Central Bank of the Philippines VS.

Morfe
603
Date March 12, 1975 GR Number L-38427 Ponente
AQUINO J.

Article 3, Section 2 BRIAN PINEDA

Petitioners: Central Bank of the Philippines Respondents: Morfe

Doctrine:

Unreasonableness is a condition dependent upon the circumstances surrounding each case

and the question whether or not "probable cause" exists is one which must be decided in the
light of the conditions obtaining in given situations.
Recit Ready Summary

Judge Morfe of the CFI nullified a search warrant issued against the FIRST MUTUAL
SAVINGS AND LOAN ORGANIZATION, which allegedly engaged in banking practices
without authority from the Monetary Board, in violation of the CENTRAL BANK ACT.
The search warrant issued by the Municipal Court authorized the search and seizure
of books of original and final entries, accounting records, financial statements, and
other effects. Morfe stated that, assuming that the deponent has personal knowledge
on the matter, he should have stated the specific illegal acts and transactions and
their respective perpetrators and victims, so that only books and records pertaining
thereto are to be seized from the said FIRST MUTUAL. The SC held that the failure of
the witness to mention the particular individuals does not disprove his knowledge of
the specific acts of the FIRST MUTUAL. That is because the records clearly suggested
that the illegal transactions constituted the general pattern of business of the
organization. The case would have been different had information alleged an isolated
transaction, in which identification of the parties involved would be necessary. Thus,
that no victims were named is immaterial. The SC also held that the law sought to
protect the public not only from actual but also potential injury that may be caused by
the illegal banking practices of the corporation.

Facts:

February 14, 1962 – Central Bank announced that corporations which claim to be “savings
and loan associations”, including First Mutual Saving and Loan Organization, have never been
authorized by the Monetary Board of the Central Bank of the Philippines to accept deposit of
funds from the public nor to engage in the banking business or activity.

o Section 2 of General Banking Act (RA 337) – violated by any institution involved with such
activity (receiving deposits of money, disbursement, safekeeping, transacts the business of a
savings and mortgage bank and/or building and loan association) without authority from
Monetary Board

• April 23, 1962 – Bank directed the investigation and gathering of evidence on savings and
loan associations operating contrary to law

• May 18, 1962 – Bank’s intelligence division filed with the Court of Manila a verified
application for a search warrant against Organization, alleging that “after close observation
and personal investigation, the premises are being used unlawfully” by illegally engaging in
illegal banking transactions.

o Within the same day, the warrant was issued by Judge Cancino commanding search at
premises No. 2745, Rizal Avenue, Manila and the seizure of the foregoing articles intended to
be used for the commission of the offense there being "good and sufficient reasons to
believe" upon examination, under oath, of a detective of the Manila Police Department and
said intelligence officer of the Bank

o On the same date, Organization filed for prohibition with writ of preliminary injunction or
writ of preliminary mandatory injunction (in case seizure has already been commenced) to
annul warrant because:

a. search warrant is a roving commission general in its terms

b. use of the word 'and others' in the search warrant permits the unreasonable search and
seizure of documents which have

no relation whatsoever to any specific criminal act

c. no court in the Philippines has any jurisdiction to try a criminal

case against a corporation

• July 2, 1962 – Hon. Jesus P. Morfe as presiding judge of the CFI of Manila

issued such order

o Judge finds the search unreasonable. If the applicant for such

warrant claims that he personally knows that the premises were being used illegally, he
should have known specific banking transactions and applied for a warrant to search and
seize only relevant books and not all of the records as this would harass the petitioner.
• August 7, 1962 - Hence the current petition, elevated to the Supreme Court on
reconsideration by the Bank.

Issue/s: Ruling:
1. Yes
1. Whether or not respondent judge acted with grave abuse of
discretion and in excess of jurisdiction in issuing the order.

Rationale/Analysis/Legal Basis:

Unreasonableness is a condition dependent upon the circumstances surrounding each case

and the question whether or not "probable cause" exists is one which must be decided in the
light of the conditions obtaining in given situations.

o The failure of the witness to mention particular individuals does not necessarily prove that
he had no personal knowledge of specific illegal transactions of the Organization, for the
witness might be acquainted with specific transactions, even if the names of the individuals
concerned were unknown to him.

o The aforementioned order would seem to assume that an illegal banking transaction, of the
kind contemplated in the contested action of the officers of the Bank, must always connote
the existence of a "victim." If this term is used to denote a party whose interests have been
actually injured, then the assumption is not necessarily justified.

o The law requiring compliance with certain requirements before anybody can engage in
banking seeks to protect the public against actual, as well as potential, injury.

o Transactions objected to by the Bank involves general pattern of the business of the
organization and not isolated transactions. It is not necessary to specify or identify the
parties involved in said isolated transactions, so that the search and seizure be limited to the
records pertinent thereto.

o There is probable cause that the Organization had violated Sections 2 and 6 of the aforesaid
law and in issuing the warrant in question, the search and seizure complained of have not
been proven to be unreasonable. in question could be undertaken.

• Requisites of a valid warrant:

1. Issued upon probable cause - YES

2. Probable cause determined personally by the judge - YES
3. Judge examined under oath or affirmation complainants and witnesses - YES
4. Describes the place to be searched and the person or things to be seized – YES