011-37270, 240-020718, 245-30317-3 and 245-30318-
1, involved in a case pending with the Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v.
Amado Lagdameo, et al. The order further states:

"It is worth mentioning that the power of the Ombudsman to investigate and to require the production
and inspection of records and documents is sanctioned by the 1987 Philippine Constitution, Republic
Act No. 6770, otherwise known as Ombudsman Act of 1989 and under existing jurisprudence on the
matter. It must be noted that R.A. 6770 especially Section 15 thereof provides, among others, the
following powers, functions and duties of the Ombudsman, to wit:

xxx

(8) Administer oaths, issue subpoena duces tecum and take testimony in any investigation or inquiry,
including the power to examine and have access to banks accounts and records;

(9) Punish for contempt in accordance with the Rules of Court and under the same procedure and with
the same penalties provided therein.

Clearly, the specific provision of R.A. 6770, a later legislation, modifies the law on the Secrecy of Bank
Deposits (R.A.1405) and places the office of the Ombudsman in the same footing as the courts of law in
this regard."2

The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail managers checks
purchased by one George Trivinio, a respondent in OMB-097-0411, pending with the office of the Ombudsman.

32 | P a g e
It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks (MCs) for a total amount
of P272.1 Million at Traders Royal Bank, United Nations Avenue branch, on May 2 and 3, 1995. Out of the 51
MCs, eleven (11) MCs in the amount of P70.6 million, were deposited and credited to an account maintained at
the Union Bank, Julia Vargas Branch.3

On May 26, 1998, the FFIB panel met in conference with petitioner Lourdes T. Marquez and Atty. Fe B.
Macalino at the bank's main office, Ayala Avenue, Makati City. The meeting was for the purpose of allowing
petitioner and Atty. Macalino to view the checks furnished by Traders Royal Bank. After convincing
themselves of the veracity of the checks, Atty. Macalino advised Ms. Marquez to comply with the order of the
Ombudsman. Petitioner agreed to an in camera inspection set on June 3, 1998.4

However, on June 4,1998, petitioner wrote the Ombudsman explaining to him that the accounts in question
cannot readily be identified and asked for time to respond to the order. The reason forwarded by the petitioner
was that "despite diligent efforts and from the accounts numbers presented, we can not identify these accounts
since the checks are issued in cash or bearer. We surmised that these accounts have long been dormant, hence
are not covered by the new account number generated by the Union Bank system. We therefore have to verify
from the Interbank records archives for the whereabouts of these accounts.5

The Ombudsman, responding to the request of the petitioner for time to comply with the order, stated: "firstly, it
must be emphasized that Union Bank, Julia Vargas Branch was depositary bank of the subject Traders Royal
Bank Manager's Check (MCs), as shown at its dorsal portion and as cleared by the Philippines Clearing House,
not the International Corporate Bank.

Notwithstanding the facts that the checks were payable to cash or bearer, nonetheless, the name of the
depositor(s) could easily be identified since the account numbers x x x where said checks were deposited are
identified in the order.

Even assuming that the accounts xxx were already classified as "dormant accounts," the bank is still required to
preserve the records pertaining to the accounts within a certain period of time as required by existing banking
rules and regulations.

And finally, the in camera inspection was already extended twice from May 13, 1998 to June 3,1998 thereby
giving the bank enough time within which to sufficiently comply with the order."6

Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner to produce the bank documents
relative to accounts in issue. The order states:

Viewed from the foregoing, your persistent refusal to comply with Ombudsman's order in unjustified,
and is merely intended to delay the investigation of the case. Your act constitutes disobedience of or
resistance to a lawful order issued by this office and is punishable as Indirect Contempt under Section
3(b) of R.A. 6770. The same may also constitute obstruction in the lawful exercise of the functions of
the Ombudsman which is punishable under Section 36 of R.A. 6770.7

On July 10,1998, petitioner together with Union Bank of the Philippines, filed a petition for declaratory relief,
prohibition and injunctions8 with the Regional Trial Court, Makati City, against the Ombudsman.

The petition was intended to clear the rights and duties of petitioner. Thus, petitioner sought a declaration of her
rights from the court due to the clear conflict between RA No.6770, Section 15 and R.A. No. 1405, Sections 2
and 3.

Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman and the other persons acting
under his authority were continuously harassing her to produce the bank documents relatives to the accounts in

33 | P a g e
question. Moreover, on June 16, 1998, the Ombudsman issued another order stating that unless petitioner
appeared before the FFIB with the documents requested, petitioner manager would be charged with indirect
contempt and obstruction of justice.

In the meantime,9 on July 14, 1998, the lower court denied petitioner's prayer for a temporary restraining order
and stated us:

"After hearing the arguments of the parties, the court finds the application for a Temporary Restraining
Order to be without merit.

"Since the application prays for restraint of the respondent, in the exercise of his contempt powers
under Section 15(9) in relation to paragraph (8) of RA. 6770, known as " The Ombudsman Act of
1989", there is no great or irreparable injury from which petitioners may suffer, if respondent is not so
restrained. Respondent should he decide to exercise his contempt powers would still have to apply with
the court. x x x Anyone who, without lawful excuse x x x refuses to produce documents for inspection,
when thereunto lawfully required shall be subject to discipline as in case of contempt of Court and upon
application of the individual or body exercising the power in question shall be dealt with by the Judge
of the First Instance (now RTC) having jurisdiction of the case in a manner provided by the law (section
580 of the Revised Administrative Code). Under the present Constitution only judges may issue
warrants, hence, respondent should apply with the Court for the issuance of the warrant needed for the
enforcement of his contempt orders. It is in these proceedings where petitioner may question the
propriety of respondent's exercise of his contempt powers. Petitioners are not therefore left without any
adequate remedy.

