[G.R. No. 138569.
September 11, 2003] Macaraya immediately prepared a deposit slip in duplicate copies
THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner,
vs. COURT OF APPEALS and L.C. DIAZ and COMPANY, CPAs,
respondents.
Solidbank is a domestic banking corporation organized and existing
under Philippine laws. Private respondent L.C. Diaz and Company,
CPAs (L.C. Diaz), is a professional partnership engaged in the
practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with
Solidbank, designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes
Macaraya (Macaraya), filled up a savings (cash) deposit slip for P990
and a savings (checks) deposit slip for P50. Macaraya instructed the
messenger of L.C. Diaz, Ismael Calapre (Calapre), to deposit the
money with Solidbank. Macaraya also gave Calapre the Solidbank
passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two
deposit slips and the passbook. The teller acknowledged receipt of
the deposit by returning to Calapre the duplicate copies of the two
deposit slips. Teller No. 6 stamped the deposit slips with the words
DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE. Since
the transaction took time and Calapre had to make another deposit
for L.C. Diaz with Allied Bank, he left the passbook with Solidbank.
Calapre then went to Allied Bank. When Calapre returned to
Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook.[3] Calapre went back to L.C. Diaz and
reported the incident to Macaraya.
with a check of P200,000. Macaraya, together with Calapre, went to
Solidbank and presented to Teller No. 6 the deposit slip and check.
The teller stamped the words DUPLICATE and SAVING TELLER 6
SOLIDBANK HEAD OFFICE on the duplicate copy of the deposit slip.
When Macaraya asked for the passbook, Teller No. 6 told Macaraya
that someone got the passbook but she could not remember to
whom she gave the passbook. When Macaraya asked Teller No. 6 if
Calapre got the passbook, Teller No. 6 answered that someone
shorter than Calapre got the passbook. Calapre was then standing
beside Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August
1991 for the deposit of a check for P90,000 drawn on Philippine
Banking Corporation (PBC). This PBC check of L.C. Diaz was a check
that it had long closed.[4] PBC subsequently dishonored the check
because of insufficient funds and because the signature in the check
differed from PBCs specimen signature. Failing to get back the
passbook, Macaraya went back to her office and reported the
matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief
Executive Officer, Luis C. Diaz (Diaz), called up Solidbank to stop any
transaction using the same passbook until L.C. Diaz could open a
new account.[5] On the same day, Diaz formally wrote Solidbank to
make the same request. It was also on the same day that L.C. Diaz
learned of the unauthorized withdrawal the day before, 14 August
1991, of P300,000 from its savings account. The withdrawal slip for
the P300,000 bore the signatures of the authorized signatories of
L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories,
however, denied signing the withdrawal slip. A certain Noel Tamayo
received the P300,000.
In an Information[6] dated 5 September 1991, L.C. Diaz charged its
messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with
Estafa through Falsification of Commercial Document. The Regional
Trial Court of Manila dismissed the criminal case after the City
Prosecutor filed a Motion to Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from
Solidbank the return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint[7] for Recovery of a
Sum of Money against Solidbank with the Regional Trial Court of
Manila, Branch 8. After trial, the trial court rendered on 28
December 1994 a decision absolving Solidbank and dismissing the
complaint.
L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October
1998, the Court of Appeals issued its Decision reversing the decision
of the trial court.
On 11 May 1999, the Court of Appeals issued its Resolution denying
the motion for reconsideration of Solidbank. The appellate court,
however, modified its decision by deleting the award of exemplary
damages and attorneys fees.
The Ruling of the Trial Court
In absolving Solidbank, the trial court applied the rules on savings
account written on the passbook. The rules state that possession of
this book shall raise the presumption of ownership and any
payment or payments made by the bank upon the production of the
said book and entry therein of the withdrawal shall have the same
effect as if made to the depositor personally.
At the time of the withdrawal, a certain Noel Tamayo was not only
in possession of the passbook, he also presented a withdrawal slip
with the signatures of the authorized signatories of L.C. Diaz. The
specimen signatures of these persons were in the signature cards.
The teller stamped the withdrawal slip with the words Saving Teller
No. 5. The teller then passed on the withdrawal slip to Genere
Manuel (Manuel) for authentication. Manuel verified the signatures
on the withdrawal slip. The withdrawal slip was then given to
another officer who compared the signatures on the withdrawal slip
with the specimen on the signature cards. The trial court concluded
that Solidbank acted with care and observed the rules on savings
account when it allowed the withdrawal of P300,000 from the
savings account of L.C. Diaz.
The trial court pointed out that the burden of proof now shifted to
L.C. Diaz to prove that the signatures on the withdrawal slip were
forged. The trial court admonished L.C. Diaz for not offering in
evidence the National Bureau of Investigation (NBI) report on the
authenticity of the signatures on the withdrawal slip for P300,000.
The trial court believed that L.C. Diaz did not offer this evidence
because it is derogatory to its action.
Another provision of the rules on savings account states that the
depositor must keep the passbook under lock and key.[10] When
another person presents the passbook for withdrawal prior to
Solidbanks receipt of the notice of loss of the passbook, that person
is considered as the owner of the passbook. The trial court ruled
that the passbook presented during the questioned transaction was
now out of the lock and key and presumptively ready for a business
transaction.
Solidbank did not have any participation in the custody and care of
the passbook. The trial court believed that Solidbanks act of
allowing the withdrawal of P300,000 was not the direct and
proximate cause of the loss. The trial court held that L.C. Diazs
negligence caused the unauthorized withdrawal. Three facts
establish L.C. Diazs negligence: (1) the possession of the passbook
by a person other than the depositor L.C. Diaz; (2) the presentation
of a signed withdrawal receipt by an unauthorized person; and (3)
the possession by an unauthorized person of a PBC check long
closed by L.C. Diaz, which check was deposited on the day of the
fraudulent withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did
not follow the precautionary procedures observed by the two
parties whenever L.C. Diaz withdrew significant amounts from its
account. L.C. Diaz claimed that a letter must accompany
withdrawals of more than P20,000. The letter must request
Solidbank to allow the withdrawal and convert the amount to a
managers check. The bearer must also have a letter authorizing him
to withdraw the same amount. Another person driving a car must
accompany the bearer so that he would not walk from Solidbank to
the office in making the withdrawal. The trial court pointed out that
L.C. Diaz disregarded these precautions in its past withdrawal. On 16
July 1991, L.C. Diaz withdrew P82,554 without any separate letter of
authorization or any communication with Solidbank that the money
be converted into a managers check.
The trial court further justified the dismissal of the complaint by
holding that the case was a last ditch effort of L.C. Diaz to recover
P300,000 after the dismissal of the criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered
DISMISSING the complaint.
The Court further renders judgment in favor of defendant bank
pursuant to its counterclaim the amount of Thirty Thousand Pesos
(P30,000.00) as attorneys fees.
With costs against plaintiff.
SO ORDERED.
The Ruling of the Court of Appeals
The Court of Appeals ruled that Solidbanks negligence was the
proximate cause of the unauthorized withdrawal of P300,000 from
the savings account of L.C. Diaz. The appellate court reached this
conclusion after applying the provision of the Civil Code on quasi-
delict, to wit:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this chapter.
The appellate court held that the three elements of a quasi-delict
are present in this case, namely: (a) damages suffered by the
plaintiff; (b) fault or negligence of the defendant, or some other
person for whose acts he must respond; and (c) the connection of
cause and effect between the fault or negligence of the defendant
and the damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who
received the withdrawal slip for P300,000 allowed the withdrawal
without making the necessary inquiry. The appellate court stated
that the teller, who was not presented by Solidbank during trial,
should have called up the depositor because the money to be
withdrawn was a significant amount. Had the teller called up L.C.
Diaz, Solidbank would have known that the withdrawal was
unauthorized. The teller did not even verify the identity of the
impostor who made the withdrawal. Thus, the appellate court
found Solidbank liable for its negligence in the selection and
supervision of its employees.
The appellate court ruled that while L.C. Diaz was also negligent in
entrusting its deposits to its messenger and its messenger in leaving
the passbook with the teller, Solidbank could not escape liability
because of the doctrine of last clear chance. Solidbank could have
averted the injury suffered by L.C. Diaz had it called up L.C. Diaz to
verify the withdrawal.
The appellate court ruled that the degree of diligence required from
Solidbank is more than that of a good father of a family. The
business and functions of banks are affected with public interest.
Banks are obligated to treat the accounts of their depositors with
meticulous care, always having in mind the fiduciary nature of their
relationship with their clients. The Court of Appeals found Solidbank
remiss in its duty, violating its fiduciary relationship with L.C. Diaz.
The dispositive portion of the decision of the Court of Appeals
reads:
WHEREFORE, premises considered, the decision appealed from is
hereby REVERSED and a new one entered.
1. Ordering defendant-appellee Consolidated Bank and Trust
Corporation to pay plaintiff-appellant the sum of Three Hundred
Thousand Pesos (P300,000.00), with interest thereon at the rate of
12% per annum from the date of filing of the complaint until paid,
the sum of P20,000.00 as exemplary damages, and P20,000.00 as
attorneys fees and expenses of litigation as well as the cost of suit;
and
2. Ordering the dismissal of defendant-appellees counterclaim in
the amount of P30,000.00 as attorneys fees.
SO ORDERED.[13]
Acting on the motion for reconsideration of Solidbank, the appellate
court affirmed its decision but modified the award of damages. The
appellate court deleted the award of exemplary damages and
attorneys fees. Invoking Article 2231[14] of the Civil Code, the
appellate court ruled that exemplary damages could be granted if
the defendant acted with gross negligence. Since Solidbank was
guilty of simple negligence only, the award of exemplary damages
was not justified. Consequently, the award of attorneys fees was
also disallowed pursuant to Article 2208 of the Civil Code. The
expenses of litigation and cost of suit were also not imposed on
Solidbank.
The dispositive portion of the Resolution reads as follows:
WHEREFORE, foregoing considered, our decision dated October 27,
1998 is affirmed with modification by deleting the award of
exemplary damages and attorneys fees, expenses of litigation and
cost of suit.
SO ORDERED.
Hence, this petition.
The Issues
Solidbank seeks the review of the decision and resolution of the
Court of Appeals on these grounds:
I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER
BANK SHOULD SUFFER THE LOSS BECAUSE ITS TELLER SHOULD
HAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE BEFORE
IT ALLOWED THE WITHDRAWAL OF P300,000.00 TO RESPONDENTS
MESSENGER EMERANO ILAGAN, SINCE THERE IS NO AGREEMENT
BETWEEN THE PARTIES IN THE OPERATION OF THE SAVINGS
ACCOUNT, NOR IS THERE ANY BANKING LAW, WHICH MANDATES
THAT A BANK TELLER SHOULD FIRST CALL UP THE DEPOSITOR
BEFORE ALLOWING A WITHDRAWAL OF A BIG AMOUNT IN A
SAVINGS ACCOUNT.
II. THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF
LAST CLEAR CHANCE AND IN HOLDING THAT PETITIONER BANKS
TELLER HAD THE LAST OPPORTUNITY TO WITHHOLD THE
WITHDRAWAL WHEN IT IS UNDISPUTED THAT THE TWO
SIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP ARE
GENUINE AND PRIVATE RESPONDENTS PASSBOOK WAS DULY
PRESENTED, AND CONTRARIWISE RESPONDENT WAS NEGLIGENT IN
THE SELECTION AND SUPERVISION OF ITS MESSENGER EMERANO
ILAGAN, AND IN THE SAFEKEEPING OF ITS CHECKS AND OTHER
FINANCIAL DOCUMENTS.
III. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
INSTANT CASE IS A LAST DITCH EFFORT OF PRIVATE RESPONDENT
TO RECOVER ITS P300,000.00 AFTER FAILING IN ITS EFFORTS TO
RECOVER THE SAME FROM ITS EMPLOYEE EMERANO ILAGAN.
IV. THE COURT OF APPEALS ERRED IN NOT MITIGATING THE
DAMAGES AWARDED AGAINST PETITIONER UNDER ARTICLE 2197
OF THE CIVIL CODE, NOTWITHSTANDING ITS FINDING THAT
PETITIONER BANKS NEGLIGENCE WAS ONLY CONTRIBUTORY.[16]
The Ruling of the Court
The petition is partly meritorious.
Solidbanks Fiduciary Duty under the Law
The rulings of the trial court and the Court of Appeals conflict on the
application of the law. The trial court pinned the liability on L.C. Diaz
based on the provisions of the rules on savings account, a
recognition of the contractual relationship between Solidbank and
L.C. Diaz, the latter being a depositor of the former. On the other
hand, the Court of Appeals applied the law on quasi-delict to
determine who between the two parties was ultimately negligent.
The law on quasi-delict or culpa aquiliana is generally applicable
when there is no pre-existing contractual relationship between the
parties.
We hold that Solidbank is liable for breach of contract due to
negligence, or culpa contractual.
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan.[17] Article 1980 of the
Civil Code expressly provides that x x x savings x x x deposits of
money in banks and similar institutions shall be governed by the
provisions concerning simple loan. There is a debtor-creditor
relationship between the bank and its depositor. The bank is the
debtor and the depositor is the creditor. The depositor lends the
bank money and the bank agrees to pay the depositor on demand.
The savings deposit agreement between the bank and the depositor
is the contract that determines the rights and obligations of the
parties.
The law imposes on banks high standards in view of the fiduciary
nature of banking. Section 2 of Republic Act No. 8791 (RA 8791),[18]
which took effect on 13 June 2000, declares that the State
recognizes the fiduciary nature of banking that requires high
standards of integrity and performance.[19] This new provision in
the general banking law, introduced in 2000, is a statutory
affirmation of Supreme Court decisions, starting with the 1990 case
of Simex International v. Court of Appeals,[20] holding that the bank
is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their
relationship.
This fiduciary relationship means that the banks obligation to
observe high standards of integrity and performance is deemed
written into every deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires banks to assume
a degree of diligence higher than that of a good father of a family.
Article 1172 of the Civil Code states that the degree of diligence
required of an obligor is that prescribed by law or contract, and
absent such stipulation then the diligence of a good father of a
family.[22] Section 2 of RA 8791 prescribes the statutory diligence
required from banks that banks must observe high standards of
integrity and performance in servicing their depositors. Although RA
8791 took effect almost nine years after the unauthorized
withdrawal of the P300,000 from L.C. Diazs savings account,
jurisprudence[23] at the time of the withdrawal already imposed on
banks the same high standard of diligence required under RA No.
8791.
However, the fiduciary nature of a bank-depositor relationship does
not convert the contract between the bank and its depositors from
a simple loan to a trust agreement, whether express or implied.
Failure by the bank to pay the depositor is failure to pay a simple
loan, and not a breach of trust.[24] The law simply imposes on the
bank a higher standard of integrity and performance in complying
with its obligations under the contract of simple loan, beyond those
required of non-bank debtors under a similar contract of simple
loan.
The fiduciary nature of banking does not convert a simple loan into
a trust agreement because banks do not accept deposits to enrich
depositors but to earn money for themselves. The law allows banks
to offer the lowest possible interest rate to depositors while
charging the highest possible interest rate on their own borrowers.
The interest spread or differential belongs to the bank and not to
the depositors who are not cestui que trust of banks. If depositors
are cestui que trust of banks, then the interest spread or income
belongs to the depositors, a situation that Congress certainly did not
intend in enacting Section 2 of RA 8791.
Solidbanks Breach of its Contractual Obligation
Article 1172 of the Civil Code provides that responsibility arising
from negligence in the performance of every kind of obligation is
demandable. For breach of the savings deposit agreement due to
negligence, or culpa contractual, the bank is liable to its depositor.
Calapre left the passbook with Solidbank because the transaction
took time and he had to go to Allied Bank for another transaction.
The passbook was still in the hands of the employees of Solidbank
for the processing of the deposit when Calapre left Solidbank.
Solidbanks rules on savings account require that the deposit book
should be carefully guarded by the depositor and kept under lock
and key, if possible. When the passbook is in the possession of
Solidbanks tellers during withdrawals, the law imposes on Solidbank
and its tellers an even higher degree of diligence in safeguarding the
passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence
in insuring that they return the passbook only to the depositor or
his authorized representative. The tellers know, or should know,
that the rules on savings account provide that any person in
possession of the passbook is presumptively its owner. If the tellers
give the passbook to the wrong person, they would be clothing that
person presumptive ownership of the passbook, facilitating
unauthorized withdrawals by that person. For failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 presumptively failed to observe such high
degree of diligence in safeguarding the passbook, and in insuring its
return to the party authorized to receive the same.
In culpa contractual, once the plaintiff proves a breach of contract,
there is a presumption that the defendant was at fault or negligent.
The burden is on the defendant to prove that he was not at fault or
negligent. In contrast, in culpa aquiliana the plaintiff has the burden
of proving that the defendant was negligent. In the present case,
L.C. Diaz has established that Solidbank breached its contractual
obligation to return the passbook only to the authorized
representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning
the passbook to Calapre. The burden was on Solidbank to prove that
there was no negligence on its part or its employees.
Solidbank failed to discharge its burden. Solidbank did not present
to the trial court Teller No. 6, the teller with whom Calapre left the
passbook and who was supposed to return the passbook to him.
The record does not indicate that Teller No. 6 verified the identity of
the person who retrieved the passbook. Solidbank also failed to
adduce in evidence its standard procedure in verifying the identity
of the person retrieving the passbook, if there is such a procedure,
and that Teller No. 6 implemented this procedure in the present
case.
Solidbank is bound by the negligence of its employees under the
principle of respondeat superior or command responsibility. The
defense of exercising the required diligence in the selection and
supervision of employees is not a complete defense in culpa
contractual, unlike in culpa aquiliana.
The bank must not only exercise high standards of integrity and
performance, it must also insure that its employees do likewise
because this is the only way to insure that the bank will comply with
its fiduciary duty. Solidbank failed to present the teller who had the
duty to return to Calapre the passbook, and thus failed to prove
that this teller exercised the high standards of integrity and
performance required of Solidbanks employees.
Proximate Cause of the Unauthorized Withdrawal
Another point of disagreement between the trial and appellate
courts is the proximate cause of the unauthorized withdrawal. The
trial court believed that L.C. Diazs negligence in not securing its
passbook under lock and key was the proximate cause that allowed
the impostor to withdraw the P300,000. For the appellate court, the
proximate cause was the tellers negligence in processing the
withdrawal without first verifying with L.C. Diaz. We do not agree
with either court.
Proximate cause is that cause which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces
the injury and without which the result would not have
occurred.[26] Proximate cause is determined by the facts of each
case upon mixed considerations of logic, common sense, policy and
precedent.
L.C. Diaz was not at fault that the passbook landed in the hands of
the impostor. Solidbank was in possession of the passbook while it
was processing the deposit. After completion of the transaction,
Solidbank had the contractual obligation to return the passbook
only to Calapre, the authorized representative of L.C. Diaz.
Solidbank failed to fulfill its contractual obligation because it gave
the passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible
the withdrawal of the P300,000 by the impostor who took
possession of the passbook. Under Solidbanks rules on savings
account, mere possession of the passbook raises the presumption
of ownership. It was the negligent act of Solidbanks Teller No. 6 that
gave the impostor presumptive ownership of the passbook. Had the
passbook not fallen into the hands of the impostor, the loss of
P300,000 would not have happened. Thus, the proximate cause of
the unauthorized withdrawal was Solidbanks negligence in not
returning the passbook to Calapre.
We do not subscribe to the appellate courts theory that the
proximate cause of the unauthorized withdrawal was the tellers
failure to call up L.C. Diaz to verify the withdrawal. Solidbank did not
have the duty to call up L.C. Diaz to confirm the withdrawal. There is
no arrangement between Solidbank and L.C. Diaz to this effect. Even
the agreement between Solidbank and L.C. Diaz pertaining to
measures that the parties must observe whenever withdrawals of
large amounts are made does not direct Solidbank to call up L.C.
Diaz.
There is no law mandating banks to call up their clients whenever
their representatives withdraw significant amounts from their
accounts. L.C. Diaz therefore had the burden to prove that it is the
usual practice of Solidbank to call up its clients to verify a
withdrawal of a large amount of money. L.C. Diaz failed to do so.
Teller No. 5 who processed the withdrawal could not have been put
on guard to verify the withdrawal. Prior to the withdrawal of
P300,000, the impostor deposited with Teller No. 6 the P90,000 PBC
check, which later bounced. The impostor apparently deposited a
large amount of money to deflect suspicion from the withdrawal of
a much bigger amount of money. The appellate court thus erred
when it imposed on Solidbank the duty to call up L.C. Diaz to
confirm the withdrawal when no law requires this from banks and
when the teller had no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the
withdrawal. Solidbank claims that since Ilagan was also a messenger
of L.C. Diaz, he was familiar with its teller so that there was no more
need for the teller to verify the withdrawal. Solidbank relies on the
following statements in the Booking and Information Sheet of
Emerano Ilagan:
xxx Ilagan also had with him (before the withdrawal) a forged check
of PBC and indicated the amount of P90,000 which he deposited in
favor of L.C. Diaz and Company. After successfully withdrawing this
large sum of money, accused Ilagan gave alias Rey (Noel Tamayo)
his share of the loot. Ilagan then hired a taxicab in the amount of
P1,000 to transport him (Ilagan) to his home province at Bauan,
Batangas. Ilagan extravagantly and lavishly spent his money but a
big part of his loot was wasted in cockfight and horse racing. Ilagan
was apprehended and meekly admitted his guilt.[28] (Emphasis
supplied.)
L.C. Diaz refutes Solidbanks contention by pointing out that the
person who withdrew the P300,000 was a certain Noel Tamayo.
Both the trial and appellate courts stated that this Noel Tamayo
presented the passbook with the withdrawal slip.
We uphold the finding of the trial and appellate courts that a certain
Noel Tamayo withdrew the P300,000. The Court is not a trier of
facts. We find no justifiable reason to reverse the factual finding of
the trial court and the Court of Appeals. The tellers who processed
the deposit of the P90,000 check and the withdrawal of the
P300,000 were not presented during trial to substantiate Solidbanks
claim that Ilagan deposited the check and made the questioned
withdrawal. Moreover, the entry quoted by Solidbank does not
categorically state that Ilagan presented the withdrawal slip and the
passbook.
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both parties are
negligent but the negligent act of one is appreciably later than that
of the other, or where it is impossible to determine whose fault or
negligence caused the loss, the one who had the last clear
opportunity to avoid the loss but failed to do so, is chargeable with
the loss.[29] Stated differently, the antecedent negligence of the
plaintiff does not preclude him from recovering damages caused by
the supervening negligence of the defendant, who had the last fair
chance to prevent the impending harm by the exercise of due
diligence.
