G.R. No.

140687

December 18, 2006

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

A Complaint for recovery of sums of money and annulment of sales of real properties and shares of stock docketed as CEB-21445 was filed by Jose "Joseph" Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee, before the Regional Trial Court (RTC) of Cebu City, Branch 58. Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US dollar deposits with Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received these amounts from Citibank N.A. through checks which she allegedly deposited at China Banking Corporation (China Bank). He likewise accused his son-in-law, George Dee, husband of his daughter, Mary Margaret, of transferring his real properties and shares of stock in George Dee's name without any consideration. Jose Gotianuy, died during the pendency of the case before the trial court. 1 He was substituted by his daughter, Elizabeth Gotianuy Lo. The latter presented the US Dollar checks withdrawn by Mary Margaret Dee from his US dollar placement with Citibank. The details of the said checks are: 1) CITIBANK CHECK NO. 69003194405412 dated September 29 1997 in the amount of US$5,937.52 payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; 2) CITIBANK CHECK NO. 69003194405296 dated September 29 1997 in the amount of US$7,197.59 payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; 3) CITIBANK CHECK NO. 69003194405414 dated September 29 1997 in the amount of US$1,198.94 payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; 4) CITIBANK CHECK NO. 69003194405413 dated September 29 1997 in the amount of US$989.04 payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; 5) CITIBANK CHECK NO. 69003194405297 dated October 01 1997 in the amount of US$766,011.97 payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; and 6) CITIBANK CHECK NO. 69003194405339 dated October 09 1997 in the amount of US$83,053.10 payable to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET.2 Upon motion of Elizabeth Gotianuy Lo, the trial court 3 issued a subpoena to Cristota Labios and Isabel Yap, employees of China Bank, to testify on the case. The Order of the trial court dated 23 February 1999, states: Issue a subpoena ad testificandum requiring MS. ISABEL YAP and CRISTOTA LABIOS of China Banking Corporation, Cebu Main Branch, corner Magallanes and D. Jakosalem Sts., Cebu City, to appear in person and to testify in the hearing of the above entitled case on March 1, 1999 at 8:30 in the morning, with regards to Citibank Checks (Exhs. "AAA" to "AAA-5") and other matters material and relevant to the issues of this case.4 China Bank moved for a reconsideration. Resolving the motion, the trial court issued an Order dated 16 April 1999 and held: The Court is of the view that as the foreign currency fund (Exhs. "AAA" to "AAA-5") is deposited with the movant China Banking Corporation, Cebu Main Branch, Cebu City, the disclosure only as to the name or in whose name the said fund is deposited is not violative of the law. Justice will be better served if the name or names of the depositor of said fund shall be disclosed because such a disclosure is material and important to the issues between the parties in the case at bar. Premises considered, the motion for reconsideration is denied partly and granted partly, in the sense that Isabel Yap and/or Cristuta Labios are directed to appear before this Court and to testify at the trial of this case on April 20, 1999, May 6 & 7, 1999 at 10:00 o'clock in the morning and only for the purpose of disclosing in whose name or names is the foreign currency fund (Exhs. "AAA" to "AAA-5") deposited with the movant Bank and not to other matters material and relevant to the issues in the case at bar.5 From this Order, China Bank filed a Petition for Certiorari6 with the Court of Appeals. In a Decision7 dated 29 October 1999, the Court of Appeals denied the petition of China Bank and affirmed the Order of the RTC. In justifying its conclusion, the Court of Appeals ratiocinated: From the foregoing, it is pristinely clear the law specifically encompasses only the money or funds in foreign currency deposited in a bank. Thus, the coverage of the law extends only to the foreign currency deposit in the CBC account where Mary Margaret Dee deposited the Citibank checks in question and nothing more. It has to be pointed out that the April 16, 1999 Order of the court of origin modified its previous February 23, 1999 Order such that the CBC representatives are directed solely to divulge "in whose name or names is the foreign currency fund (Exhs. "AAA" to "AAA-5") deposited with the movant bank." It precluded inquiry on "other materials and relevant to the issues in the case at bar." We find that the directive of the court below does not contravene the plain language of RA 6426 as amended by P.D. No. 1246. The contention of petitioner that the [prescription] on absolute confidentiality under the law in question covers even the name of the depositor and is beyond the compulsive process of the courts is palpably untenable as the law protects only the deposits itself but not the name of the depositor. To uphold the theory of petitioner CBC is reading into the statute "something that is not within the manifest intention of the legislature as gathered from the statute itself, for to depart from the meaning expressed by the words, is to alter the statute, to legislate and not to interpret, and judicial legislation should be avoided. Maledicta expositio quae corrumpit textum It is a dangerous construction which is against the words. Expressing the same principle is the maxim: Ubi lex non distinguit nec nos distinguere debemos, which simply means that where the law does not distinguish, we should not make any distinction." ( Gonzaga, Statutes and their Construction, p. 75.)8 From the Decision of the Court of Appeals, China Bank elevated the case to this Court based on the following issues: I THE HONORABLE COURT OF APPEALS HAS INTERPRETED THE PROVISION OF SECTION 8 OF R.A. 6426, AS AMENDED, OTHERWISE KNOWN AS THE FOREIGN CURRENCY DEPOSIT ACT, IN A MANNER CONTRARY TO THE LEGISLATIVE