"The questioned orders were issued with the investigation of the case of Fact-Finding and Intelligence
Bureau vs. Amado Lagdameo, et. al., OMB-0-97-0411, for violation of RA. 3019. Since petitioner
failed to show prima facie evidence that the subject matter of the investigation is outside the jurisdiction
of the Office of the Ombudsman, no writ of injunction may be issued by this Court to delay this
investigation pursuant to section 14 of Ombudsman Act of 1989."10

On July 20,1998, petitioner filed a motion for reconsideration based on the following grounds:

a. Petitioners' application for filed Temporary Restraining Order is not only to restrain the Ombudsman
from exercising his contempt powers, but to stop him from implementing his Orders dated April 29,
1998 and June 16, 1998: and

b. The subject matter of the investigation being conducted by the Ombudsman at petitioners' premises is
outside his jurisdiction.11

On July 23, 1998, the Ombudsman filed a motion to dismiss the petition for declaratory relief12 on the ground
that the Regional Trial Court has no jurisdiction to hear a petition for relief from the findings and orders of the
Ombudsman, citing R.A. No. 6770, Sections 14 and 27. On August 7, 1998, the Ombudsman filed an
opposition to petitioner's motion for reconsideration dated July 20, 1998.13

On August 19,1998, the lower court denied petitioner's motion for reconsideration,14 and also the Ombudsman's
motion to dismiss. 15

On August 21, 1998, petitioner received a copy of the motion to cite her for contempt, filed with the Office of
the Ombudsman by Agapito B. Rosales, Director, Fact Finding and Intelligence Bureau (FFIB).16

On August 31, 1998, petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt
on the ground that the filing thereof was premature due to the petition pending in the lower court.17 Petitioner

34 | P a g e
likewise reiterated that she had no intention to disobey the orders of the Ombudsman. However, she wanted to
be clarified as to how she would comply with the orders without her breaking any law, particularly RA. No.
1405.18

Respondent Ombudsman panel set the incident for hearing on September 7, 1998.19 After hearing, the panel
issued an order dated September 7, 1998, ordering petitioner and counsel to appear for a continuation of the
hearing of the contempt charges against her.20

On September 10, 1998, petitioner filed with the Ombudsman a motion for reconsideration of the above
order.21 Her motion was premised on the fact that there was a pending case with the Regional Trial Court,
Makati City,22 which would determine whether obeying the orders of the Ombudsman to produce bank
documents would not violate any law.

The FFIB opposed the motion,23 and on October 14, 1998, the Ombudsman denied the motion by order the
dispositive portion of which reads:

"Wherefore, respondent Lourdes T. Marquez's motion for reconsideration is hereby DENIED, for lack
of merit. Let the hearing of the motion of the Fact Finding Intelligence Bureau (FFIB) to cite her for
indirect contempt to be intransferrably set to 29 October 1998 at 2:00 o'clock p.m. at which date and
time she should appear personally to submit her additional evidence. Failure to do so shall be deemed a
waiver thereof."24

Hence, the present petition.25

The issue is whether petitioner may be cited for indirect contempt for her failure to produce the documents
requested by the Ombudsman. And whether the order of the Ombudsman to have an in camera inspection of
the questioned account is allowed as an exception to the law on secrecy of bank deposits (R.A. No.1405).

An examination of the secrecy of bank deposits law (R.A. No.1405) would reveal the following exceptions:

1. Where the depositor consents in writing;

2. Impeachment case;

3. By court order in bribery or dereliction of duty cases against public officials;

4. Deposit is subject of litigation;

5. Sec. 8, R.A. No.3019, in cases of unexplained wealth as held in the case of PNB vs. Gancayco.26

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

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

35 | P a g e
In Union Bank of the Philippines v. Court of Appeals, we held that "Section 2 of the Law on Secrecy of Bank
Deposits, as amended, declares bank deposits to be "absolutely confidential" except:

(1) In an examination made in the course of a special or general examination of a bank that is
specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to
believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary
to look into the deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only and the results thereof shall be for the
exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or

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

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

Zone of privacy are recognized and protected in our laws. The Civil Code provides that" [e]very person shall
respect the dignity, personality, privacy and peace of mind of his neighbors and other persons" and punishes as
actionable torts several acts for meddling and prying into the privacy of another. It also holds public officer or
employee or any private individual liable for damages for any violation of the rights and liberties of another
person, and recognizes the privacy of letters and other private communications. The Revised Penal Code makes
a crime of the violation of secrets by an officer, revelation of trade and industrial secrets, and trespass to
dwelling. Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the Secrecy of Bank
Deposits Act, and the Intellectual Property Code.28

IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to cease and desist from requiring
Union Bank Manager Lourdes T. Marquez, or anyone in her place to comply with the order dated October
14,1998, and similar orders. No costs.

SO ORDERED . 1âwphi1.nêt

Davide, Jr:, C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Buena,
Gonzaga-Reyes, Ynares-Santiago, De Leon. Jr., and Sandoval-Gutierrez, JJ., concur.

36 | P a g e
 DIGEST

FACTS:

Respondent Ombudsman Desierto ordered petitioner Marquez to produce several bank documents for purposes
of inspection in camera relative to various accounts maintained at Union Bank of the Philippines, Julia Vargas
Branch, where petitioner is the branch manager.

The order is based on a pending investigation at the Office of the Ombudsman against Amado Lagdameo, et. al.
for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public
Estates Authority and AMARI.

Petitioner wanted to be clarified first as to how she would comply with the orders without her breaking any law,
particularly RA. No. 1405.

ISSUE:

Whether the order of the Ombudsman to have an in camera inspection of the questioned account is allowed as
an exception to the law on secrecy of bank deposits (R.A. No.1405).

HELD: No.

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

37 | P a g e
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 94723 August 21, 1997

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and
Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG
BARTELLI y NORTHCOTT, respondents.

TORRES, JR., J.:

In our predisposition to discover the "original intent" of a statute, courts become the unfeeling pillars of
the status quo. Ligle do we realize that statutes or even constitutions are bundles of compromises thrown our
way by their framers. Unless we exercise vigilance, the statute may already be out of tune and irrelevant to our
day.