We do not apply the doctrine of last clear chance to the present
case. Solidbank is liable for breach of contract due to negligence in
the performance of its contractual obligation to L.C. Diaz. This is a
case of culpa contractual, where neither the contributory
negligence of the plaintiff nor his last clear chance to avoid the loss,
would exonerate the defendant from liability.[31] Such contributory
negligence or last clear chance by the plaintiff merely serves to
reduce the recovery of damages by the plaintiff but does not
exculpate the defendant from his breach of contract.[32]
Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated
by the courts, according to the circumstances. This means that if the
defendant exercised the proper diligence in the selection and
supervision of its employee, or if the plaintiff was guilty of
contributory negligence, then the courts may reduce the award of
damages. In this case, L.C. Diaz was guilty of contributory negligence
in allowing a withdrawal slip signed by its authorized signatories to
fall into the hands of an impostor. Thus, the liability of Solidbank
should be reduced.
In Philippine Bank of Commerce v. Court of Appeals,[33] where the
Court held the depositor guilty of contributory negligence, we
allocated the damages between the depositor and the bank on a 40-
60 ratio. Applying the same ruling to this case, we hold that L.C. Diaz
must shoulder 40% of the actual damages awarded by the appellate
court. Solidbank must pay the other 60% of the actual damages.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner Solidbank Corporation shall pay private
respondent L.C. Diaz and Company, CPAs only 60% of the actual
damages awarded by the Court of Appeals. The remaining 40% of
the actual damages shall be borne by private respondent L.C. Diaz
and Company, CPAs. Proportionate costs.
G.R. No. L-60033 April 4, 1984
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA
SANTOS, petitioners, vs.THE CITY FISCAL OF MANILA, HON. JOSE B.
FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. LOTA and CLEMENT
DAVID, respondents.
On March 31, 1982, by virtue of a court resolution issued by this
Court on the same date, a temporary restraining order was duly
issued ordering the respondents, their officers, agents,
representatives and/or person or persons acting upon their
(respondents') orders or in their place or stead to refrain from
proceeding with the preliminary investigation in Case No. 8131938
of the Office of the City Fiscal of Manila (pp. 47-48, rec.). On January
24, 1983, private respondent Clement David filed a motion to lift
restraining order which was denied in the resolution of this Court
dated May 18, 1983.
As can be gleaned from the above, the instant petition seeks to
prohibit public respondents from proceeding with the preliminary
investigation of I.S. No. 81-31938, in which petitioners were charged
by private respondent Clement David, with estafa and violation of
Central Bank Circular No. 364 and related regulations regarding
foreign exchange transactions principally, on the ground of lack of
jurisdiction in that the allegations of the charged, as well as the
testimony of private respondent's principal witness and the
evidence through said witness, showed that petitioners' obligation
is civil in nature.
For purposes of brevity, We hereby adopt the antecedent facts
narrated by the Solicitor General in its Comment dated June
28,1982, as follows:
On December 23,1981, private respondent David filed I.S. No. 81-
31938 in the Office of the City Fiscal of Manila, which case was
assigned to respondent Lota for preliminary investigation.
In I.S. No. 81-31938, David charged petitioners (together with one
Robert Marshall and the following directors of the Nation Savings
and Loan Association, Inc., namely Homero Gonzales, Juan Merino,
Flavio Macasaet, Victor Gomez, Jr., Perfecto Manalac, Jaime V. Paz,
Paulino B. Dionisio, and one John Doe) with estafa and violation of
Central Bank Circular No. 364 and related Central Bank regulations
on foreign exchange transactions, allegedly committed as follows
(Petition, Annex "A"):
"From March 20, 1979 to March, 1981, David invested with the
Nation Savings and Loan Association, (hereinafter called NSLA) the
sum of P1,145,546.20 on nine deposits, P13,531.94 on savings
account deposits (jointly with his sister, Denise Kuhne),
US$10,000.00 on time deposit, US$15,000.00 under a receipt and
guarantee of payment and US$50,000.00 under a receipt dated June
8, 1980 (au jointly with Denise Kuhne), that David was induced into
making the aforestated investments by Robert Marshall an
Australian national who was allegedly a close associate of petitioner
Guingona Jr., then NSLA President, petitioner Martin, then NSLA
Executive Vice-President of NSLA and petitioner Santos, then NSLA
General Manager; that on March 21, 1981 N LA was placed under
receivership by the Central Bank, so that David filed claims
therewith for his investments and those of his sister; that on July 22,
1981 David received a report from the Central Bank that only
P305,821.92 of those investments were entered in the records of
NSLA; that, therefore, the respondents in I.S. No. 81-31938
misappropriated the balance of the investments, at the same time
violating Central Bank Circular No. 364 and related Central Bank
regulations on foreign exchange transactions; that after demands,
petitioner Guingona Jr. paid only P200,000.00, thereby reducing the
amounts misappropriated to P959,078.14 and US$75,000.00."
Petitioners, Martin and Santos, filed a joint counter-affidavit
(Petition, Annex' B') in which they stated the following.
"That Martin became President of NSLA in March 1978 (after the
resignation of Guingona, Jr.) and served as such until October 30,
1980, while Santos was General Manager up to November 1980;
that because NSLA was urgently in need of funds and at David's
insistence, his investments were treated as special- accounts with
interest above the legal rate, an recorded in separate confidential
documents only a portion of which were to be reported because he
did not want the Australian government to tax his total earnings
(nor) to know his total investments; that all transactions with David
were recorded except the sum of US$15,000.00 which was a
personal loan of Santos; that David's check for US$50,000.00 was
cleared through Guingona, Jr.'s dollar account because NSLA did not
have one, that a draft of US$30,000.00 was placed in the name of
one Paz Roces because of a pending transaction with her; that the
Philippine Deposit Insurance Corporation had already reimbursed
David within the legal limits; that majority of the stockholders of
NSLA had filed Special Proceedings No. 82-1695 in the Court of First
Instance to contest its (NSLA's) closure; that after NSLA was placed
under receivership, Martin executed a promissory note in David's
favor and caused the transfer to him of a nine and on behalf (9 1/2)
carat diamond ring with a net value of P510,000.00; and, that the
liabilities of NSLA to David were civil in nature."
Petitioner, Guingona, Jr., in his counter-affidavit stated the
following.
"That he had no hand whatsoever in the transactions between
David and NSLA since he (Guingona Jr.) had resigned as NSLA
president in March 1978, or prior to those transactions; that he
assumed a portion o; the liabilities of NSLA to David because of the
latter's insistence that he placed his investments with NSLA because
of his faith in Guingona, Jr.; that in a Promissory Note dated June
17, 1981 (Petition, Annex "D") he (Guingona, Jr.) bound himself to
pay David the sums of P668.307.01 and US$37,500.00 in stated
installments; that he (Guingona, Jr.) secured payment of those
amounts with second mortgages over two (2) parcels of land under
a deed of Second Real Estate Mortgage (Petition, Annex "E") in
which it was provided that the mortgage over one (1) parcel shall be
cancelled upon payment of one-half of the obligation to David; that
he (Guingona, Jr.) paid P200,000.00 and tendered another
P300,000.00 which David refused to accept, hence, he (Guingona,
Jr.) filed Civil Case No. Q-33865 in the Court of First Instance of Rizal
at Quezon City, to effect the release of the mortgage over one (1) of
the two parcels of land conveyed to David under second
mortgages."
At the inception of the preliminary investigation before respondent
Lota, petitioners moved to dismiss the charges against them for lack
of jurisdiction because David's claims allegedly comprised a purely
civil obligation which was itself novated. Fiscal Lota denied the
motion to dismiss.
But, after the presentation of David's principal witness, petitioners
filed the instant petition because: (a) the production of the
Promisory Notes, Banker's Acceptance, Certificates of Time Deposits
and Savings Account allegedly showed that the transactions
between David and NSLA were simple loans, i.e., civil obligations on
the part of NSLA which were novated when Guingona, Jr. and
Martin assumed them; and (b) David's principal witness allegedly
testified that the duplicate originals of the aforesaid instruments of
indebtedness were all on file with NSLA, contrary to David's claim
that some of his investments were not record (Petition, pp. 8-9).
Petitioners alleged that they did not exhaust available
administrative remedies because to do so would be futile.
As correctly pointed out by the Solicitor General, the sole issue for
resolution is whether public respondents acted without jurisdiction
when they investigated the charges (estafa and violation of CB
Circular No. 364 and related regulations regarding foreign exchange
transactions) subject matter of I.S. No. 81-31938.
There is merit in the contention of the petitioners that their liability
is civil in nature and therefore, public respondents have no
jurisdiction over the charge of estafa.
A casual perusal of the December 23, 1981 affidavit. complaint filed
in the Office of the City Fiscal of Manila by private respondent David
against petitioners Teopisto Guingona, Jr., Antonio I. Martin and
Teresita G. Santos, together with one Robert Marshall and the other
directors of the Nation Savings and Loan Association, will show that
from March 20, 1979 to March, 1981, private respondent David,
together with his sister, Denise Kuhne, invested with the Nation
Savings and Loan Association the sum of P1,145,546.20 on time
deposits covered by Bankers Acceptances and Certificates of Time
Deposits and the sum of P13,531.94 on savings account deposits
covered by passbook nos. 6-632 and 29-742, or a total of
P1,159,078.14 (pp. 15-16, roc.). It appears further that private
respondent David, together with his sister, made investments in the
aforesaid bank in the amount of US$75,000.00 (p. 17, rec.).
Moreover, the records reveal that when the aforesaid bank was
placed under receivership on March 21, 1981, petitioners Guingona
and Martin, upon the request of private respondent David, assumed
the obligation of the bank to private respondent David by executing
on June 17, 1981 a joint promissory note in favor of private
respondent acknowledging an indebtedness of Pl,336,614.02 and
US$75,000.00 (p. 80, rec.). This promissory note was based on the
statement of account as of June 30, 1981 prepared by the private
respondent (p. 81, rec.). The amount of indebtedness assumed
appears to be bigger than the original claim because of the added
interest and the inclusion of other deposits of private respondent's
sister in the amount of P116,613.20.
Thereafter, or on July 17, 1981, petitioners Guingona and Martin
agreed to divide the said indebtedness, and petitioner Guingona
executed another promissory note antedated to June 17, 1981
whereby he personally acknowledged an indebtedness of
P668,307.01 (1/2 of P1,336,614.02) and US$37,500.00 (1/2 of
US$75,000.00) in favor of private respondent (p. 25, rec.). The
aforesaid promissory notes were executed as a result of deposits
made by Clement David and Denise Kuhne with the Nation Savings
and Loan Association.
Furthermore, the various pleadings and documents filed by private
respondent David, before this Court indisputably show that he has
indeed invested his money on time and savings deposits with the
Nation Savings and Loan Association.
It must be pointed out that when private respondent David invested
his money on nine. and savings deposits with the aforesaid bank,
the contract that was perfected was a contract of simple loan or
mutuum and not a contract of deposit. Thus, Article 1980 of the
New Civil Code provides that:
Article 1980. Fixed, savings, and current deposits of-money in
banks and similar institutions shall be governed by the provisions
concerning simple loan.
In the case of Central Bank of the Philippines vs. Morfe (63 SCRA
114,119 [1975], We said:
It should be noted that fixed, savings, and current deposits of
money in banks and similar institutions are hat true deposits. are
considered simple loans and, as such, are not preferred credits."