PURPOSE, THAT IS, TO PROVIDE ABSOLUTE CONFIDENTIALITY OF WHATEVER INFORMATION RELATIVE TO THE FOREIGN CURRENCY DEPOSIT. II PRIVATE RESPONDENT IS NOT THE OWNER OF THE QUESTIONED FOREIGN CURRENCY DEPOSIT. THUS, HE CANNOT INVOKE THE AID OF THE COURT IN COMPELLING THE DISCLOSURE OF SOMEONE ELSE'S FOREIGN CURRENCY DEPOSIT ON THE FLIMSY PRETEXT THAT THE CHECKS (IN FOREIGN CURRENCY) HE HAD ISSUED MAY HAVE ENDED UP THEREIN. III PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF SEC. 8, R.A. 6426, IN BEHALF OF THE FOREIGN CURRENCY DEPOSITOR, OWING TO ITS SOLEMN OBLIGATION TO ITS CLIENT TO EXERCISE EXTRAORDINARY DILIGENCE IN THE HANDLING OF THE ACCOUNT.9 As amended by Presidential Decree No. 1246, the law reads: SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977 ) (Emphasis supplied.) Under the above provision, the law provides that all foreign currency deposits authorized under Republic Act No. 6426, as amended by Sec. 8, Presidential Decree No. 1246, Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034 are considered absolutely confidential in nature and may not be inquired into. There is only one exception to the secrecy of foreign currency deposits, that is, disclosure is allowed upon the written permission of the depositor. This much was pronounced in the case of Intengan v. Court of Appeals,10 where it was held that the only exception to the secrecy of foreign currency deposits is in the case of a written permission of the depositor. It must be remembered that under the whereas clause of Presidential Decree No. 1246 which amended Sec. 8 of Republic Act No. 6426, the Foreign Currency Deposit System including the Offshore Banking System under Presidential Decree 1034 were intended to draw deposits from foreign lenders and investors, and we quote: Whereas, in order to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines, certain incentives were provided for under the two Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on the interest income of depositors who are nonresidents and are not engaged in trade or business in the Philippines; Whereas, making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country. As to the deposit in foreign currencies entitled to be protected under the confidentiality rule, Presidential Decree No. 1034, 11 defines deposits to mean funds in foreign currencies which are accepted and held by an offshore banking unit in the regular course of business, with the obligation to return an equivalent amount to the owner thereof, with or without interest. 12 It is in this light that the court in the case of Salvacion v. Central Bank of the Philippines ,13 allowed the inquiry of the foreign currency deposit in question mainly due to the peculiar circumstances of the case such that a strict interpretation of the letter of the law would result to rank injustice. Therein, Greg Bartelli y Northcott, an American tourist, was charged with criminal cases for serious illegal detention and rape committed against then 12 year-old Karen Salvacion. A separate civil case for damages with preliminary attachment was filed against Greg Bartelli. The trial court issued an Order granting the Salvacions' application for the issuance of a writ of preliminary attachment. A notice of garnishment was then served on China Bank where Bartelli held a dollar account. China Bank refused, invoking the secrecy of bank deposits. The Supreme Court ruled: "In fine, the application of the law depends on the extent of its justice x x x It would be unthinkable, that the questioned law exempting foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever would be used as a device by an accused x x x for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent. 14 With the foregoing, we are now tasked to determine the single material issue of whether or not petitioner China Bank is correct in its submission that the Citibank dollar checks with both Jose Gotianuy and/or Mary Margaret Dee as payees, deposited with China Bank, may not be looked into under the law on secrecy of foreign currency deposits. As a corollary issue, sought to be resolved is whether Jose Gotianuy may be considered a depositor who is entitled to seek an inquiry over the said deposits. The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor of Mary Margaret Dee. It reasoned that since Jose Gotianuy is the named co-payee of the latter in the subject checks, which checks were deposited in China Bank, then, Jose Gotianuy is likewise a depositor thereof. On that basis, no written consent from Mary Margaret Dee is necessitated. We agree in the conclusion arrived at by the Court of Appeals. The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are co-payees of various Citibank checks;15 (2) Mary Margaret Dee withdrew these checks from Citibank; 16 (3) Mary Margaret Dee admitted in her Answer to the Request for Admissions by the Adverse Party sent to her by Jose Gotianuy17 that she withdrew the funds from Citibank upon the instruction of her father Jose Gotianuy and that the funds belonged exclusively to the latter; (4) these checks were endorsed by Mary Margaret Dee at the dorsal portion; and (5) Jose Gotianuy discovered that these checks were deposited with China Bank as shown by the stamp of China Bank at the dorsal side of the checks. Thus, with this, there is no issue as to the source of the funds. Mary Margaret Dee declared the source to be Jose Gotianuy. There is likewise no dispute that these funds in the form of Citibank US dollar Checks are now deposited with China Bank. As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose Gotianuy has the right to inquire into the said deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of business, to be placed to his credit and subject to his check or the beneficiary of the funds held by the bank as trustee. 18 On this score, the observations of the Court of Appeals are worth reiterating: Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency account with Citibank, NA. The monies subject of said checks originally came from the late Jose Gotianuy, the owner of the account. Thus, he also has legal rights and interests in the CBC account where said monies were deposited. More importantly, the Citibank checks (Exhibits "AAA" to "AAA-5") readily demonstrate (sic) that the late Jose Gotianuy is one of the payees of said checks . Being a co-payee thereof, then he or his estate can be considered as a co-depositor of said checks. Ergo, since the late Jose Gotianuy is a co-depositor of the CBC account, then his request for the assailed subpoena is tantamount to an express permission of a depositor for the disclosure of the name of the account holder. The April 16, 1999 Order perforce must be sustained. 19 (Emphasis supplied.) One more point. It must be remembered that in the complaint of Jose Gotianuy, he alleged that his US dollar deposits with Citibank were illegally taken from him. On the other hand, China Bank employee Cristuta Labios testified that Mary Margaret Dee came to China Bank and deposited the money of Jose Gotianuy in Citibank US dollar checks to the dollar account of her sister Adrienne Chu. 20 This fortifies our conclusion that an inquiry into the said deposit at China Bank is justified. At the very least, Jose Gotianuy as the owner of these funds is entitled to a hearing on the whereabouts of these funds. All things considered and in view of the distinctive circumstances attendant to the present case, we are constrained to render a limited pro hac vice ruling.21 Clearly it was not the intent of the legislature when it enacted the law on secrecy on foreign currency deposits to perpetuate injustice. This Court is of the view that the allowance of the inquiry would be in accord with the rudiments of fair play,22 the upholding of fairness in our judicial system and would be an avoidance of delay and time-wasteful and circuitous way of administering justice. 23 WHEREFORE, premises considered, the Petition is DENIED. The Decision of the Court of Appeals dated 29 October 1999 affirming the Order of the RTC, Branch 58, Cebu City dated 16 April 1999 is AFFIRMED and this case is orderedREMANDED to the trial court for continuation of hearing with utmost dispatch consistent with the above disquisition. No costs. SO ORDERED.