The petition is for declaratory relief. It prays for the following reliefs:

a.) Immediately upon the filing of this petition, an Order be issued restraining the respondents
from applying and enforcing Section 113 of Central Bank Circular No. 960;

b.) After hearing, judgment be rendered:

1.) Declaring the respective rights and duties of petitioners and respondents;

2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provisions of the
Constitution, hence void; because its provision that "Foreign currency deposits shall be exempt
from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever

i.) has taken away the right of petitioners to have the bank deposit of defendant
Greg Bartelli y Northcott garnished to satisfy the judgment rendered in
petitioners' favor in violation of substantive due process guaranteed by the
Constitution;

ii.) has given foreign currency depositors an undue favor or a class privilege in
violation of the equal protection clause of the Constitution;

iii.) has provided a safe haven for criminals like the herein respondent Greg
Bartelli y Northcott since criminals could escape civil liability for their
wrongful acts by merely converting their money to a foreign currency and
depositing it in a foreign currency deposit account with an authorized bank.

38 | P a g e
The antecedent facts:

On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen
Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen Salvacion
for four days, or up to February 7, 1989 and was able to rape the child once on February 4, and three times each
day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living nearby, rescued
Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen recovered from
Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.)
COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account — China Banking Corp.,
US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.)
Stuffed Doll (Teddy Bear) used in seducing the complainant.

On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, Criminal
Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4) counts
of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati Civil Case No. 89-3214 for
damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day there was a
scheduled hearing for Bartelli's petition for bail the latter escaped from jail.

On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of Warrant of
Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal cases
were archived in an Order dated February 28, 1989.

Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989 granting the
application of herein petitioners, for the issuance of the writ of preliminary attachment. After petitioners gave
Bond No. JCL (4) 1981 by FGU Insurance Corporation in the amount of P100,000.00, a Writ of Preliminary
Attachment was issued by the trial court on February 28, 1989.

On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Banking
Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation
invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. On March 15, 1989,
Deputy Sheriff of Makati Armando de Guzman sent his reply to China Banking Corporation saying that the
garnishment did not violate the secrecy of bank deposits since the disclosure is merely incidental to a
garnishment properly and legally made by virtue of a court order which has placed the subject deposits
in custodia legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a letter
dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar
deposits or defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body, whatsoever.

This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter dated April 25,
1989 on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been
repealed or amended since said section has rendered nugatory the substantive right of the plaintiff to have the
claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as granted
to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows:

May 26, 1989

Ms. Erlinda S. Carolino

12 Pres. Osmena Avenue
South Admiral Village
Paranaque, Metro Manila

Dear Ms. Carolino:

39 | P a g e
 This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB
Circular No. 960 (1983).

The cited provision is absolute in application. It does not admit of any exception, nor has the
same been repealed nor amended.

The purpose of the law is to encourage dollar accounts within the country's banking system
which would help in the development of the economy. There is no intention to render futile the
basic rights of a person as was suggested in your subject letter. The law may be harsh as some
perceive it, but it is still the law. Compliance is, therefore, enjoined.

Very truly yours,

(SGD) AGAPITO S. FAJARDO

Director1

Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve summons by
publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs. Greg Bartelli y Northcott."
Summons with the complaint was a published in the Manila Times once a week for three consecutive weeks.
Greg Bartelli failed to file his answer to the complaint and was declared in default on August 7, 1989. After
hearing the case ex-parte, the court rendered judgment in favor of petitioners on March 29, 1990, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant,

ordering the latter:

1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages;

2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E. Salvacion
the amount of P150,000.00 each or a total of P300,000.00 for both of them;

3. To pay plaintiffs exemplary damages of P100,000.00; and

4. To pay attorney's fees in an amount equivalent to 25% of the total amount of damages herein
awarded;

5. To pay litigation expenses of P10,000.00; plus

6. Costs of the suit.

SO ORDERED.

The heinous acts of respondent Greg Bartelli which gave rise to the award were related in graphic detail by the
trial court in its decision as follows:

The defendant in this case was originally detained in the municipal jail of Makati but was able
to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati to the
Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati, Branch
136, where he was charged with four counts of Rape and Serious Illegal Detention (Crim.
Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel, summons was
served upon defendant by publication in the Manila Times, a newspaper of general circulation
as attested by the Advertising Manager of the Metro Media Times, Inc., the publisher of the

40 | P a g e
said newspaper. Defendant, however, failed to file his answer to the complaint despite the lapse
of the period of sixty (60) days from the last publication; hence, upon motion of the plaintiffs,
through counsel, defendant was declared in default and plaintiffs were authorized to present
their evidence ex parte.

In support of the complaint, plaintiffs presented as witnesses the minor Karen E. Salvacion, her
father, Federico N. Salvacion, Jr., a certain Joseph Aguilar and a certain Liberato Madulio, who
gave the following testimony:

Karen took her first year high school in St. Mary's Academy in Pasay City but has recently
transferred to Arellano University for her second year.

In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square, with
her friend Edna Tangile whiling away her free time. At about 3:30 p.m. while she was finishing
her snack on a concrete bench in front of Plaza Fair, an American approached her. She was then
alone because Edna Tangile had already left, and she was about to go home. (TSN, Aug. 15,
1989, pp. 2 to 5)

The American asked her name and introduced himself as Greg Bartelli. He sat beside her when
he talked to her. He said he was a Math teacher and told her that he has a sister who is a nurse
in New York. His sister allegedly has a daughter who is about Karen's age and who was with
him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5)

The American asked Karen what was her favorite subject and she told him it's Pilipino. He then
invited her to go with him to his house where she could teach Pilipino to his niece. He even
gave her a stuffed toy to persuade her to teach his niece. (Id., pp. 5-6)

They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendant's house
along Kalayaan Avenue. (Id., p. 6)

When they reached the apartment house, Karen noticed that defendant's alleged niece was not
outside the house but defendant told her maybe his niece was inside. When Karen did not see
the alleged niece inside the house, defendant told her maybe his niece was upstairs, and invited
Karen to go upstairs. (Id., p. 7)

Upon entering the bedroom defendant suddenly locked the door. Karen became nervous
because his niece was not there. Defendant got a piece of cotton cord and tied Karen's hands
with it, and then he undressed her. Karen cried for help but defendant strangled her. He took a
packing tape and he covered her mouth with it and he circled it around her head. (Id., p. 7)