This Court also declared in the recent case of Serrano vs. Central
Bank of the Philippines that:
Bank deposits are in the nature of irregular deposits. They are really
'loans because they earn interest. All kinds of bank deposits,
whether fixed, savings, or current are to be treated as loans and are
to be covered by the law on loans. Current and saving deposits, are
loans to a bank because it can use the same. The petitioner here in
making time deposits that earn interests will respondent Overseas
Bank of Manila was in reality a creditor of the respondent Bank and
not a depositor. The respondent Bank was in turn a debtor of
petitioner. Failure of the respondent Bank to honor the time deposit
is failure to pay its obligation as a debtor and not a breach of trust
arising from a depositary's failure to return the subject matter of
the deposit (Emphasis supplied).
Hence, the relationship between the private respondent and the
Nation Savings and Loan Association is that of creditor and debtor;
consequently, the ownership of the amount deposited was
transmitted to the Bank upon the perfection of the contract and it
can make use of the amount deposited for its banking operations,
such as to pay interests on deposits and to pay withdrawals. While
the Bank has the obligation to return the amount deposited, it has,
however, no obligation to return or deliver the same money that
was deposited. And, the failure of the Bank to return the amount
deposited will not constitute estafa through misappropriation
punishable under Article 315, par. l(b) of the Revised Penal Code,
but it will only give rise to civil liability over which the public
respondents have no- jurisdiction.
WE have already laid down the rule that:
In order that a person can be convicted under the above-quoted
provision, it must be proven that he has the obligation to deliver or
return the some money, goods or personal property that he
received Petitioners had no such obligation to return the same
money, i.e., the bills or coins, which they received from private
respondents. This is so because as clearly as stated in criminal
complaints, the related civil complaints and the supporting sworn
statements, the sums of money that petitioners received were
loans.
The nature of simple loan is defined in Articles 1933 and 1953 of the
Civil Code.
"Art. 1933. — By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may
use the same for a certain time- and return it, in which case the
contract is called a commodatum; or money or other consumable
thing, upon the condition that the same amount of the same kind
and quality shall he paid in which case the contract is simply called a
loan or mutuum.
"Commodatum is essentially gratuitous.
"Simple loan may be gratuitous or with a stipulation to pay interest.
"In commodatum the bailor retains the ownership of the thing
loaned while in simple loan, ownership passes to the borrower.
"Art. 1953. — A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay
to the creditor an equal amount of the same kind and quality."
It can be readily noted from the above-quoted provisions that in
simple loan (mutuum), as contrasted to commodatum the borrower
acquires ownership of the money, goods or personal property
borrowed Being the owner, the borrower can dispose of the thing
borrowed (Article 248, Civil Code) and his act will not be considered
misappropriation thereof'.
But even granting that the failure of the bank to pay the time and
savings deposits of private respondent David would constitute a
violation of paragraph 1(b) of Article 315 of the Revised Penal Code,
nevertheless any incipient criminal liability was deemed avoided,
because when the aforesaid bank was placed under receivership by
the Central Bank, petitioners Guingona and Martin assumed the
obligation of the bank to private respondent David, thereby
resulting in the novation of the original contractual obligation
arising from deposit into a contract of loan and converting the
original trust relation between the bank and private respondent
David into an ordinary debtor-creditor relation between the
petitioners and private respondent. Consequently, the failure of the
bank or petitioners Guingona and Martin to pay the deposits of
private respondent would not constitute a breach of trust but would
merely be a failure to pay the obligation as a debtor.
Moreover, while it is true that novation does not extinguish criminal
liability, it may however, prevent the rise of criminal liability as long
as it occurs prior to the filing of the criminal information in court.
Thus, in Gonzales vs. Serrano,We held that:
As pointed out in People vs. Nery, novation prior to the filing of the
criminal information — as in the case at bar — may convert the
relation between the parties into an ordinary creditor-debtor
relation, and place the complainant in estoppel to insist on the
original transaction or "cast doubt on the true nature" thereof.
Again, in the latest case of Ong vs. Court of Appeals, this Court
reiterated the ruling in People vs. Nery, declaring that:
The novation theory may perhaps apply prior to the filling of the
criminal information in court by the state prosecutors because up to
that time the original trust relation may be converted by the parties
into an ordinary creditor-debtor situation, thereby placing the
complainant in estoppel to insist on the original trust. But after the
justice authorities have taken cognizance of the crime and instituted
action in court, the offended party may no longer divest the
prosecution of its power to exact the criminal liability, as
distinguished from the civil. The crime being an offense against the
state, only the latter can renounce it.
It may be observed in this regard that novation is not one of the
means recognized by the Penal Code whereby criminal liability can
be extinguished; hence, the role of novation may only be to either
prevent the rise of criminal habihty or to cast doubt on the true
nature of the original basic transaction, whether or not it was such
that its breach would not give rise to penal responsibility, as when
money loaned is made to appear as a deposit, or other similar
disguise is resorted to.
In the case at bar, there is no dispute that petitioners Guingona and
Martin executed a promissory note on June 17, 1981 assuming the
obligation of the bank to private respondent David; while the
criminal complaint for estafa was filed on December 23, 1981 with
the Office of the City Fiscal. Hence, it is clear that novation occurred
long before the filing of the criminal complaint with the Office of the
City Fiscal.
Consequently, as aforestated, any incipient criminal liability would
be avoided but there will still be a civil liability on the part of
petitioners Guingona and Martin to pay the assumed obligation.
Petitioners herein were likewise charged with violation of Section 3
of Central Bank Circular No. 364 and other related regulations
regarding foreign exchange transactions by accepting foreign
currency deposit in the amount of US$75,000.00 without authority
from the Central Bank. They contend however, that the US dollars
intended by respondent David for deposit were all converted into
Philippine currency before acceptance and deposit into Nation
Savings and Loan Association.
Petitioners' contention is worthy of behelf for the following reasons:
1. It appears from the records that when respondent David
was about to make a deposit of bank draft issued in his name in the
amount of US$50,000.00 with the Nation Savings and Loan
Association, the same had to be cleared first and converted into
Philippine currency. Accordingly, the bank draft was endorsed by
respondent David to petitioner Guingona, who in turn deposited it
to his dollar account with the Security Bank and Trust Company.
Petitioner Guingona merely accommodated the request of the
Nation Savings and loan Association in order to clear the bank draft
through his dollar account because the bank did not have a dollar
account. Immediately after the bank draft was cleared, petitioner
Guingona authorized Nation Savings and Loan Association to
withdraw the same in order to be utilized by the bank for its
operations.
2. It is safe to assume that the U.S. dollars were converted first
into Philippine pesos before they were accepted and deposited in
Nation Savings and Loan Association, because the bank is presumed
to have followed the ordinary course of the business which is to
accept deposits in Philippine currency only, and that the transaction
was regular and fair, in the absence of a clear and convincing
evidence to the contrary (see paragraphs p and q, Sec. 5, Rule 131,
Rules of Court).
3. Respondent David has not denied the aforesaid contention
of herein petitioners despite the fact that it was raised. in
petitioners' reply filed on May 7, 1982 to private respondent's
comment and in the July 27, 1982 reply to public respondents'
comment and reiterated in petitioners' memorandum filed on
October 30, 1982, thereby adding more support to the conclusion
that the US$75,000.00 were really converted into Philippine
currency before they were accepted and deposited into Nation
Savings and Loan Association. Considering that this might adversely
affect his case, respondent David should have promptly denied
petitioners' allegation.
In conclusion, considering that the liability of the petitioners is
purely civil in nature and that there is no clear showing that they
engaged in foreign exchange transactions, We hold that the public
respondents acted without jurisdiction when they investigated the
charges against the petitioners. Consequently, public respondents
should be restrained from further proceeding with the criminal case
for to allow the case to continue, even if the petitioners could have
appealed to the Ministry of Justice, would work great injustice to
petitioners and would render meaningless the proper
administration of justice.
While as a rule, the prosecution in a criminal offense cannot be the
subject of prohibition and injunction, this court has recognized the
resort to the extraordinary writs of prohibition and injunction in
extreme cases, thus:
On the issue of whether a writ of injunction can restrain the
proceedings in Criminal Case No. 3140, the general rule is that
"ordinarily, criminal prosecution may not be blocked by court
prohibition or injunction." Exceptions, however, are allowed in the
following instances:
"1. for the orderly administration of justice;
"2. to prevent the use of the strong arm of the law in an
oppressive and vindictive manner;
"3. to avoid multiplicity of actions;
"4. to afford adequate protection to constitutional rights;
"5. in proper cases, because the statute relied upon is
unconstitutional or was held invalid"
Likewise, in Lopez vs. The City Judge, et al., We held that:
The writs of certiorari and prohibition, as extraordinary legal
remedies, are in the ultimate analysis, intended to annul void
proceedings; to prevent the unlawful and oppressive exercise of
legal authority and to provide for a fair and orderly administration
of justice. Thus, in Yu Kong Eng vs. Trinidad, 47 Phil. 385, We took
cognizance of a petition for certiorari and prohibition although the
accused in the case could have appealed in due time from the order
complained of, our action in the premises being based on the public
welfare policy the advancement of public policy. In Dimayuga vs.
Fajardo, 43 Phil. 304, We also admitted a petition to restrain the
prosecution of certain chiropractors although, if convicted, they
could have appealed. We gave due course to their petition for the
orderly administration of justice and to avoid possible oppression by
the strong arm of the law. And in Arevalo vs. Nepomuceno, 63 Phil.
627, the petition for certiorari challenging the trial court's action
admitting an amended information was sustained despite the
availability of appeal at the proper time.
[ G.R. No. 43191, November 13, 1935 ]
PAULINO GULLAS, PLAINTIFF AND APPELLANT, VS. THE PHILIPPINE
NATIONAL BANK, DEFENDANT AND APPELLANT.
Both parties to this case appealed from a judgment of the Court of
First Instance of Cebu, which sentenced the defendant to return to
the account of the plaintiff the sum of P509, with legal interest and
costs, the plaintiff to secure damages in the amount of P10,000
more or less, and the defendant to be absolved totally from the
amended complaint. As it is conceded that the plaintiff has already
received the sum represented by the United States treasury
warrant, which is in Question, the appeal will thus determine the
amount, if any, which should be paid, to the plaintiff by the
defendant.
The parties to the case are Paulino Gullas and the Philippine
National Bank. The first named is a member of the Philippine Bar,
resident in the City of Cebu. The second named is a banking
corporation with a branch in the same city. Attorney Gullas has had
a current account with the bank.
It appears from the record that on August 2, 1933, the Treasurer of
the United States for the United States Veterans Bureau issued a
warrant in the amount of $361, payable to the order of Francisco
Sabectoria Bacos. Paulino Gullas and Pedro Lopez signed as
indorsers of this check. Thereupon it was cashed by the Philippine
National Bank. Subsequently the treasury warrant was dishonored
by the Insular Treasurer.
At that time the outstanding balance of Attorney Gullas on the
books of the bank was P509. Against this balance he had issued
certain checks which could not be paid when the money was
sequestered by the bank. On August 20, 1933, Attorney Gullas left
his residence for Manila.
The bank on learning of the dishonor of the treasury warrant sent
notices by mail to Mr. Gullas which could not be delivered to him at
that time because he was in Manila. In the bank's letter of August
21, 1933, addressed to Messrs. Paulino Gullas and Pedro Lopez,
they were informed that the United States Treasury warrant No.