G.R. No. 167000

June 8, 2011

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner, vs. GROUP MANAGEMENT CORPORATION (GMC) AND LAPU-LAPU DEVELOPMENT & HOUSING Corporation (LLDHc), Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 169971 GROUP MANAGEMENT CORPORATION (GMC), Petitioner, vs. LAPU-LAPU DEVELOPMENT & HOUSING Corporation (LLDHc) and GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Respondents. At bar are two consolidated Petitions for Review on Certiorari concerning 78 parcels of land located in Barrio Marigondon, Lapu-Lapu City. The parties in both cases have been in litigation over these lots for the last two decades in what seems to be an endless exercise of filing repetitious suits before the Court of Appeals and even this Court, questioning the various decisions and resolutions issued by the two separate trial courts involved. With this decision, it is intended that all legal disputes among the parties concerned, particularly over all the issues involved in these cases, will finally come to an end In the Petition in G.R. No. 167000, the Government Service Insurance System (GSIS) seeks to reverse and set aside the November 25, 2004 Decision1 and January 20, 2005 Resolution2 of the Twentieth Division of the Court of Appeals in CA-G.R. SP No. 85096 and to annul and set aside the March 11, 20043 and May 7, 20044 Orders of the Regional Trial Court (RTC) of Lapu-Lapu City (Lapu-Lapu RTC) in Civil Case No. 2203-L. In the Petition in G.R. No. 169971, Group Management Corporation (GMC) seeks to reverse and set aside the September 23, 2005 Decision5 in CA-G.R. SP No. 84382 wherein the Special Nineteenth Division of the Court of Appeals annulled and set aside the March 11, 2004 Order of the Lapu-Lapu RTC in Civil Case No. 2203-L. Both these cases stem from the same undisputed factual antecedents as follows: Lapu-Lapu Development & Housing Corporation6 (LLDHC) was the registered owner of seventy-eight (78) lots (subject lots), situated in Barrio Marigondon, Lapu-Lapu City. On February 4, 1974, LLDHC and the GSIS entered into a Project and Loan Agreement for the development of the subject lots. GSIS agreed to extend a Twenty-Five Million Peso-loan (P25,000,000.00) to LLDHC, and in return, LLDHC will develop, subdivide, and sell its lots to GSIS members. To secure the payment of the loan, LLDHC executed a real estate mortgage over the subject lots in favor of GSIS. For LLDHCs failure to fulfill its obligations, GSIS foreclosed the mortgage. As the lone bidder in the public auction sale, GSIS acquired the subject lots, and eventually was able to consolidate its ownership over the subject lots with the corresponding transfer certificates of title (TCTs) issued in its name. On November 19, 1979, GMC offered to purchase on installments the subject lots from GSIS for a total price of One Million One Hundred Thousand Pesos (P1,100,000.00), with the aggregate area specified as 423,177 square meters. GSIS accepted the offer and on February 26, 1980, executed a Deed of Conditional Sale over the subject lots. However, when GMC discovered that the total area of the subject lots was only 298,504 square meters, it wrote GSIS and proposed to proportionately reduce the purchase price to conform to the actual total area of the subject lots. GSIS approved this proposal and an Amendment to the Deed of Conditional Sale was executed to reflect the final sales agreement between GSIS and GMC. On April 23, 1980, LLDHC filed a complaint for Annulment of Foreclosure with Writ of Mandatory Injunction against GSIS before the RTC of Manila (Manila RTC). This became Civil Case No. R-82-34297 and was assigned to Branch 38.