Then, defendant suddenly pushed Karen towards the bed which was just near the door. He tied
her feet and hands spread apart to the bed posts. He knelt in front of her and inserted his finger
in her sex organ. She felt severe pain. She tried to shout but no sound could come out because
there were tapes on her mouth. When defendant withdrew his finger it was full of blood and
Karen felt more pain after the withdrawal of the finger. (Id., p. 8)

He then got a Johnson's Baby Oil and he applied it to his sex organ as well as to her sex organ.
After that he forced his sex organ into her but he was not able to do so. While he was doing it,
Karen found it difficult to breathe and she perspired a lot while feeling severe pain. She merely
presumed that he was able to insert his sex organ a little, because she could not see. Karen
could not recall how long the defendant was in that position. (Id. pp. 8-9)

41 | P a g e
After that, he stood up and went to the bathroom to wash. He also told Karen to take a shower
and he untied her hands. Karen could only hear the sound of the water while the defendant, she
presumed, was in the bathroom washing his sex organ. When she took a shower more blood
came out from her. In the meantime, defendant changed the mattress because it was full of
blood. After the shower, Karen was allowed by defendant to sleep. She fell asleep because she
got tired crying. The incident happened at about 4:00 p.m. Karen had no way of determining
the exact time because defendant removed her watch. Defendant did not care to give her food
before she went to sleep. Karen woke up at about 8:00 o'clock the following morning. (Id., pp.
9-10)

The following day, February 5, 1989, a Sunday, after a breakfast of biscuit and coke at about
8:30 to 9:00 a.m. defendant raped Karen while she was still bleeding. For lunch, they also took
biscuit and coke. She was raped for the second time at about 12:00 to 2:00 p.m. In the evening,
they had rice for dinner which defendant had stored downstairs; it was he who cooked the rice
that is why it looks like "lugaw". For the third time, Karen was raped again during the night.
During those three times defendant succeeded in inserting his sex organ but she could not say
whether the organ was inserted wholly.

Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands and
feet nor put a tape on her mouth anymore but she did not cry for help for fear that she might be
killed; besides, all the windows and doors were closed. And even if she shouted for help,
nobody would hear her. She was so afraid that if somebody would hear her and would be able
to call the police, it was still possible that as she was still inside the house, defendant might kill
her. Besides, the defendant did not leave that Sunday, ruling out her chance to call for help. At
nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12-14)

On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty
minutes after a breakfast of biscuits; again in the afternoon; and again in the evening. At first,
Karen did not know that there was a window because everything was covered by a carpet, until
defendant opened the window for around fifteen minutes or less to let some air in, and she
found that the window was covered by styrofoam and plywood. After that, he again closed the
window with a hammer and he put the styrofoam, plywood, and carpet back. (Id., pp. 14-15)

That Monday evening, Karen had a chance to call for help, although defendant left but kept the
door closed. She went to the bathroom and saw a small window covered by styrofoam and she
also spotted a small hole. She stepped on the bowl and she cried for help through the hole. She
cried: "Maawa no po kayo so akin. Tulungan n'yo akong makalabas dito. Kinidnap ako!"
Somebody heard her. It was a woman, probably a neighbor, but she got angry and said she was
"istorbo". Karen pleaded for help and the woman told her to sleep and she will call the police.
She finally fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp. 15-16)

She woke up at 6:00 o'clock the following morning, and she saw defendant in bed, this time
sleeping. She waited for him to wake up. When he woke up, he again got some food but he
always kept the door locked. As usual, she was merely fed with biscuit and coke. On that day,
February 7, 1989, she was again raped three times. The first at about 6:30 to 7:00 a.m., the
second at about 8:30 — 9:00, and the third was after lunch at 12:00 noon. After he had raped
her for the second time he left but only for a short while. Upon his return, he caught her
shouting for help but he did not understand what she was shouting about. After she was raped
the third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the
bathroom and shouted for help. After shouting for about five minutes, she heard many voices.
The voices were asking for her name and she gave her name as Karen Salvacion. After a while,
she heard a voice of a woman saying they will just call the police. They were also telling her to
change her clothes. She went from the bathroom to the room but she did not change her clothes

42 | P a g e
 being afraid that should the neighbors call for the police and the defendant see her in different
clothes, he might kill her. At that time she was wearing a T-shirt of the American because the
latter washed her dress. (Id., p. 16)

Afterwards, defendant arrived and he opened the door. He asked her if she had asked for help
because there were many policemen outside and she denied it. He told her to change her
clothes, and she did change to the one she was wearing on Saturday. He instructed her to tell
the police that she left home and willingly; then he went downstairs but he locked the door. She
could hear people conversing but she could not understand what they were saying. (Id., p. 19)

When she heard the voices of many people who were conversing downstairs, she knocked
repeatedly at the door as hard as she could. She heard somebody going upstairs and when the
door was opened, she saw a policeman. The policeman asked her name and the reason why she
was there. She told him she was kidnapped. Downstairs, he saw about five policemen in
uniform and the defendant was talking to them. "Nakikipag-areglo po sa mga pulis," Karen
added. "The policeman told him to just explain at the precinct. (Id., p. 20)

They went out of the house and she saw some of her neighbors in front of the house. They rode
the car of a certain person she called Kuya Boy together with defendant, the policeman, and
two of her neighbors whom she called Kuya Bong Lacson and one Ate Nita. They were brought
to Sub-Station I and there she was investigated by a policeman. At about 2:00 a.m., her father
arrived, followed by her mother together with some of their neighbors. Then they were brought
to the second floor of the police headquarters. (Id., p. 21)

At the headquarters, she was asked several questions by the investigator. The written statement
she gave to the police was marked as Exhibit A. Then they proceeded to the National Bureau of
Investigation together with the investigator and her parents. At the NBI, a doctor, a medico-
legal officer, examined her private parts. It was already 3:00 in the early morning of the
following day when they reached the NBI. (TSN, Aug. 15, 1989, p. 22) The findings of the
medico-legal officer has been marked as Exhibit B.