20175 in the name of Francisco Sabectoria Bacos for $361 or P722,
the payment for which had been received has been returned by our
Manila office with the notation that the payment of his check has
been stopped by the Insular Treasurer. "In view of this therefore we
have applied the outstanding balances of your current accounts
with us to the part payment of the foregoing check", namely, Mr.
Paulino Gullas P509. On the return of Attorney Gullas to Cebu on
August 31, 1933, notice of dishonor was received and the unpaid
balance of the United States Treasury warrant was immediately paid
by him.
As a consequence of these happenings, two occurrences transpired
which inconvenienced Attorney Gullas. In the first place, as above
indicated, checks including one for his insurance were not paid
because of the lack of funds standing to his credit in the bank. In the
second place, periodicals in the vicinity gave prominence to the
news to the great mortification of Gullas.
A variety of incidental questions have been suggested on the record
which it can be taken for granted as having been adversely disposed
of in this opinion. The main issues are two, namely, (1) as to the
right of the Philippine National Bank to apply a deposit to the debt
of a depositor to the bank, and (2) as to the amount of damages, if
any, which should be awarded Gullas,
The Civil Code contains provisions regarding compensation (set off)
and deposit. (Articles 1195 et seq., 1758 et seq.) These portions of
Philippine law provide that compensation shall take place when two
persons are reciprocally creditor and debtor of each other (Civil
Code, article 1195). In this connection, it has been held that the
relation existing between a depositor and a bank is that of creditor
and debtor.
The Negotiable Instruments Law contains provisions establishing
the liability of a general indorser and giving the procedure for notice
of dishonor. The general indorser of a negotiable instrument
engages that if it be dishonored and the necessary proceedings of
dishonor be duly taken, he will pay the amount thereof to the
holder. (Negotiable Instruments Law, sec. 66.) In this connection, it
has been held by a long line of authorities that notice of dishonor is
necessary in order to charge an indorser and that the right of action
against him does not accrue until the notice is given.
As a general rule, a bank has a right of set off of the deposits in its
hands for the payment of any indebtedness to it on the part of a
depositor. In Louisiana, however, a civil law jurisdiction, the rule is
denied, and it is held that a bank has no right, without an order
from or special assent of the depositor to retain out of his deposit
an amount sufficient to meet his indebtedness. The basis of the
Louisiana doctrine is the theory of confidential contracts arising
from irregular deposits, e. g.f the deposit of money with a banker.
With freedom of selection and1 after full consideration, we have
decided to adopt the general rule in preference to the minority rule
as more in harmony with modern banking practice.
Starting, therefore, from the premise that the Philippine National
Bank had with respect to the deposit of Gullas a right of set off, we
next consider if that remedy was enforced properly. The fact we
believe is undeniable that prior to the mailing of notice of dishonor,
and without waiting for any action by Gullas, the bank made use of
the money standing in his account to make good for the treasury
warrant. At this point recall that Gullas was merely an indorser and
had issued checks in good faith.
As to a depositor who has funds sufficient to meet payment of a
check drawn by him in favor of a third party, it has been held that
he has a right of action against the bank for its refusal to pay such a
check in the absence of notice to him that the bank has applied the
funds so deposited in extinguishment of past due claims held
against him. (Callahan vs. Bank of Anderson [1904], 2 Ann. Cas.,
203.) The decision cited represents the minority doctrine, for on
principle it would seem that notice is not necessary to a maker
because the right is based on the doctrine that the relationship is
that of creditor and debtor. However this may be, as to an indorser
the situation is different, and notice should actually have been given
him in order that he might protect his interests.
We accordingly are of the opinion that the action of the bank was
prejudicial to Gullas. But to follow up that statement with others
proving exact damages is not so easy. For instance, for alleged
libelous articles the bank would not be primarily liable. The same
remark could be made relative to the loss of business which Gullas
claims but which could not be traced definitely to this occurrence.
Also Gullas having eventually been reimbursed lost little through
the actual levy by the bank on his funds. On the other hand, it was
not agreeable for one to draw checks in all good faith, then, leave
for Manila, and on return find that those checks had not been
cashed because of the action taken by the bank. That caused a
disturbance in Gullas' finances, especially with reference to his
insurance, which was injurious to him. All facts and circumstances
considered, we are of the opinion that Gullas should be awarded
nominal damages because of the premature action of the bank
against which Gullas had no means of protection, and have finally
determined that the amount should be P250.
Agreeable to the foregoing, the errors assigned by the parties will in
the main be overruled, with the result that the judgment of the trial
court will be modified by sentencing the defendant to pay the
plaintiff the sum of and the-costs of both instances.
G.R. No. 141835 February 4, 2009
CENTRAL BANK OF THE PHILIPPINES, vs. CITYTRUST BANKING
CORPORATION
Pursuant to Republic Act No. 625, the old Central Bank Law,
respondent Citytrust Banking Corporation (Citytrust), formerly Feati
Bank, maintained a demand deposit account with petitioner Central
Bank of the Philippines, now Bangko Sentral ng Pilipinas.
As required, Citytrust furnished petitioner with the names and
corresponding signatures of five of its officers authorized to sign
checks and serve as drawers and indorsers for its account. And it
provided petitioner with the list and corresponding signatures of its
roving tellers authorized to withdraw, sign receipts and perform
other transactions on its behalf. Petitioner later issued security
identification cards to the roving tellers one of whom was
Rounceval Flores (Flores).
On July 15, 1977, Flores presented for payment to petitioners Senior
Teller Iluminada dela Cruz (Iluminada) two Citytrust checks of even
date, payable to Citytrust, one in the amount of P850,000 and the
other in the amount of P900,000, both of which were signed and
indorsed by Citytrusts authorized signatory-drawers.
After the checks were certified by petitioners Accounting
Department, Iluminada verified them, prepared the cash transfer
slip on which she affixed her signature, stamped the checks with the
notation Received Payment and asked Flores to, as he did, sign on
the space above such notation. Instead of signing his name,
however, Flores signed as Rosauro C. Cayabyab a fact Iluminada
failed to notice.
Iluminada thereupon sent the cash transfer slip and checks to
petitioners Cash Department where an officer verified and
compared the drawers signatures on the checks against their
specimen signatures provided by Citytrust, and finding the same in
order, approved the cash transfer slip and paid the corresponding
amounts to Flores. Petitioner then debited the amount of the
checks totaling P1,750,000 from Citytrusts demand deposit account.
More than a year and nine months later, Citytrust, by letter dated
April 23, 1979, alleging that the checks were already cancelled
because they were stolen, demanded petitioner to restore the
amounts covered thereby to its demand deposit account. Petitioner
did not heed the demand, however.
Citytrust later filed a complaint for estafa, with reservation on the
filing of a separate civil action, against Flores. Flores was convicted.
Citytrust thereafter filed before the Regional Trial Court (RTC) of
Manila a complaint for recovery of sum of money with damages
against petitioner which it alleged erred in encashing the checks and
in charging the proceeds thereof to its account, despite the lack of
authority of Rosauro C. Cayabyab.
By Decision[1] of November 13, 1991, Branch 32 of the RTC of
Manila found both Citytrust and petitioner negligent and
accordingly held them equally liable for the loss. Both parties
appealed to the Court of Appeals which, by Decision[2] dated July
16, 1999, affirmed the trial courts decision, it holding that both
parties contributed equally to the fraudulent encashment of the
checks, hence, they should equally share the loss in consonance
with Article 2179[3] vis a vis Article 1172[4] of the Civil Code.
In arriving at its Decision, the appellate court noted that while
Citytrust failed to take adequate precautionary measures to prevent
the fraudulent encashment of its checks, petitioner was not entirely
blame-free in light of its failure to verify the signature of Citytrusts
agent authorized to receive payment.
Brushing aside petitioners contention that it cannot be sued, the
appellate court held that petitioners Charter specifically clothes it
with the power to sue and be sued.
Also brushing aside petitioners assertion that Citytrusts reservation
of the filing of a separate civil action against Flores precluded
Citytrust from filing the civil action against it, the appellate court
held that the action for the recovery of sum of money is separate
and distinct and is grounded on a separate cause of action from that
of the criminal case for estafa.
Hence, the present appeal, petitioner maintaining that Flores having
been an authorized roving teller, Citytrust is bound by his acts. Also
maintaining that it was not negligent in releasing the proceeds of
the checks to Flores, the failure of its teller to properly verify his
signature notwithstanding, petitioner contends that verification
could be dispensed with, Flores having been known to be an
authorized roving teller of Citytrust who had had numerous
transactions with it (petitioner) on its (Citytrusts) behalf for five
years prior to the questioned transaction.
Attributing negligence solely to Citytrust, petitioner harps on
Citytrusts allowing Flores to steal the checks and failing to timely
cancel them; allowing Flores to wear the issued identification card
issued by it (petitioner); failing to report Flores absence from work
on the day of the incident; and failing to explain the circumstances
surrounding the supposed theft and cancellation of the checks.
Drawing attention to Citytrusts considerable delay in demanding the
restoration of the proceeds of the checks, petitioners argue that,
assuming arguendo that its teller was negligent, Citytrusts
negligence, which preceded that committed by the teller, was the
proximate cause of the loss or fraud.
The petition is bereft of merit.
Petitioners teller Iluminada did not verify Flores signature on the
flimsy excuse that Flores had had previous transactions with it for a
number of years. That circumstance did not excuse the teller from
focusing attention to or at least glancing at Flores as he was signing,
and to satisfy herself that the signature he had just affixed matched
that of his specimen signature. Had she done that, she would have
readily been put on notice that Flores was affixing, not his but a
fictitious signature.
Given that petitioner is the government body mandated to
supervise and regulate banking and other financial institutions, this
Courts ruling in Consolidated Bank and Trust Corporation v. Court of
Appeals[5] illumines:
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan. Article 1980 of the Civil
Code expressly provides that x x x savings x x x deposits of money in
banks and similar institutions shall be governed by the provisions
concerning simple loan. There is a debtor-creditor relationship
between the bank and its depositor. The bank is the debtor and the
depositor is the creditor. The depositor lends the bank money and
the bank agrees to pay the depositor on demand. The savings
deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties.
The law imposes on banks high standards in view of the fiduciary
nature of banking. Section 2 of Republic Act No. 8791 (RA 8791),
which took effect on 13 June 2000, declares that the State
recognizes the fiduciary nature of banking that requires high
standards of integrity and performance. This new provision in the
general banking law, introduced in 2000, is a statutory affirmation
of Supreme Court decisions, starting with the 1990 case of Simex
International v. Court of Appeals, holding that the bank is under
obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their
relationship.
This fiduciary relationship means that the banks obligation to
observe high standards of integrity and performance is deemed
written into every deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires banks to assume
a degree of diligence higher than that of a good father of a family.
Article 1172 of the Civil Code states that the degree of diligence
required of an obligor is that prescribed by law or contract, and
absent such stipulation then the diligence of a good father of a
family. Section 2 of RA 8791 prescribes the statutory diligence
required from banks that banks must observe high standards of
integrity and performance in servicing their depositors. Although RA
8791 took effect almost nine years after the unauthorized
withdrawal of the P300,000 from L.C. Diazs savings account,
jurisprudence at the time of the withdrawal already imposed on
banks the same high standard of diligence required under RA No.
8791.
Citytrusts failure to timely examine its account, cancel the checks
and notify petitioner of their alleged loss/theft should mitigate
petitioners liability, in accordance with Article 2179 of the Civil Code
which provides that if the plaintiffs negligence was only
contributory, the immediate and proximate cause of the injury
being the defendants lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded.