On November 3, 1989, GMC filed its own complaint against GSIS for Specific Performance with Damages before the Lapu-Lapu RTC. The complaint was docketed as Civil Case No. 2203-L and it sought to compel GSIS to execute a Final Deed of Sale over the subject lots since the purchase price had already been fully paid by GMC. GSIS, in defense, submitted to the court a Commission on Audit (COA) Memorandum dated April 3, 1989, purportedly disallowing in audit the sale of the subject lots for "apparent inherent irregularities," the sale price to GMC being lower than GSISs purchase price at the public auction. LLDHC, having been allowed to intervene, filed a Motion to Dismiss GMCs complaint. When this motion was denied, LLDHC filed its Answer-in-Intervention and participated in the ensuing proceedings as an intervenor. GMC, on February 1, 1992, filed its own Motion to Intervene with a Complaint-in-Intervention in Civil Case No. R-82-3429. This was dismissed on February 17, 1992 and finally denied on March 23, 1992 by the Manila RTC on the ground that GMC can protect its interest in another proceeding.8 On February 24, 1992, after a full-blown trial, the Lapu-Lapu RTC rendered its Decision9 in Civil Case No. 2203-L, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering defendant to: 1. Execute the final deed of absolute sale and deliver the seventy-eight (78) certificates of title covering said seventy-eight (78) parcels of land to the [Group Management Corporation (GMC)]; 2. Pay [GMC] actual damages, plus attorneys fees and expenses of litigation, in the amount of P285,638.88 and P100,000.00 exemplary damages; 3. [D]ismissing in toto intervenors complaint-in-intervention for lack of evidence of legal standing and legal interest in the suit, as well as failure to substantiate any cause of action against either [GMC] or [GSIS].10 In deciding in favor of GMC, the Lapu-Lapu RTC held that there existed a valid and binding sales contract between GSIS and GMC, which GSIS could not continue to ignore without any justifiable reason especially since GMC had already fully complied with its obligations. 11 The Lapu-Lapu RTC found GSISs invocation of COAs alleged disapproval of the sale belated and self -serving. The Lapu-Lapu RTC said that COA, in disapproving GSISs sale of the subject lots to GMC, violated its own circular which excludes the disposal by a gover nment owned and/or controlled corporation of its "acquired assets" (e.g., foreclosed assets or collaterals acquired in the regular course of business). 12 The Lapu-Lapu RTC also held that COA may not intrude into GSISs charter-granted power to dispose of its acquired assets within five years from acquisition by "preventing/aborting the sale in question by refusing to pass it in audit." 13 Moreover, the Lapu-Lapu RTC held that the GSISproferred COA Memorandum was inadmissible in evidence not only because as a mere photocopy it failed to measure up to the "best evidence" rule under the Revised Rules of Court, but also because no one from COA, not even the auditor who supposedly prepared it, was ever presented to testify to the veracity of its contents or its due execution. 14 In dismissing LLDHCs complaint-in-intervention, the Lapu-Lapu RTC held that LLDHC failed to prove its legal personality as a party-intervenor and all it was able to establish was a "suggestion of right for [GSIS] to renege [on] the sale for reasons peculiar to [GSIS] but not transmissible nor subject to invocation by [LLDHC]."15 LLDHC and GSIS filed their separate Notices of Appeal but these were dismissed by the Lapu-Lapu RTC on December 6, 1993. 16 On May 10, 1994, the Manila RTC rendered a Decision17 in Civil Case No. R-82-3429. The Manila RTC held that GSIS was unable to prove the alleged violations committed by LLDHC to warrant the foreclosure of the mortgage over the subject lots. Thus, the Manila RTC annulled the foreclosure made by GSIS and ordered LLDHC to pay GSIS the balance of its loan with interest, to wit: WHEREFORE, judgment is hereby rendered: 1. ANNULLING the foreclosure by the defendant GSIS of the mortgage over the seventy-eight (78) parcels of land here involved: 2. CANCELLING the consolidated certificates of [title] issued in the name of GSIS and directing the Register of Deeds of Lapu-Lapu City to issue new certificates of [title] over those seventy-eight (78) parcels of land in the name of the plaintiff, in exactly the same condition as they were before the foreclosure; 3. ORDERING the plaintiff to pay the GSIS the amount of P9,200,000.00 with interest thereon at the rate of twelve (12%) percent per annum commencing from October 12, 1989 until fully paid; and 4. ORDERING defendant GSIS to execute a properly registrable release of discharge of mortgage over the parcels of land here involved after full payment of such amount by the plaintiff. All claims and counterclaims by the parties as against each other are hereby dismissed. No pronouncement as to costs.18 Armed with the Manila RTC decision, LLDHC, on July 27, 1994, filed before the Court of Appeals a Petition for Annulment of Judgment of the Lapu-Lapu RTC Decision in Civil Case No. 2203-L.19 LLDHC alleged that the Manila RTC decision nullified the sale of the subject lots to GMC and consequently, the Lapu-Lapu RTC decision was also nullified. This petition, docketed as CA-G.R. SP No. 34696, was dismissed by the Court of Appeals on December 29, 1994. 20 The Court of Appeals, in finding that the grounds LLDHC relied on were without merit, said: In fine, there being no showing from the allegations of the petition that the respondent court is without jurisdiction over the subject matter and of the parties in Civil Case No. 2309 [2203-L], petitioner has no cause of action for the annulment of judgment. The complaint must allege ultimate facts for the annulment of the decision (Avendana v. Bautista, 142 SCRA 41). We find none in this case. 21 No appeal having been taken by LLDHC, the decision of the Court of Appeals in CA-G.R. SP No. 34696 became final and executory on January 28, 1995, as stated in the Entry of Final Judgment dated August 18, 1995.22 On February 2, 1995, LLDHC filed before this Court a Petition for Certiorari 23 docketed as G.R. No. 118633. LLDHC, in seeking to annul the February 24, 1992 Decision of the Lapu-Lapu RTC, again alleged that the Manila RTC Decision nullified the Lapu-Lapu RTC Decision. Finding the petition a mere reproduction of the Petition for Annulment filed before the Court of Appeals in CA-G.R. SP No. 34696, this Court, in a Resolution24 dated September 6, 1996, dismissed the petition in this wise:

In a last ditch attempt to annul the February 24, 1992 Decision of the respondent court, this petition was brought before us on February 2, 1995. Dismissal of this petition is inevitable. The instant petition which is captioned, For: Certiorari With Preliminary Injunction, is actually another Petition for Annulment of Judgment of the February 24, 1992 Decision of the respondent Regional Trial Court of Lapu-lapu City, Branch 27 in Civil Case No. 2203-L. A close perusal of this petition as well as the Petition for Annulment of Judgment brought by the petitioner before the Court of Appeals in CA-G.R. SP No. 34696 reveals that the instant petition is a mere reproduction of the petition/complaint filed before the appellate tribunal for annulment of judgment. Paragraphs two (2) to eighteen (18) of this petition were copied verbatim from the Petition for Annulment of Judgment earlier filed in the court a quo, except for the designation of the parties thereto, i.e., plaintiff was changed to petitioner, defendant to respondent. In fact, even the prayer in this petition is the same prayer in the Petition for Annulment of Judgment dismissed by the Court of Appeals, x x x. xxxx Under Section 9(2) of Batas Pambansa Blg. 129, otherwise known as "The Judiciary Reorganization Act of 1980," it is the Court of Appeals (then the Intermediate Appellate Court), and not this Court, which has jurisdiction to annul judgments of Regional Trial Courts, viz: SEC. 9. Jurisdiction -- The Intermediate Appellate Court shall exercise: xxxx (2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and xxxx Thus, this Court apparently has no jurisdiction to entertain a petition which is evidently another petition to annul the February 24, 1992 Decision of the respondent Branch 27, Regional Trial Court of Lapu-lapu City, it appearing that jurisdiction thereto properly pertains to the Court of Appeals. Such a petition was brought before the appellate court, but due to petitioners failure to nullify Judge Risos Decision in said forum, LLDHC, apparently at a loss as to what legal remedy to take, brought the instant petition under the guise of a petition for certiorari under Rule 65 seeking once again to annul the judgment of Branch 27. Instead of filing this petition for certiorari under Rule 65, which is essentially another Petition to Annul Judgment, petitioner LLDHC should have filed a timely Petition for Review under Rule 45 of the Revised Rules of Court of the decision of the Court of Appeals, dated December 29, 1994, dismissing the Petition for Annulment of Judgment filed by the petitioner LLDHC before the court a quo. But, this is all academic now. The appellate courts decision had become final and executory on January 28, 1995. 25 Despite such pronouncements, this Court, nevertheless, passed upon the merits of LLDHCs Petition for Cert iorari in G.R. No. 118633. This Court said that the petition, "which was truly for annulment of judgment," 26 cannot prosper because the two grounds on which a judgment may be annulled were not present in the case. 27 Going further, this Court held that even if the petition were to be given due course as a petition for certiorari under Rule 65 of the Revised Rules of Court, it would still be dismissible for not being brought within a reasonable period of time as it took LLDHC almost three years from the time it received the February 24, 1992 decision until the time it brought this action.28 LLDHCs motion for reconsideration was denied with finality 29 on November 18, 1996, and on February 18, 1997, an Entry of Judgment 30 was made certifying that the September 6, 1996 Resolution of this Court in G.R. No. 118633 had become final and executory on December 23, 1996. Consequently, on November 28, 1996, the Lapu-Lapu RTC issued an Order31 directing the execution of the judgment in Civil Case No. 2203-L. A corresponding Writ of Execution32 was issued on December 17, 1996. The Motions to Stay Execution filed by LLDHC and GSIS were denied by the Lapu-Lapu RTC on February 19, 1997.33 Meanwhile, on December 27, 1996, the Court of Appeals rendered a Decision 34 in the separate appeals taken by GSIS and LLDHC from the May 10, 1994 Manila RTC Decision in Civil Case No. R-82-3429. This case, docketed as CA-G.R. CV No. 49117, affirmed the Manila RTC decision with modification insofar as awarding LLDHC attorneys fees and litigation expenses. On March 3, 1997, GSIS came to this Court on a Petition for Review of the Court of Appeals decision in CA -G.R. CV No. 49117. This was docketed as G.R. No. 127732 and was dismissed on April 14, 199735 due to late filing, the due date being January 31, 1997. This dismissal became final and executory on May 30, 1997. 36 On March 8, 1997, LLDHC filed a Petition for Certiorari with preliminary injunction before the Court of Appeals, praying that GMC and the LapuLapu RTC be ordered to cease and desist from proceeding with the execution of its Decision in Civil Case No. 2203-L, on the theory that the Manila RTC decision was a supervening event which made it mandatory for the Lapu-Lapu RTC to stop the execution of its decision. This case was docketed as CA-G.R. SP No. 44052. On July 16, 1997, the Court of Appeals issued an Order temporarily restraining the Lapu-Lapu RTC and GMC from executing the February 24, 1992 decision in Civil Case No. 2203-L so as not to render the resolution of the case moot and academic.37 On July 21, 1997, because of GSISs continued refusal to implement the December 17, 1996 Writ of Execution, the Lapu -Lapu RTC, upon GMCs motion, issued an Order38 redirecting its instructions to the Register of Deeds of Lapu-Lapu City, to wit: WHEREFORE, the defendant GSIS having refused to implement the Order of this Court dated December 17, 1996 the Court in accordance with Rule 39, Sec. 10-a of the 1997 Rules of Procedure, hereby directs the Register of Deeds of Lapu-lapu City to cancel the Transfer Certificate of Titles of the properties involved in this case and to issue new ones in the name of the plaintiff and to deliver the same to the latter within ten (10) days after this Order shall have become final. 