She was studying at the St. Mary's Academy in Pasay City at the time of the incident but she
subsequently transferred to Apolinario Mabini, Arellano University, situated along Taft
Avenue, because she was ashamed to be the subject of conversation in the school. She first
applied for transfer to Jose Abad Santos, Arellano University along Taft Avenue near the Light
Rail Transit Station but she was denied admission after she told the school the true reason for
her transfer. The reason for their denial was that they might be implicated in the case. (TSN,
Aug. 15, 1989, p. 46)

xxx xxx xxx

After the incident, Karen has changed a lot. She does not play with her brother and sister
anymore, and she is always in a state of shock; she has been absent-minded and is ashamed
even to go out of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be restless or sad, (Id.,
p. 11) The father prays for P500,000.00 moral damages for Karen for this shocking experience
which probably, she would always recall until she reaches old age, and he is not sure if she
could ever recover from this experience. (TSN, Sept. 24, 1989, pp. 10-11)

Pursuant to an Order granting leave to publish notice of decision, said notice was published in the Manila
Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days from the date of the last
publication of the notice of judgment and the decision of the trial court had become final, petitioners tried to

43 | P a g e
execute on Bartelli's dollar deposit with China Banking Corporation. Likewise, the bank invoked Section 113 of
Central Bank Circular No. 960.

Thus, petitioners decided to seek relief from this Court.

The issues raised and the arguments articulated by the parties boil down to two:

May this Court entertain the instant petition despite the fact that original jurisdiction in petitions for declaratory
relief rests with the lower court? Should Section 113 of Central Bank Circular No. 960 and Section 8 of R.A.
6426, as amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a
foreign transient?

Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that "Foreign
currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever." should be adjudged as
unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank deposit of
defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in violation
of substantive due process guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue
favor or a class privilege in violation of the equal protection clause of the Constitution; 3.) it has provided a safe
haven for criminals like the herein respondent Greg Bartelli y Northcott since criminals could escape civil
liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a
foreign currency deposit account with an authorized bank; and 4.) The Monetary Board, in issuing Section 113
of Central Bank Circular No. 960 has exceeded its delegated quasi-legislative power when it took away: a.) the
plaintiffs substantive right to have the claim sought to be enforced by the civil action secured by way of the writ
of preliminary attachment as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive
right to have the judgment credit satisfied by way of the writ of execution out of the bank deposit of the
judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of Court, which is beyond
its power to do so.

On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in issuing Section
113 of CB Circular No. 960 did not exceed its power or authority because the subject Section is copied verbatim
from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary Board that grants
exemption from attachment or garnishment to foreign currency deposits, but the law (R.A. 6426 as amended)
itself; that it does not violate the substantive due process guaranteed by the Constitution because a.) it was based
on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular methods of procedure; and
d.) it applies to all members of a class.

Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from attachment,
garnishment or any other order or process of any court, is to assure the development and speedy growth of the
Foreign Currency Deposit System and the Offshore Banking System in the Philippines; that another reason is to
encourage the inflow of foreign currency deposits into the banking institutions thereby placing such institutions
more in a position to properly channel the same to loans and investments in the Philippines, thus directly
contributing to the economic development of the country; that the subject section is being enforced according to
the regular methods of procedure; and that it applies to all foreign currency deposits made by any person and
therefore does not violate the equal protection clause of the Constitution.

Respondent Central Bank further avers that the questioned provision is needed to promote the public interest
and the general welfare; that the State cannot just stand idly by while a considerable segment of the society
suffers from economic distress; that the State had to take some measures to encourage economic development;
and that in so doing persons and property may be subjected to some kinds of restraints or burdens to secure the
general welfare or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of the
Revised Rules of Court provide that some properties are exempted from execution/attachment especially

44 | P a g e
provided by law and R.A. No. 6426 as amended is such a law, in that it specifically provides, among others, that
foreign currency deposits shall be exempted from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body whatsoever.

For its part, respondent China Banking Corporation, aside from giving reasons similar to that of respondent
Central Bank, also stated that respondent China Bank is not unmindful of the inhuman sufferings experienced
by the minor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it is only too willing to release the
dollar deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner has undergone; but it is
restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and that
despite the harsh effect of these laws on petitioners, CBC has no other alternative but to follow the same.

This Court finds the petition to be partly meritorious.

Petitioner deserves to receive the damages awarded to her by the court. But this petition for declaratory relief
can only be entertained and treated as a petition for mandamus to require respondents to honor and comply with
the writ of execution in Civil Case No. 89-3214.

This Court has no original and exclusive jurisdiction over a petition for declaratory relief.2 However, exceptions
to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions
that should be resolved, it may be treated as one for mandamus.3

Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of kindness
by teaching his alleged niece the Filipino language as requested by the American, trustingly went with said
stranger to his apartment, and there she was raped by said American tourist Greg Bartelli. Not once, but ten
times. She was detained therein for four (4) days. This American tourist was able to escape from the jail and
avoid punishment. On the other hand, the child, having received a favorable judgment in the Civil Case for
damages in the amount of more than P1,000,000.00, which amount could alleviate the humiliation, anxiety, and
besmirched reputation she had suffered and may continue to suffer for a long, long time; and knowing that this
person who had wronged her has the money, could not, however get the award of damages because of this
unreasonable law. This questioned law, therefore makes futile the favorable judgment and award of damages
that she and her parents fully deserve. As stated by the trial court in its decision,

Indeed, after hearing the testimony of Karen, the Court believes that it was undoubtedly a
shocking and traumatic experience she had undergone which could haunt her mind for a long,
long time, the mere recall of which could make her feel so humiliated, as in fact she had been
actually humiliated once when she was refused admission at the Abad Santos High School,
Arellano University, where she sought to transfer from another school, simply because the
school authorities of the said High School learned about what happened to her and allegedly
feared that they might be implicated in the case.

xxx xxx xxx

The reason for imposing exemplary or corrective damages is due to the wanton and bestial
manner defendant had committed the acts of rape during a period of serious illegal detention of
his hapless victim, the minor Karen Salvacion whose only fault was in her being so naive and
credulous to believe easily that defendant, an American national, could not have such a bestial
desire on her nor capable of committing such a heinous crime. Being only 12 years old when
that unfortunate incident happened, she has never heard of an old Filipino adage that in every
forest there is a
snake, . . . .4

45 | P a g e
If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom how the incentive
for foreign currency deposit could be more important than his child's rights to said award of damages; in this
case, the victim's claim for damages from this alien who had the gall to wrong a child of tender years of a
country where he is a mere visitor. This further illustrates the flaw in the questioned provisions.