For had Citytrust timely discovered the loss/theft and/or
subsequent encashment, their proceeds or part thereof could have
been recovered.
In line with the ruling in Consolidated Bank, the Court deems it
proper to allocate the loss between petitioner and Citytrust on a 60-
40 ratio.
[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.
On September 21, 1993, Citibank filed a complaint for violation of
section 31,[4] in relation to section 144[5] of the Corporation Code
against two (2) of its officers, Dante L. Santos and Marilou Genuino.
Attached to the complaint was an affidavit[6] 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.
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:
b) Carmen Intengan
d) Rosario Neri
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 clients deposits was done through the
accomplishment of either an Application For Managers 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 Managers Checks or Term
Investment Application, the funds of the bank client covered
thereof were then deposited in the Citibank accounts of Torrance
and/or Global.
Second step: Once the said fund transfers had been effected, Global
and/or Torrance would then issue its/ their checks drawn against
its/their Citibank accounts in favor of the other companies whose
financial products, such as securities, shares of stocks and other
certificates, were offering higher yields.
Third step: On maturity date(s) of the placements made by Torrance
and/or Global in the other companies, using the monies of the
Citibank client, the other companies would then. return the
placements to Global and/or Torrance with the corresponding
interests earned.
Fourth step: Upon receipt by Global and/or Torrance of the
remittances from the other companies, Global and/or Torrance
would then issue its/their own checks drawn against their Citibank
accounts in favor of Santos and Genuino.
The amounts covered by the checks represent the shares of Santos
and Genuino in the margins Global and/or Torrance had realized out
of the placements [using the diverted monies of the Citibank clients]
made with the other companies.
Fifth step: At the same time, Global and/or Torrance would also
issue its/their check(s) drawn against its/their Citibank accounts in
favor of the bank client.
The check(s) cover the principal amount (or parts thereof) which the
Citibank client had previously transferred, with the help of Santos
and/or Genuino, from his Citibank account to the Citibank
account(s) of Global and/or Torrance for placement in the other
companies, plus the interests or earnings his placements in other
companies had made less the spreads made by Global, Torrance,
Santos and Genuino.
The complaints which were docketed as I.S. Nos. 93-9969, 93-10058
and 94-1215 were subsequently amended to include a charge of
estafa under Article 315, paragraph 1(b)[11] of the Revised Penal
Code.
As an incident to the foregoing, petitioners filed respective motions
for the exclusion and physical withdrawal of their bank records that
were attached to Lims 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 Resolution[14] ordering, inter
alia, the withdrawal of the aforesaid informations against private
respondents. Petitioners motion for reconsideration[15] was denied
by DOJ Acting Secretary Demetrio G. Demetria in a Resolution dated
March 6, 1995.
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
tribunals concurrent jurisdiction to issue the extraordinary writs
therein prayed for.
On July 8, 1996, the Court of Appeals rendered judgment dismissing
the petition and declared therein, as follows:
Clearly, the disclosure of petitioners deposits was necessary to
establish the allegation that Santos and Genuino had violated
Section 31 of the Corporation Code in acquiring any interest adverse
to the corporation in respect of any matter which has been reposed
in him in confidence. To substantiate the alleged scheme of Santos
and Genuino, private respondents had to present the records of the
monies which were manipulated by the two officers which included
the bank records of herein petitioners.
Although petitioners were not the parties involved in IS. No. 93-
8469, their accounts were relevant to the complete prosecution of
the case against Santos and Genuino and the respondent DOJ
properly ruled that the disclosure of the same falls under the last
exception of R.A. No. 1405. That ruling is consistent with the
principle laid down in the case of Mellon Bank, N.A. vs. Magsino
(190 SCRA 633) where the Supreme Court allowed the testimonies
on the bank deposits of someone not a party to the case as it found
that said bank deposits were material or relevant to the allegations
in the complaint. Significantly, therefore, as long as the bank
deposits are material to the case, although not necessarily the
direct subject matter thereof, a disclosure of the same is proper and
falls within the scope of the exceptions provided for by R.A. No.
1405.
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 Resolution[18] 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 reinstated[19]
and eventually given due course.[20]
In assailing the appellate courts findings, petitioners assert that the
disclosure of their bank records was unwarranted and illegal for the
following reasons:
I. IN BLATANT VIOLATION OF R.A. NO. 1405, PRIVATE
RESPONDENTS ILLEGALLY MADE DISCLOSURES OF PETITIONERS
CONFIDENTIAL BANK DEPOSITS FOR THEIR SELFISH ENDS IN
PROSECUTING THEIR COMPLAINT IN IS. NO. 93-8469 THAT DID NOT
INVOLVE PETITIONERS.
II. PRIVATE RESPONDENTS DISCLOSURES DO NOT FALL UNDER
THE FOURTH EXCEPTION OF R.A. NO. 1405 (i.e., in cases where the
money deposited or invested is the subject matter of the litigation),
NOR UNDER ANY OTHER EXCEPTION:
(1) PETITIONERS DEPOSITS ARE NOT INVOLVED IN ANY
LITIGATION BETWEEN PETITIONERS AND RESPONDENTS. THERE IS
NO LITIGATION BETWEEN THE PARTIES, MUCH LESS ONE
INVOLVING PETITIONERS DEPOSITS AS THE SUBJECT MATTER
THEREOF.
(2) EVEN ASSUMING ARGUENDO THAT THERE IS A LITIGATION
INVOLVING PETITIONERS DEPOSITS AS THE SUBJECT MATTER
THEREOF, PRIVATE RESPONDENTS DISCLOSURES OF PETITIONERS
DEPOSITS ARE NEVERTHELESS ILLEGAL FOR WANT OF THE
REQUISITE COURT ORDER, IN VIOLATION OF R.A. NO. 1405.
III. THEREFORE, PETITIONERS ARE ENTITLED TO PROSECUTE
PRIVATE RESPONDENTS FOR VIOLATIONS OF R.A. NO. 1405 FOR
HAVING ILLEGALLY 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.
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 latters written permission.
It does not matter if that such disclosure was necessary to establish
Citibanks case against Dante L. Santos and Marilou Genuino. Lims
act of disclosing details of petitioners bank records regarding their
foreign currency deposits, with the authority of Reyes, would
appear to belong to that species of criminal acts punishable by
special laws, called malum prohibitum. In this regard, it has been
held that:
While it is true that, as a rule and on principles of abstract justice,
men are not and should not be held criminally responsible for acts
committed by them without guilty knowledge and criminal or at
least evil intent xxx, the courts have always recognized the power of
the legislature, on grounds of public policy and compelled by
necessity, the great master of things, to forbid in a limited class of
cases the doing of certain acts, and to make their commission
criminal without regard to the intent of the doer. xxx In such cases
no judicial authority has the power to require, in the enforcement
of the law, such knowledge or motive to be shown. As was said in
the case of State vs. McBrayer xxx:
It is a mistaken notion that positive, willful intent, as distinguished
from a mere intent, to violate the criminal law, is an essential
ingredient in every criminal offense, and that where there is the
absence of such intent there is no offense; this is especially so as to
statutory offenses. When the statute plainly forbids an act to be
done, and it is done by some person, the law implies conclusively
the guilty intent, although the offender was honestly mistaken as to
the meaning of the law he violates. When the language is plain and
positive, and the offense is not made to depend upon the positive,
willful intent and purpose, nothing is left to interpretation.
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.
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.
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 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.
GOVERNMENT SERVICE INSURANCE SYSTEM, vs. 15TH DIVISION OF
THE COURT OF APPEALS and INDUSTRIAL BANK OF KOREA, TONG
YANG MERCHANT BANK, HANAREUM BANKING CORP., LAND BANK
OF THE PHILIPPINES, WESTMONT BANK and DOMSAT HOLDINGS,
INC.,
G.R. No. 189206 June 8, 2011
The subject of this petition for certiorari is the Decision[1] of the
Court of Appeals in CA-G.R. SP No. 82647 allowing the quashal by
the Regional Trial Court (RTC) of Makati of a subpoena for the
production of bank ledger. This case is incident to Civil Case No. 99-
1853, which is the main case for collection of sum of money with
damages filed by Industrial Bank of Korea, Tong Yang Merchant
Bank, First Merchant Banking Corporation, Land Bank of the
Philippines, and Westmont Bank (now United Overseas Bank),
collectively known as the Banks against Domsat Holdings, Inc.
(Domsat) and the Government Service Insurance System (GSIS). Said
case stemmed from a Loan Agreement,[2] whereby the Banks
agreed to lend United States (U.S.) $11 Million to Domsat for the
purpose of financing the lease and/or purchase of a Gorizon
Satellite from the International Organization of Space
Communications (Intersputnik).
The controversy originated from a surety agreement by which
Domsat obtained a surety bond from GSIS to secure the payment of
the loan from the Banks. We quote the terms of the Surety Bond in
its entirety:
KNOW ALL MEN BY THESE PRESENTS:
That we, DOMSAT HOLDINGS, INC., represented by its President as
PRINCIPAL, and the GOVERNMENT SERVICE INSURANCE SYSTEM, as
Administrator of the GENERAL INSURANCE FUND, a corporation duly
organized and existing under and by virtue of the laws of the
Philippines, with principal office in the City of Pasay, Metro Manila,
Philippines as SURETY, are held and firmly bound unto the OBLIGEES:
LAND BANK OF THE PHILIPPINES, 7th Floor, Land Bank Bldg. IV. 313
Sen. Gil J. Puyat Avenue, Makati City; WESTMONT BANK, 411
Quintin Paredes St., Binondo, Manila: TONG YANG MERCHANT
BANK, 185, 2-Ka, Ulchi-ro, Chungk-ku, Seoul, Korea; INDUSTRIAL
BANK OF KOREA, 50, 2-Ga, Ulchi-ro, Chung-gu, Seoul, Korea; and
FIRST MERCHANT BANKING CORPORATION, 199-40, 2-Ga, Euliji-ro,
Jung-gu, Seoul, Korea, in the sum, of US $ ELEVEN MILLION DOLLARS
($11,000,000.00) for the payment of which sum, well and truly to be
made, we bind ourselves, our heirs, executors, administrators,
successors and assigns, jointly and severally, firmly by these
presents.
THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS:
WHEREAS, the above bounden PRINCIPAL, on the 12th day of
December, 1996 entered into a contract agreement with the
aforementioned OBLIGEES to fully and faithfully
Guarantee the repayment of the principal and interest on the loan
granted the PRINCIPAL to be used for the financing of the two (2)
year lease of a Russian Satellite from INTERSPUTNIK, in accordance
with the terms and conditions of the credit package entered into by
the parties.
This bond shall remain valid and effective until the loan including
interest has been fully paid and liquidated, a copy of which
contract/agreement is hereto attached and made part hereof;
WHEREAS, the aforementioned OBLIGEES require said PRINCIPAL to
give a good and sufficient bond in the above stated sum to secure
the full and faithful performance on his part of said
contract/agreement.
NOW, THEREFORE, if the PRINCIPAL shall well and truly perform and
fulfill all the undertakings, covenants, terms, conditions, and
agreements stipulated in said contract/agreements, then this
obligation shall be null and void; otherwise, it shall remain in full
force and effect.