39 While the TRO issued by the Court of Appeals in CA-G.R. SP No. 44052 was in effect, the Manila RTC, on August 1, 1997, issued a Writ of Execution40 of its judgment in Civil Case No. R-82-3429. On August 7, 1997, the Sheriff implemented the Writ and ordered the Register of Deeds of Lapu-Lapu City to cancel the consolidated certificates of title issued in the name of GSIS and to issue new ones in favor of LLDHC. In conformity with the TRO, the Lapu-Lapu RTC on August 19, 1997, ordered41 the suspension of its July 21, 1997 Order. With no similar restraining order against the execution of the Manila RTC Decision, a Writ of Possession was issued on August 21, 1997 to cause GSIS and all persons claiming rights under it to vacate the properties in question and to place LLDHC in peaceful possession thereof. 42 On October 23, 1997, the Lapu-Lapu RTC, being aware of the events that have taken place while the TRO was in effect, issued an Order43 reiterating its previous Orders of November 28, 1996, December 17, 1996, and July 21, 1997. The Lapu-Lapu RTC held that since the restraining order issued by the Court of Appeals in CA-G.R. SP No. 44052 had already lapsed by operation of law, and the February 24, 1992 Decision in Civil Case No. 2203-L had not only become final and executory but had been affirmed and upheld by both the Court of Appeals and this Court, the inescapable mandate was to give due course to the efficacy of its decision. The Lapu-Lapu RTC thus directed the Register of Deeds of Lapu-Lapu City to effect the transfer of the titles to the subject lots in favor of GMC and declared "any and all acts done by the

Register of Deeds of Lapu-Lapu City null and void starting with the surreptitious issuance of the new certificates of title in the name of [LLDHC], contrary" to its decision and orders. 44 On November 13, 1997, LLDHC filed before the Court of Appeals another Petition for Certiorari with preliminary injunction and motion to consolidate with CA-G.R. SP No. 44052. This case was docketed as CA-G.R. SP No. 45946, but was dismissed45 on November 20, 1997 for LLDHCs failure to comply with Section 1, Rule 65 of the 1997 Rules of Civil Procedure which requires the petition to be acco mpanied by, among others, "copies of all pleadings and documents relevant and pertinent thereto."46 The petition in CA-G.R. SP No. 44052 would likewise be dismissed47 by the Court of Appeals on January 9, 1998, but this time, on the merits, to wit: The validity of the decision of the respondent judge in Civil Case No. 2303-L has thus been brought both before this Court and to the Supreme Court by the petitioner. In both instances the respondent judge has been upheld. The instant petition is petitioners latest attempt to resist the implementation or execution of that decision using as a shield a decision of a Regional Trial Court in the National Capital Region. We are not prepared to allow it. The applicable rule and jurisprudence are clear. The prevailing party is entitled as a matter of right to a writ of execution, and the issuance thereof is a ministerial duty compellable by mandamus. We do not believe that there exists in this instance a supervening event which would justify a deviation from this rule. 48 Prior to this, however, on November 28, 1997, the Lapu-Lapu RTC, acting on GMCs Omnibus Motion, made the following orders: for LLDHC to show cause why it should not be declared in contempt; for a writ of preliminary prohibitory injunction to be issued to restrain all persons acting on LLDHCs orders from carrying out such orders in defiance of its final and executory judgment; and for a writ of preliminary mandatory injunction to be issued to direct the ouster of LLDHC. The Lapu-Lapu RTC also declared the Register of Deeds of Lapu-Lapu City in contempt and directed the Office of the City Sheriff to implement the above orders and to immediately detain and confine the Register of Deeds of LapuLapu City at the City Jail if he continues to refuse to transfer the titles of the subject lots after ten days from receipt of this order.49 On December 22, 1997, the Lapu-Lapu RTC denied50 the motion for reconsideration filed by the Register of Deeds of Lapu-Lapu City. In separate motions, LLDHC, and again the Register of Deeds of Lapu-Lapu City, sought the reconsideration of the November 28, 1997 and December 22, 1997 Orders. On May 27, 1998, the Lapu-Lapu RTC, acting under a new judge,51 granted both motions and accordingly set aside the November 28, 1997 and December 22, 1997 Orders. 52 With the denial53 of its motion for reconsideration on August 4, 1998, GMC came to this Court on a Petition for Certiorari, Prohibition and Mandamus, seeking to set aside the May 27, 1998 Order of the Lapu-Lapu RTC in Civil Case No. 2203-L. The Petition was referred to the Court of Appeals, which under Batas Pambansa Blg. 129, exercises original jurisdiction to issue such writs.54 This was docketed as CA-G.R. SP No. 50650. On April 30, 1999, the Court of Appeals rendered its Decision 55 in CA-G.R. SP No. 50650, the dispositive portion of which reads: WHEREFORE, the petition being partly meritorious, the Court hereby resolves as follows: (1) To AFFIRM the Orders of May 28, 1998 and August 4, 1998 in Civil Case No. 2203-L insofar as they set aside the order holding respondent Register of Deeds guilty of indirect contempt of court and to NULLIFY said orders in so far as they set aside the directives contained in paragraphs (a) and (b) and (c) of the order dated November 28, 1997. (2) To DECLARE without FORCE and EFFECT insofar as petitioner Group Management Corporation is concerned the decision in Civil Case No. R-82-3429 as well as the orders and writs issued for its execution and enforcement: and (3) To ENJOIN respondent Lapu-Lapu Development and Housing Corporation, along with its agents and representatives and/or persons/public officials/employees acting in its interest, specifically respondent Regional Trial Court of Manila Branch 38, and respondent Register of Deeds of Lapu-Lapu City, from obstructing, interfering with or in any manner delaying the implementation/execution/ enforcement by the Lapu-Lapu City RTC of its order and writ of execution in Civil Case No. 2203-L. For lack of sufficient basis the charge of contempt of court against respondent Lapu-Lapu Development and Housing Corporation and the public respondents is hereby DISMISSED.56 With the denial of LLDHCs motion for reconsideration on December 29, 1999, 57 LLDHC, on January 26, 2000, filed before this Court a Petition for Review on Certiorari assailing the April 30, 1999 decision of the Court of Appeals in CA-G.R. SP No. 50650. This petition was docketed as G.R. No. 141407. This Court dismissed LLDHCs petition and upheld the decision of the Court of Appe als in CA-G.R. SP No. 50650 in its decision dated September 9, 2002.58 LLDHCs Motion for Reconsideration and Second Motion for Reconsideration were also denied on November 13, 200259 and February 3, 2003,60 respectively. The September 9, 2002 decision of this Court in G.R. No. 141407 became final on March 10, 2003. 