It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's economy was in
a shambles; when foreign investments were minimal and presumably, this was the reason why said statute was
enacted. But the realities of the present times show that the country has recovered economically; and even if
not, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive.
The intention of the questioned law may be good when enacted. The law failed to anticipate the iniquitous
effects producing outright injustice and inequality such as the case before us.

It has thus been said that —

But I also know,5 that laws and institutions must go hand in hand with the progress of the
human mind. As that becomes more developed, more enlightened, as new discoveries are made,
new truths are disclosed and manners and opinions change with the change of circumstances,
institutions must advance also, and keep pace with the times. . . We might as well require a man
to wear still the coat which fitted him when a boy, as civilized society to remain ever under the
regimen of their barbarous ancestors.

In his Comment, the Solicitor General correctly opined, thus:

The present petition has far-reaching implications on the right of a national to obtain redress for
a wrong committed by an alien who takes refuge under a law and regulation promulgated for a
purpose which does not contemplate the application thereof envisaged by the alien. More
specifically, the petition raises the question whether the protection against attachment,
garnishment or other court process accorded to foreign currency deposits by PD No. 1246 and
CB Circular No. 960 applies when the deposit does not come from a lender or investor but from
a mere transient or tourist who is not expected to maintain the deposit in the bank for long.

The resolution of this question is important for the protection of nationals who are victimized in
the forum by foreigners who are merely passing through.

xxx xxx xxx

. . . Respondents China Banking Corporation and Central Bank of the Philippines refused to
honor the writ of execution issued in Civil Case No. 89-3214 on the strength of the following
provision of Central Bank Circular No. 960:

Sec. 113. Exemption from attachment. — Foreign currency deposits shall be

exempt from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body
whatsoever.

Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426:

Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall
promulgate such rules and regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the publication of such rules
and regulations in the Official Gazette and in a newspaper of national
circulation for at least once a week for three consecutive weeks. In case the

46 | P a g e
 Central Bank promulgates new rules and regulations decreasing the rights of
depositors, the rules and regulations at the time the deposit was made shall
govern.

The aforecited Section 113 was copied from Section 8 of Republic Act NO. 6426, as amended
by P.D. 1246, thus:

Sec. 8. Secrecy of Foreign Currency Deposits. — All foreign currency deposits

authorized under this Act, as amended by Presidential Decree No. 1035, as well
as foreign currency deposits authorized under Presidential Decree No. 1034,
are hereby declared as and considered of an absolutely confidential nature and,
except upon the written permission of the depositor, in no instance shall such
foreign currency deposits be examined, inquired or looked into by any person,
government official, bureau or office whether judicial or administrative or
legislative or any other entity whether public or private: Provided, however,
that said foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.

The purpose of PD 1246 in according protection against attachment, garnishment and other
court process to foreign currency deposits is stated in its whereases, viz.:

WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree

No. 1035, certain Philippine banking institutions and branches of foreign banks
are authorized to accept deposits in foreign currency;

WHEREAS, under the provisions of Presidential Decree No. 1034 authorizing

the establishment of an offshore banking system in the Philippines, offshore
banking units are also authorized to receive foreign currency deposits in certain
cases;

WHEREAS, in order to assure the development and speedy growth of the

Foreign Currency Deposit System and the Offshore Banking System in the
Philippines, certain incentives were provided for under the two Systems such
as confidentiality of deposits subject to certain exceptions and tax exemptions
on the interest income of depositors who are nonresidents and are not engaged
in trade or business in the Philippines;

WHEREAS, making absolute the protective cloak of confidentiality over such

foreign currency deposits, exempting such deposits from tax, and guaranteeing
the vested rights of depositors would better encourage the inflow of foreign
currency deposits into the banking institutions authorized to accept such
deposits in the Philippines thereby placing such institutions more in a position
to properly channel the same to loans and investments in the Philippines, thus
directly contributing to the economic development of the country;

Thus, one of the principal purposes of the protection accorded to foreign currency deposits is
"to assure the development and speedy growth of the Foreign Currency Deposit system and the
Offshore Banking in the Philippines" (3rd Whereas).

The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD
No. 1034 are as follows:

47 | P a g e
 WHEREAS, conditions conducive to the establishment of an offshore banking
system, such as political stability, a growing economy and adequate
communication facilities, among others, exist in the Philippines;

WHEREAS, it is in the interest of developing countries to have as wide access

as possible to the sources of capital funds for economic development;

WHEREAS, an offshore banking system based in the Philippines will be

advantageous and beneficial to the country by increasing our links with foreign
lenders, facilitating the flow of desired investments into the Philippines,
creating employment opportunities and expertise in international finance, and
contributing to the national development effort.

WHEREAS, the geographical location, physical and human resources, and

other positive factors provide the Philippines with the clear potential to develop
as another financial center in Asia;

On the other hand, the Foreign Currency Deposit system was created by PD. No. 1035. Its
purposes are as follows:

WHEREAS, the establishment of an offshore banking system in the

Philippines has been authorized under a separate decree;

WHEREAS, a number of local commercial banks, as depository bank under the

Foreign Currency Deposit Act (RA No. 6426), have the resources and
managerial competence to more actively engage in foreign exchange
transactions and participate in the grant of foreign currency loans to resident
corporations and firms;

WHEREAS, it is timely to expand the foreign currency lending authority of the

said depository banks under RA 6426 and apply to their transactions the same
taxes as would be applicable to transaction of the proposed offshore banking
units;

It is evident from the above [Whereas clauses] that the Offshore Banking System and the
Foreign Currency Deposit System were designed to draw deposits from
foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD No.
1035). It is these deposits that are induced by the two laws and given protection and incentives
by them.

Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of
deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said
laws because such depositor stays only for a few days in the country and, therefore, will
maintain his deposit in the bank only for a short time.

Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with
respondent China Banking Corporation only for safekeeping during his temporary stay in the
Philippines.

For the reasons stated above, the Solicitor General thus submits that the dollar deposit of
respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank
Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes.6

48 | P a g e
In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned
Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative body whatsoever, is
applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that "in case of
doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and
justice to prevail. "Ninguno non deue enriquecerse tortizeramente con dano de otro." Simply stated, when the
statute is silent or ambiguous, this is one of those fundamental solutions that would respond to the vehement
urge of conscience. (Padilla vs. Padilla, 74 Phil. 377).

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device by
accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent.

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding the final and
executory judgment of the lower court against the Central Bank Circular protecting the foreign depositor?
Shielding or protecting the dollar deposit of a transient alien depositor against injustice to a national and victim
of a crime? This situation calls for fairness against legal tyranny.

We definitely cannot have both ways and rest in the belief that we have served the ends of justice.

IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it
amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar
circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution issued in Civil
Case No. 89-3214, "Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and
to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such amount as would
satisfy the judgment.

SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco and
Panganiban, JJ., concur.

Padilla, J., took no part.

Mendoza and Hermosisima, Jr., JJ., are on leave.

49 | P a g e
 DIGEST

FACTS:

Greg Bartelli, an American tourist, was arrested for committing four counts of rape and serious illegal detention
against Karen Salvacion. Police recovered from him several dollar checks and a dollar account in the China
Banking Corp. He was, however, able to escape from prison. In a civil case filed against him, the trial court
awarded Salvacion moral, exemplary and attorney’s fees amounting to almost P1,000,000.00.

Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China Banking Corp. but the
latter refused arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency deposits from
attachment, garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever. Salvacion therefore filed this action for declaratory relief in the Supreme
Court.

ISSUE:

Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426, as amended by
PD 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient?

HELD: NO.

The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246, insofar as it amends Section
8 of Republic Act No. 6426, are hereby held to be INAPPLICABLE to this case because of its peculiar
circumstances. Respondents are hereby required to comply with the writ of execution issued in the civil case
and to release to petitioners the dollar deposit of Bartelli in such amount as would satisfy the judgment.

Supreme Court ruled that the questioned law makes futile the favorable judgment and award of damages that
Salvacion and her parents fully deserve. It then proceeded to show that the economic basis for the enactment of
RA No. 6426 is not anymore present; and even if it still exists, the questioned law still denies those entitled to
due process of law for being unreasonable and oppressive. The intention of the law may be good when enacted.
The law failed to anticipate the iniquitous effects producing outright injustice and inequality such as the case
before us.

The SC adopted the comment of the Solicitor General who argued that the Offshore Banking System and the
Foreign Currency Deposit System were designed to draw deposits from foreign lenders and investors and,
subsequently, to give the latter protection. However, the foreign currency deposit made by a transient or a
tourist is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by
said laws because such depositor stays only for a few days in the country and, therefore, will maintain his
deposit in the bank only for a short time. Considering that Bartelli is just a tourist or a transient, he is not
entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment,
garnishment or other court processes.

50 | P a g e
Further, the SC said: “In fine, the application of the law depends on the extent of its justice. Eventually, if we
rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen
aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code
which provides that “in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail.”

NOTES:

– On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen
Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989 and was able to rape the child once on February 4,
and three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and
people living nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal
Jail. The policemen recovered from Bartelli the following items: 1.) Dollar Check No. 368, Control No.
021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.);
3.) Dollar Account — China Banking Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine
Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the
complainant.

51 | P a g e
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-34964 January 31, 1973

CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants,

vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila, Branch
VIII, and VICENTE G. ACABAN, respondents-appellees.

Sy Santos, Del Rosario and Associates for petitioners-appellants.

Tagalo, Gozar and Associates for respondents-appellees.

MAKALINTAL, J.:

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

On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against Bautista Logging Co., Inc.,
B & B Forest Development Corporation and Marino Bautista for the collection of a sum of money. Upon
motion of the plaintiff the trial court declared the defendants in default for failure to answer within the
reglementary period, and authorized the Branch Clerk of Court and/or Deputy Clerk to receive the plaintiff's
evidence. On January 20, 1970 judgment by default was rendered against the defendants.

To satisfy the judgment, the plaintiff sought the garnishment of the bank deposit of the defendant B & B Forest
Development Corporation with the China Banking Corporation. Accordingly, a notice of garnishment was
issued by the Deputy Sheriff of the trial court and served on said bank through its cashier, Tan Kim Liong. In
reply, the bank' cashier invited the attention of the Deputy Sheriff to the provisions of Republic Act No. 1405
which, it was alleged, prohibit the disclosure of any information relative to bank deposits. Thereupon the
plaintiff filed a motion to cite Tan Kim Liong for contempt of court.

In an order dated March 4, 1972 the trial court denied the plaintiff's motion. However, Tan Kim Liong was
ordered "to inform the Court within five days from receipt of this order whether or not there is a deposit in the
China Banking Corporation of defendant B & B Forest Development Corporation, and if there is any deposit, to
hold the same intact and not allow any withdrawal until further order from this Court." Tan Kim Liong moved
to reconsider but was turned down by order of March 27, 1972. In the same order he was directed "to comply
with the order of this Court dated March 4, 1972 within ten (10) days from the receipt of copy of this order,
otherwise his arrest and confinement will be ordered by the Court." Resisting the two orders, the China Banking
Corporation and Tan Kim Liong instituted the instant petition.

The pertinent provisions of Republic Act No. 1405 relied upon by the petitioners reads:

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 Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of absolutely confidential nature
and may not be examined, inquired or looked into by any person, government official, bureau
or office, except upon written permission of the depositor, or in cases of impeachment, or upon
order of a competent court in cases of bribery or dereliction of duty of public officials, or in
cases where the money deposited or invested is the subject matter of the litigation.