DOMSAT HOLDINGS, INC GOVERNMENT SERVICE INSURANCE
When Domsat failed to pay the loan, GSIS refused to comply with
its obligation reasoning that Domsat did not use the loan proceeds
for the payment of rental for the satellite. GSIS alleged that Domsat,
with Westmont Bank as the conduit, transferred the U.S. $11
Million loan proceeds from the Industrial Bank of Korea to Citibank
New York account of Westmont Bank and from there to the
Binondo Branch of Westmont Bank.[5] The Banks filed a complaint
before the RTC of Makati against Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of a
subpoena duces tecum to the custodian of records of Westmont
Bank to produce the following documents:
1. Ledger covering the account of DOMSAT Holdings, Inc.
with Westmont Bank (now United Overseas Bank), any and all
documents, records, files, books, deeds, papers, notes and other
data and materials relating to the account or transactions of
DOMSAT Holdings, Inc. with or through the Westmont Bank (now
United Overseas Bank) for the period January 1997 to December
2002, in his/her direct or indirect possession, custody or control
(whether actual or constructive), whether in his/her capacity as
Custodian of Records or otherwise;
2. All applications for cashiers/ managers checks and bank
transfers funded by the account of DOMSAT Holdings, Inc. with or
through the Westmont Bank (now United Overseas Bank) for the
period January 1997 to December 2002, and all other data and
materials covering said applications, in his/her direct or indirect
possession, custody or control (whether actual or constructive),
whether in his/her capacity as Custodian of Records or otherwise;
3. Ledger covering the account of Philippine Agila Satellite,
Inc. with Westmont Bank (now United Overseas Bank), any and all
documents, records, files, books, deeds, papers, notes and other
data and materials relating to the account or transactions of
Philippine Agila Satellite, Inc. with or through the Westmont bank
(now United Overseas Bank) for the period January 1997 to
December 2002, in his/her direct or indirect possession, custody or
control (whether actual or constructive), whether in his/her
capacity as Custodian of Records or otherwise;
4. All applications for cashiers/managers checks funded by
the account of Philippine Agila Satellite, Inc. with or through the
Westmont Bank (now United Overseas Bank) for the period January
1997 to December 2002, and all other data and materials covering
said applications, in his/her direct or indirect possession, custody or
control (whether actual or constructive), whether in his/her
capacity as Custodian of Records or otherwise.
The RTC issued a subpoena decus tecum on 21 November 2002.[7]
A motion to quash was filed by the banks on three grounds: 1) the
subpoena is unreasonable, oppressive and does not establish the
relevance of the documents sought; 2) request for the documents
will violate the Law on Secrecy of Bank Deposits; and 3) GSIS failed
to advance the reasonable cost of production of the documents.[8]
Domsat also joined the banks motion to quash through its
Manifestation/Comment.[9] On 9 April 2003, the RTC issued an
Order denying the motion to quash for lack of merit. We quote the
pertinent portion of the Order, thus:
After a careful consideration of the arguments of the parties, the
Court did not find merit in the motion.
The serious objection appears to be that the subpoena is violative of
the Law on Secrecy of Bank Deposit, as amended. The law declares
bank deposits to be absolutely confidential except: x x x (6) In cases
where the money deposited or invested is the subject matter of the
litigation.
The case at bench is for the collection of a sum of money from
defendants that obtained a loan from the plaintiff. The loan was
secured by defendant GSIS which was the surety. It is the
contention of defendant GSIS that the proceeds of the loan was
deviated to purposes other than to what the loan was extended.
The quashal of the subpoena would deny defendant GSIS its right to
prove its defenses.
WHEREFORE, for lack of merit the motion is DENIED.
On 26 June 2003, another Order was issued by the RTC denying the
motion for reconsideration filed by the banks.[11] On 1 September
2003 however, the trial court granted the second motion for
reconsideration filed by the banks. The previous subpoenas issued
were consequently quashed.[12] The trial court invoked the ruling
in Intengan v. Court of Appeals,[13] where it was ruled that foreign
currency deposits are absolutely confidential and may be examined
only when there is a written permission from the depositor. The
motion for reconsideration filed by GSIS was denied on 30
December 2003.
Hence, these assailed orders are the subject of the petition for
certiorari before the Court of Appeals. GSIS raised the following
arguments in support of its petition:
I. Respondent Judge acted with grave abuse of discretion
when it favorably considered respondent banks
(second) Motion for Reconsideration dated July 9, 2003
 despite the fact that it did not contain a notice of
hearing and was therefore a mere scrap of paper.
II. Respondent judge capriciously and arbitrarily ignored
Section 2 of the Foreign Currency Deposit Act (RA 6426)
in ruling in his Orders dated September 1 and December
30, 2003 that the US$11,000,000.00 deposit in the
account of respondent Domsat in Westmont Bank is
covered by the secrecy of bank deposit.
III. Since both respondent banks and respondent Domsat
have disclosed during the trial the US$11,000,000.00
deposit, it is no longer secret and confidential, and
petitioner GSIS right to inquire into what happened to
such deposit can not be suppressed.[14]
The Court of Appeals addressed these issues in seriatim.
The Court of Appeals resorted to a liberal interpretation of the rules
to avoid miscarriage of justice when it allowed the filing and
acceptance of the second motion for reconsideration. The appellate
court also underscored the fact that GSIS did not raise the defect of
lack of notice in its opposition to the second motion for
reconsideration. The appellate court held that failure to timely
object to the admission of a defective motion is considered a waiver
of its right to do so.
The Court of Appeals declared that Domsats deposit in Westmont
Bank is covered by Republic Act No. 6426 or the Bank Secrecy Law.
We quote the pertinent portion of the Decision:
It is our considered opinion that Domsats deposit of $11,000,000.00
in Westmont Bank is covered by the Bank Secrecy Law, as such it
cannot be examined, inquired or looked into without the written
consent of its owner. The ruling in Van Twest vs. Court of Appeals
was rendered during the effectivity of CB Circular No. 960, Series of
1983, under Sec. 102 thereof, transfer to foreign currency deposit
account or receipt from another foreign currency deposit account,
whether for payment of legitimate obligation or otherwise, are not
eligible for deposit under the System.
CB Circular No. 960 has since been superseded by CB Circular 1318
and later by CB Circular 1389. Section 102 of Circular 960 has not
been re-enacted in the later Circulars. What is applicable now is the
decision in Intengan vs. Court of Appeals where the Supreme Court
has ruled that the under R.A. 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.
Petitioner, therefore, had inappropriately invoked the provisions of
Central Bank (CB) Circular Nos. 343 which has already been
superseded by more recently issued CB Circulars. CB Circular 343
requires the surrender to the banking system of foreign exchange,
including proceeds of foreign borrowings. This requirement,
however, can no longer be found in later circulars.
In its Reply to respondent banks comment, petitioner appears to
have conceded that what is applicable in this case is CB Circular
1389. Obviously, under CB 1389, proceeds of foreign borrowings are
no longer required to be surrendered to the banking system.
Undaunted, petitioner now argues that paragraph 2, Section 27 of
CB Circular 1389 is applicable because Domsats $11,000,000.00 loan
from respondent banks was intended to be paid to a foreign
supplier Intersputnik and, therefore, should have been paid directly
to Intersputnik and not deposited into Westmont Bank. The fact
that it was deposited to the local bank Westmont Bank, petitioner
claims violates the circular and makes the deposit lose its
confidentiality status under R.A. 6426. However, a reading of the
entire Section 27 of CB Circular 1389 reveals that the portion
quoted by the petitioner refers only to the procedure/conditions of
drawdown for service of debts using foreign exchange. The above-
said provision relied upon by the petitioner does not in any manner
prescribe the conditions before any foreign currency deposit can be
entitled to the confidentiality provisions of R.A. 6426.
Anent the third issue, the Court of Appeals ruled that the testimony
of the incumbent president of Westmont Bank is not the written
consent contemplated by Republic Act No. 6426.
The Court of Appeals however upheld the issuance of subpoena
praying for the production of applications for cashiers or managers
checks by Domsat through Westmont Bank, as well as a copy of an
Agreement and/or Contract and/or Memorandum between Domsat
and/or Philippine Agila Satellite and Intersputnik for the acquisition
and/or lease of a Gorizon Satellite. The appellate court believed that
the production of these documents does not involve the
examination of Domsats account since it will never be known how
much money was deposited into it or withdrawn therefrom and
how much remains therein.
On 29 February 2008, the Court of Appeals rendered the assailed
Decision, the decretal portion of which reads:
WHEREFORE, the petition is partially GRANTED. Accordingly, the
assailed Order dated December 30, 2003 is hereby modified in that
the quashal of the subpoena for the production of Domsats bank
ledger in Westmont Bank is upheld while respondent court is
hereby ordered to issue subpoena duces tecum ad testificandum
directing the records custodian of Westmont Bank to bring to court
the following documents:
a) applications for cashiers or managers checks by respondent
Domsat through Westmont Bank from January 1997 to December
2002;
b) bank transfers by respondent Domsat through Westmont Bank
from January 1997 to December 2002; and
c) copy of an agreement and/or contract and/or memorandum
between respondent Domsat and/or Philippine Agila Satellite and
Intersputnik for the acquisition and/or lease of a Gorizon satellite.
GSIS filed a motion for reconsideration which the Court of Appeals
denied on 19 June 2009. Thus, the instant petition ascribing grave
abuse of discretion on the part of the Court of Appeals in ruling that
Domsats deposit with Westmont Bank cannot be examined and in
finding that the banks second motion for reconsideration in Civil
Case No. 99-1853 is procedurally acceptable.
This Court notes that GSIS filed a petition for certiorari under Rule
65 of the Rules of Court to assail the Decision and Resolution of the
Court of Appeals. Petitioner availed of the improper remedy as the
appeal from a final disposition of the Court of Appeals is a petition
for review under Rule 45 and not a special civil action under Rule
65.[18] Certiorari under Rule 65 lies only when there is no appeal,
nor plain, speedy and adequate remedy in the ordinary course of
law. That action is not a substitute for a lost appeal in general; it is
not allowed when a party to a case fails to appeal a judgment to the
proper forum.[19] Where an appeal is available, certiorari will not
prosper even if the ground therefor is grave abuse of discretion.
Accordingly, when a party adopts an improper remedy, his petition
may be dismissed outright.
Yet, even if this procedural infirmity is discarded for the broader
interest of justice, the petition sorely lacks merit.
GSIS insists that Domsats deposit with Westmont Bank can be
examined and inquired into. It anchored its argument on Republic
Act No. 1405 or the Law on Secrecy of Bank Deposits, which allows
the disclosure of bank deposits in cases where the money deposited
is the subject matter of the litigation. GSIS asserts that the subject
matter of the litigation is the U.S. $11 Million obtained by Domsat
from the Banks to supposedly finance the lease of a Russian satellite
from Intersputnik. Whether or not it should be held liable as a
surety for the principal amount of U.S. $11 Million, GSIS contends, is
contingent upon whether Domsat indeed utilized the amount to
lease a Russian satellite as agreed in the Surety Bond Agreement.
Hence, GSIS argues that the whereabouts of the U.S. $11 Million is
the subject matter of the case and the disclosure of bank deposits
relating to the U.S. $11 Million should be allowed.
GSIS also contends that the concerted refusal of Domsat and the
banks to divulge the whereabouts of the U.S. $11 Million will greatly
prejudice and burden the GSIS pension fund considering that a
substantial portion of this fund is earmarked every year to cover the
surety bond issued.
Lastly, GSIS defends the acceptance by the trial court of the second
motion for reconsideration filed by the banks on the grounds that it
is pro forma and did not conform to the notice requirements of
Section 4, Rule 15 of the Rules of Civil Procedure.