61 On March 11, 2004, the Lapu-Lapu RTC, acting on GMCs Motion for Execution, issued an Order 62 the dispositive portion of which reads: WHEREFORE, in light of the foregoing considerations, plaintiff Group Management Corporations motion is GRANTED, while defendant GSIS motion to stay the issuance of a writ of execution is denied for lack of merit. Consequently, the Sheriff of this Court is directed to proceed with the immediate implementation of this Courts decision dated February 24, 1992, by enforcing completely this Courts Order of Execution dated November 28, 1996, the writ of execution dated December 17, 1996, the Order dated July 21, 1997, the Order dated October 23 1997, the Order dated November 28, 1997 and the Order dated December 22, 1997. 63 On May 7, 2004, the Lapu-Lapu RTC denied64 the motions for reconsideration filed by LLDHC and GSIS. On May 27, 2004, LLDHC filed before the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus65against the Lapu-Lapu RTC for having issued the Orders of March 11, 2004 and May 7, 2004 (assailed Orders). This petition docketed as CA-G.R. SP No. 84382, sought the annulment of the assailed Orders and for the Court of Appeals to command the Lapu-Lapu RTC to desist from further proceeding in Civil Case No. 2203-L, to dismiss GMCs Motion for Execution, and for the issuance of a Temporary Restraining Order (TRO)/Writ of Preliminary Inj unction against the Lapu-Lapu RTC and GMC. On July 6, 2004, GSIS filed its own Petition for Certiorari and Prohibition with Preliminary Injunction and Temporary Restraining Order 66 before the Court of Appeals to annul the assailed Orders of the Lapu-Lapu RTC, to prohibit the judge therein and the Register of Deeds of Lapu-Lapu City from implementing such assailed Orders, and for the issuance of a TRO and writ of preliminary injunction to maintain the status quo while the case is under litigation. This petition was docketed as CA-G.R. SP No. 85096.

The Court of Appeals initially dismissed outright LLDHCs petition for failure to attach the Required Secretarys Certificate /Board Resolution authorizing petitioner to initiate the petition,67 but in a Resolution68 dated August 2, 2004, after having found the explanation for the mistake satisfactory, the Court of Appeals, "on equitable consideration and for the purpose of preserving the status quo during the pendency of the appeal,"69 issued a TRO against the Lapu-Lapu RTC from enforcing its jurisdiction and judgment/order in Civil Case No. 2203-L until further orders. In its August 30, 2004 Resolution, 70 the Court of Appeals, without resolving the case on its merits, also issued a Writ of Preliminary Injunction, commanding the Lapu-Lapu RTC to cease and desist from implementing the assailed Orders in Civil Case No. 2203-L, until further orders. On November 25, 2004, the Twentieth Division of the Court of Appeals promulgated its decision in CA-G.R. SP No. 85096. It dismissed GSISs petition and affirmed the assailed Orders of March 11, 2004 and May 7, 2004. Th e Court of Appeals found no merit in GSISs petition since the judgment in Civil Case No. 2203-L, which was decided way back on February 24, 1992, had long become final and executory, which meant that the Lapu-Lapu RTC had no legal obstacle to cause said judgment to be executed and enforced. The Court of Appeals quoted in full, portions of this Courts Decision in G.R. No. 141407 to underscore the fact that no less than the Supreme Court had declared that the dec ision in Civil Case No. 2203-L was valid and binding and had become final and executory a long time ago and had not been in any way nullified by the decision rendered by the Manila RTC on May 10, 1994 in Civil Case No. R-82-3429. On January 20, 2005, the Court of Appeals upheld its decision and denied GSISs Motion for Reconsideration.71 However, on September 23, 2005, the Special Nineteenth Division of the Court of Appeals came out with its own decision in CA-G.R. SP No. 84382. It granted LLDHCs petition, contrary to the Court of Appeals decision in CA -G.R. SP No. 85096, and annulled and set aside the March 11, 2004 Order of the Lapu-Lapu RTC in this wise: WHEREFORE, finding merit in the instant Petition for Certiorari, Prohibition and Mandamus, the same is hereby GRANTED, and the assailed Order, dated March 11, 2004, of the Regional Trial Court, 7th Judicial Region, Branch 27, Lapulapu City, in Civil Case No. 2203-L is ANNULLED AND SET ASIDE. Accordingly, respondent Judge Benedicto Cobarde is hereby ORDERED: a) to DESIST from further proceeding in Civil Case No. 2203-L; and b) to DISMISS GMCs Motion for Execution in the abovementioned case; Meanwhile, the Writ of Preliminary Injunction earlier issued is hereby declared PERMANENT. No pronouncement as to costs. 72 GSIS73 and GMC74 are now before this Court, with their separate Petitions for Review on Certiorari, assailing the decisions of the Court of Appeals in CA-G.R. SP No. 85096 and CA-G.R. SP No. 84382, respectively. G.R. No. 167000 In G.R. No. 167000, GSIS is assailing the Orders issued by the Lapu-Lapu RTC on March 11, 2004 and May 7, 2004 for being legally unenforceable on GSIS because the titles of the 78 lots in Marigondon, Lapu-Lapu City were already in LLDHCs name, due to the final and executory judgment rendered by the Manila RTC in Civil Case No. R-82-3429. GSIS contends that it is legally and physically impossible for it to comply with the assailed Orders as the "subject matter to be delivered or performed have already been taken away from" 75 GSIS. GSIS asserts that the circumstances which have arisen, from the judgment of the Ma nila RTC to the cancellation of GSISs titles, are "supervening events" which should be considered as an exception to the doctrine of finality of judgments because they render the execution of the final and executory judgment of the Lapu-Lapu RTC in Civil Case No. 2203-L unjust and inequitable. GSIS further claims that it should not be made to pay damages of any kind because its funds and properties are exempt from execution, garnishment, and other legal processes under Section 39 of Republic Act No. 8291. LLDHC, in its Compliance,76 believes that it was impleaded in this case as a mere nominal party since it filed its own Petition for Certiorari before the Court of Appeals, which was granted in CA-G.R. SP No. 84382. LLDHC essentially agrees with GSIS that the implementation of the assailed Orders have become legally impossible due to the fully implemented Writ of Execution issued by the Manila RTC in Civil Case No. R-82-3429. LLDHC alleges that because of this "supervening event," GSIS cannot be compelled to execute a final deed of sale in GMCs favor, and "LLDHC cannot be divested of its titles, ownership and possession" of the subject properties. 