Sec 3. It shall be unlawful for any official or employee of a banking institution to disclose to
any person other than those mentioned in Section two hereof any information concerning said
deposits.

Sec. 5. Any violation of this law will subject offender upon conviction, to an imprisonment of
not more than five years or a fine of not more than twenty thousand pesos or both, in the
discretion of the court.

The petitioners argue that the disclosure of the information required by the court does not fall within any of the
four (4) exceptions enumerated in Section 2, and that if the questioned orders are complied with Tan Kim Liong
may be criminally liable under Section 5 and the bank exposed to a possible damage suit by B & B Forest
Development Corporation. Specifically referring to this case, the position of the petitioners is that the bank
deposit of judgment debtor B & B Forest Development Corporation cannot be subject to garnishment to satisfy
a final judgment against it in view of the aforequoted provisions of law.

We do not view the situation in that light. The lower court did not order an examination of or inquiry into the
deposit of B & B Forest Development Corporation, as contemplated in the law. It merely required Tan Kim
Liong to inform the court whether or not the defendant B & B Forest Development Corporation had a deposit in
the China Banking Corporation only for purposes of the garnishment issued by it, so that the bank would hold
the same intact and not allow any withdrawal until further order. It will be noted from the discussion of the
conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act
1405, that it was not the intention of the lawmakers to place bank deposits beyond the reach of execution to
satisfy a final judgment. Thus:

Mr. MARCOS. Now, for purposes of the record, I should like the Chairman of the Committee
on Ways and Means to clarify this further. Suppose an individual has a tax case. He is being
held liable by the Bureau of Internal Revenue for, say, P1,000.00 worth of tax liability, and
because of this the deposit of this individual is attached by the Bureau of Internal Revenue.

Mr. RAMOS. The attachment will only apply after the court has pronounced sentence declaring
the liability of such person. But where the primary aim is to determine whether he has a bank
deposit in order to bring about a proper assessment by the Bureau of Internal Revenue, such
inquiry is not authorized by this proposed law.

Mr. MARCOS. But under our rules of procedure and under the Civil Code, the attachment or
garnishment of money deposited is allowed. Let us assume, for instance, that there is a
preliminary attachment which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or garnishment will bring out into the
open the value of such deposit. Is that prohibited by this amendment or by this law?

Mr. RAMOS. It is only prohibited to the extent that the inquiry is limited, or rather, the inquiry
is made only for the purpose of satisfying a tax liability already declared for the protection of
the right in favor of the government; but when the object is merely to inquire whether he has a
deposit or not for purposes of taxation, then this is fully covered by the law.

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Mr. MARCOS. And it protects the depositor, does it not?

Mr. RAMOS. Yes, it protects the depositor.

Mr. MARCOS. The law prohibits a mere investigation into the existence and the amount of the
deposit.

Mr. RAMOS. Into the very nature of such deposit.

Mr. MARCOS. So I come to my original question. Therefore, preliminary garnishment or

attachment of the deposit is not allowed?

Mr. RAMOS. No, without judicial authorization.

Mr. MARCOS. I am glad that is clarified. So that the established rule of procedure as well as
the substantive law on the matter is amended?

Mr. RAMOS. Yes. That is the effect.

Mr. MARCOS. I see. Suppose there has been a decision, definitely establishing the liability of
an individual for taxation purposes and this judgment is sought to be executed ... in the
execution of that judgment, does this bill, or this proposed law, if approved, allow the
investigation or scrutiny of the bank deposit in order to execute the judgment?

Mr. RAMOS. To satisfy a judgment which has become executory.

Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is P1,000,000 and the deposit
is half a million, will this bill allow scrutiny into the deposit in order that the judgment may be
executed?

Mr. RAMOS. Merely to determine the amount of such money to satisfy that obligation to the
Government, but not to determine whether a deposit has been made in evasion of taxes.

xxx xxx xxx

Mr. MACAPAGAL. But let us suppose that in an ordinary civil action for the recovery of a
sum of money the plaintiff wishes to attach the properties of the defendant to insure the
satisfaction of the judgment. Once the judgment is rendered, does the gentleman mean that the
plaintiff cannot attach the bank deposit of the defendant?

Mr. RAMOS. That was the question raised by the gentleman from Pangasinan to which I
replied that outside the very purpose of this law it could be reached by attachment.

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

Mr. RAMOS. That is so.

(Vol. II, Congressional Record, House of Representatives, No. 12, pp. 3839-3840, July 27,
1955).

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It is sufficiently clear from the foregoing discussion of the conference committee report of the two houses of
Congress that the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405
does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such
a case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the execution
process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into
cash and depositing the same in a bank.

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

Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Concepcion, C.J. and Teehankee, J., took no part.

DIGEST

Facts:

On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against Bautista Logging Co., Inc.,
B & B Forest Development Corporation and Marino Bautista for the collection of a sum of money. Upon
motion of the plaintiff, the court declared the defendants in default for not answering within the prescribe
period. To satisfy the judgment, the plaintiff sought for the garnishment of the bank deposits of the defendants
with the China Banking Corporation. Consequently, a notice of garnishment was issued by the deputy sheriff of
the trial court and served on the bank’s cashier. The bank cashier, replied in the negative. In the reply, he invited
the attention of the sheriff to RA 1405. The plaintiff then filed a motion to cite the cashier for contempt of court.
The trial court, despite having denied the motion, ordered that the cashier confirm whether or not the defendants
have existing deposit in their bank. The cashier moved to reconsider but was denied and, subsequently, he was
ordered to comply with the order of the court within 10 days, otherwise, he would be arrested. Hence this
petition.

Issue:

Whether or not china bank may validly refuse to comply with a court process garnishing the bank deposit of the
debtor by invoking the provisions of RA 1405.

Held:

The prohibition against examination of or inquiry into a bank deposit under Republic Act 1405 does not
preclude its being garnished to insure satisfaction of a judgment. In the present case, there was no inquiry as to
how much the actual deposits are, the only inquiry that the court had was whether or not there are deposits of
the then defendants in China bank.

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