Domsat denies the allegations of GSIS and reiterates that it did not
give a categorical or affirmative written consent or permission to
GSIS to examine its bank statements with Westmont Bank.
The Banks maintain that Republic Act No. 1405 is not the applicable
law in the instant case because the Domsat deposit is a foreign
currency deposit, thus covered by Republic Act No. 6426. Under said
law, only the consent of the depositor shall serve as the exception
for the disclosure of his/her deposit.
The Banks counter the arguments of GSIS as a mere rehash of its
previous arguments before the Court of Appeals. They justify the
issuance of the subpoena as an interlocutory matter which may be
reconsidered anytime and that the pro forma rule has no
application to interlocutory orders.
It appears that only GSIS appealed the ruling of the Court of Appeals
pertaining to the quashal of the subpoena for the production of
Domsats bank ledger with Westmont Bank. Since neither Domsat
nor the Banks interposed an appeal from the other portions of the
decision, particularly for the production of applications for cashiers
or managers checks by Domsat through Westmont Bank, as well as
a copy of an agreement and/or contract and/or memorandum
between Domsat and/or Philippine Agila Satellite and Intersputnik
for the acquisition and/or lease of a Gorizon satellite, the latter
became final and executory.
GSIS invokes Republic Act No. 1405 to justify the issuance of the
subpoena while the banks cite Republic Act No. 6426 to oppose it.
The core issue is which of the two laws should apply in the instant
case.
Republic Act No. 1405 was enacted in 1955. Section 2 thereof was
first amended by Presidential Decree No. 1792 in 1981 and further
amended by Republic Act No. 7653 in 1993. It now reads:
Section 2. All deposits of whatever nature with banks or banking
institutions in the Philippines including investments in bonds issued
by the Government of the Philippines, its political subdivisions and
its instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked
into by any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where
the money deposited or invested is the subject matter of the
litigation.
Section 8 of Republic Act No. 6426, which was enacted in 1974, and
amended by Presidential Decree No. 1035 and later by Presidential
Decree No. 1246, provides:
Section 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 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.
On the one hand, Republic Act No. 1405 provides for four (4)
exceptions when records of deposits may be disclosed. These are
under any of the following instances: a) upon written permission of
the depositor, (b) in cases of impeachment, (c) upon order of a
competent court in the case of bribery or dereliction of duty of
public officials or, (d) when the money deposited or invested is the
subject matter of the litigation, and e) in cases of violation of the
Anti-Money Laundering Act (AMLA), the Anti-Money Laundering
Council (AMLC) may inquire into a bank account upon order of any
competent court.[22] On the other hand, the lone exception to the
non-disclosure of foreign currency deposits, under Republic Act No.
6426, is disclosure upon the written permission of the depositor.
These two laws both support the confidentiality of bank deposits.
There is no conflict between them. Republic Act No. 1405 was
enacted for the purpose of giving encouragement to the people to
deposit their money in banking institutions and to discourage
private hoarding so that the same may be properly utilized by banks
in authorized loans to assist in the economic development of the
country.[23] It covers all bank deposits in the Philippines and no
distinction was made between domestic and foreign deposits. Thus,
Republic Act No. 1405 is considered a law of general application. On
the other hand, Republic Act No. 6426 was intended to encourage
deposits from foreign lenders and investors.[24] It is a special law
designed especially for foreign currency deposits in the Philippines.
A general law does not nullify a specific or special law. Generalia
specialibus non derogant.[25] Therefore, it is beyond cavil that
Republic Act No. 6426 applies in this case.
Intengan v. Court of Appeals affirmed the above-cited principle and
categorically declared that for foreign currency deposits, such as
U.S. dollar deposits, the applicable law is Republic Act No. 6426.
In said case, Citibank filed an action against its officers for
persuading their clients to transfer their dollar deposits to
competitor banks. Bank records, including dollar deposits of
petitioners, purporting to establish the deception practiced by the
officers, were annexed to the complaint. Petitioners now
complained that Citibank violated Republic Act No. 1405. This Court
ruled that since the accounts in question are U.S. dollar deposits,
the applicable law therefore is not Republic Act No. 1405 but
Republic Act No. 6426.
The above pronouncement was reiterated in China Banking
Corporation v. Court of Appeals,[26] where respondent accused his
daughter of stealing his dollar deposits with Citibank. The latter
allegedly received the checks from Citibank and deposited them to
her account in China Bank. The subject checks were presented in
evidence. A subpoena was issued to employees of China Bank to
testify on these checks. China Bank argued that the Citibank dollar
checks with both respondent and/or her daughter as payees,
deposited with China Bank, may not be looked into under the law
on secrecy of foreign currency deposits. This Court highlighted the
exception to the non-disclosure of foreign currency deposits, i.e., in
the case of a written permission of the depositor, and ruled that
respondent, as owner of the funds unlawfully taken and which are
undisputably now deposited with China Bank, he has the right to
inquire into the said deposits.
Applying Section 8 of Republic Act No. 6426, absent the written
permission from Domsat, Westmont Bank cannot be legally
compelled to disclose the bank deposits of Domsat, otherwise, it
might expose itself to criminal liability under the same act.[27]
The basis for the application of subpoena is to prove that the loan
intended for Domsat by the Banks and guaranteed by GSIS, was
diverted to a purpose other than that stated in the surety bond. The
Banks, however, argue that GSIS is in fact liable to them for the
proper applications of the loan proceeds and not vice-versa. We are
however not prepared to rule on the merits of this case lest we pre-
empt the findings of the lower courts on the matter.
The third issue raised by GSIS was properly addressed by the
appellate court. The appellate court maintained that the judge may,
in the exercise of his sound discretion, grant the second motion for
reconsideration despite its being pro forma. The appellate court
correctly relied on precedents where this Court set aside
technicality in favor of substantive justice. Furthermore, the
appellate court accurately pointed out that petitioner did not assail
the defect of lack of notice in its opposition to the second motion of
reconsideration, thus it can be considered a waiver of the defect.
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father
and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR.,
and EVELINA E. SALVACION vs. CENTRAL BANK OF THE
PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI
y NORTHCOTT
G.R. No. 94723 August 21, 1997
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.
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.
Ejercito v. Sandiganbayan
G.R. NO. 157294-95 November 30, 2006
The Special Prosecution Panel filed before the Sandiganbayan a
Request for Issuance of Subpoena Duces Tecum for the issuance of
a subpoena directing the President of Export and Industry Bank (EIB,
formerly Urban Bank) or his/her authorized representative to
produce documents relating to Trust Account No. 858 and Savings
Account of President Estrada. The SB granted the request.
Estrada filed a Motion to Quash the subpoenas claiming that his
bank accounts are covered by R.A. No. 1405 (The Secrecy of Bank
Deposits Law) and do not fall under any of the exceptions stated
therein. He further claimed that the specific identification of
documents in the questioned subpoenas, including details on dates
and amounts, could only have been made possible by an earlier
illegal disclosure thereof by the EIB and the Philippine Deposit
Insurance Corporation (PDIC) in its capacity as receiver of the then
Urban Bank. The disclosure being illegal, petitioner concluded, the
prosecution in the case may not be allowed to make use of the
information. The SB denied the motion.
ISSUE/S:
1. Is the Trust Account covered by the term “deposit”under the
Bank Secrecy Law?
2. Are the Trust and Savings Accounts of Estrada excepted from the
protection of the Bank Secrecy Law?
3. Does the fruit of poisonous tree principle apply?
RULING:
1. YES. The contention that trust accounts are not covered by the
term “deposits,”as used in R.A. 1405, by the mere fact that they do
not entail a creditor-debtor relationship between the trustor and
the bank, does not lie. An examination of the law shows that the
term “deposits”used therein is to be understood broadly and not
limited only to accounts which give rise to a creditor-debtor
relationship between the depositor and the bank. If the money
deposited under an account may be used by banks for authorized
loans to third persons, then such account, regardless of whether it
creates a creditor-debtor relationship between the depositor and
the bank, falls under the category of accounts which the law
precisely seeks to protect for the purpose of boosting the economic
development of the country.
Trust Account No. 858 is, without doubt, one such account. The
Trust Agreement between Estrada and Urban Bank provides that
the trust account covers “deposit, placement or investment of
funds”by Urban Bank for and in behalf of Estrada. The money
deposited under Trust Account No. 858, was, therefore, intended
not merely to remain with the bank but to be invested by it
elsewhere. To hold that this type of account is not protected by R.A.
1405 would encourage private hoarding of funds that could
otherwise be invested by banks in other ventures, contrary to the
policy behind the law.
The phrase “of whatever nature”proscribes any restrictive
interpretation of “deposits.”Moreover, it is clear from the
immediately quoted provision that, generally, the law applies not
only to money which is deposited but also to those which are
invested. This further shows that the law was not intended to apply
only to “deposits”in the strict sense of the word. Otherwise, there
would have been no need to add the phrase “or invested.” Clearly,
therefore, R.A. 1405 is broad enough to cover Trust Account No.
858.
2. YES. The protection afforded by the law is, however, not
absolute, there being recognized exceptions thereto, as
abovequoted Section 2 provides. In the present case, two
exceptions apply, to wit: (1) the examination of bank accounts is
upon order of a competent court in cases of bribery or dereliction of
duty of public officials, and (2) the money deposited or invested is
the subject matter of the litigation.
Estrada contends that since plunder is neither bribery nor
dereliction of duty, his accounts are not excepted from the
protection of R.A. 1405. He is wrong. Cases of unexplained wealth
are similar to cases of bribery or dereliction of duty and no reason is
seen why these two classes of cases cannot be excepted from the
rule making bank deposits confidential. The policy as to one cannot
be different from the policy as to the other. This policy expresses
the notion that a public office is a public trust and any person who
enters upon its discharge does so with the full knowledge that his
life, so far as relevant to his duty, is open to public scrutiny. An
examination of the “overt or criminal acts as described in Section
1(d)”of R.A. No. 7080 would make the similarity between plunder
and bribery even more pronounced since bribery is essentially
included among these criminal acts. Plunder being thus analogous
to bribery, the exception to R.A. 1405 applicable in cases of bribery
must also apply to cases of plunder.
The plunder case now pending with the SB necessarily involves an
inquiry into the whereabouts of the amount purportedly acquired
illegally by former President Joseph Estrada. In light then of this
Court’s pronouncement in Union Bank, the subject matter of the
litigation cannot be limited to bank accounts under the name of
President Estrada alone, but must include those accounts to which
the money purportedly acquired illegally or a portion thereof was
alleged to have been transferred. Trust Account No. 858 and Savings
Account No. 0116-17345-9 in the name of petitioner fall under this
description and must thus be part of the subject matter of the
litigation.

In sum, exception (1) applies since the plunder case pending against
former President Estrada is analogous to bribery or dereliction of
duty, while exception (2) applies because the money deposited in
petitioner’s bank accounts is said to form part of the subject matter
of the same plunder case.

3. NO. The “fruit of the poisonous tree”principle, which states that

once the primary source (the “tree”) is shown to have been
unlawfully obtained, any secondary or derivative evidence (the
“fruit”) derived from it is also inadmissible, does not apply in this
case. In the first place, R.A. 1405 does not provide for the
application of this rule. R.A. 1405, it bears noting, nowhere provides
that an unlawful examination of bank accounts shall render the
evidence obtained therefrom inadmissible in evidence. Moreover,
there is no basis for applying the same in this case since the primary
source for the detailed information regarding petitioner’s bank
accounts—the investigation previously conducted by the
Ombudsman—was lawful.