77 GMC in its comment78 argues that GSIS has no legal standing to institute this petition because it has no more interest in the subject lots, since it is no longer in possession and the titles thereto have already been registered in LLDHCs name. GMC claims that the decisi on of the Special Nineteenth Division of the Court of Appeals is barred by res judicata, and that LLDHC is guilty of forum shopping for filing several petitions before the Court of Appeals and this Court with the same issues and arguments. GMC also asserts that the judgment in Civil Case No. R-823429 is enforceable only between GSIS and LLDHC as GMC was not a party to the case, and that the Manila RTC cannot overrule the LapuLapu RTC, they being co-equal courts. G.R. No. 169971 In G.R. No. 169971, GMC is praying that the decision of the Special Nineteenth Division of the Court of Appeals in CA-G.R. SP No. 84382 be reversed and set aside. GMC is claiming that the Court of Appeals, in rendering the said decision, committed a palpable legal error by overruling several final decisions rendered by the Lapu-Lapu RTC, the Court of Appeals, and this Court.79 GMC claims that the Lapu-Lapu RTCs duty to continue with the implementation of its orders is purely ministerial as the judgment has not only become final and executory, but has been affirmed by both the Court of Appeals and the Supreme Court in several equally final and executory decisions. 80 GMC, repeating its arguments in G.R. No. 167000, maintains that the petition is barred by res judicata, that there is forum shopping, and that the Manila RTC decision is not binding on GMC. LLDHC in its comment81 insists that there is a supervening event which rendered it necessary to stay the execution of the judgment of the Lapu-Lapu RTC. LLDHC also asserts that, as correctly found by the Court of Appeals in CA-G.R. SP No. 84382, the Lapu-Lapu RTC decision in Civil Case No. 2203-L was not affirmed with finality by the Court of Appeals and the Supreme Court as the decision was not reviewed on the merits. SUMMARY OF THE ISSUES The present case is peculiar in the sense that it involves two conflicting final and executory decisions of two different trial courts. Moreover, one of the RTC decisions had been fully executed and implemented. To complicate things further, the parties have previously filed several petitions, which have reached not only the Court of Appeals but also this Court. Upon consolidation of the two petitions, this Court has narrowed down the issues to the following: 1. Whether or not the decision of the Manila RTC in Civil Case No. R-82-3429 constitutes a supervening event, which should be admitted as an exception to the doctrine of finality of judgments.

2. Whether or not the September 23, 2005 Decision of the Special Nineteenth Division of the Court of Appeals in CA-G.R. SP No. 84382 and GSISs Petition in G.R. No. 167000 are barred by res judicata. 3. Whether or not there is a legal and physical impossibility for GSIS to comply with the March 11, 2004 and May 7, 2004 Orders of the Lapu-Lapu RTC in Civil Case No. 2203-L. 4. Whether or not LLDHC and GSIS are guilty of forum shopping. DISCUSSION First Issue: Supervening Event It is well-settled that once a judgment attains finality, it becomes immutable and unalterable. It may not be changed, altered or modified in any way even if the modification were for the purpose of correcting an erroneous conclusion of fact or law. This is referred to as the "doctrine of finality of judgments," and this doctrine applies even to the highest court of the land. 82 This Court explained its rationale in this wise: The doctrine of finality of judgment is grounded on fundamental considerations of public policy and sound practice, and that, at the risk of occasional errors, the judgments or orders of courts must become final at some definite time fixed by law; otherwise, there would be no end to litigations, thus setting to naught the main role of courts of justice which is to assist in the enforcement of the rule of law and the maintenance of peace and order by settling justiciable controversies with finality. 83 This Court has, on several occasions, ruled that the doctrine of finality of judgments admits of certain exceptions, namely: "the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision which render its execution unjust and inequitable."84 Both GSIS and LLDHC claim that the execution of the decision and orders in Civil Case No. 2203-L should be stayed because of the occurrence of "supervening events" which render the execution of the judgment "impossible, unfair, unjust and inequitable." 85 However, in order for an event to be considered a supervening event to justify the alteration or modification of a final judgment, the event must have transpired after the judgment has become final and executory, to wit: Supervening events refer to facts which transpire after judgment has become final and executory or to new circumstances which developed after the judgment has acquired finality, including matters which the parties were not aware of prior to or during the trial as they were not yet in existence at that time.86 The Lapu-Lapu RTC Decision in Civil Case No. 2203-L was promulgated on February 24, 1992, while the Manila RTC Decision in Civil Case No. R-82-3429 was promulgated on May 10, 1994. As early as December 6, 1993, both GSISs and LLDHCs appeals of the Lapu -Lapu RTC Decision were dismissed by the said RTC. 87 Only GSIS moved to reconsider this dismissal, which was denied on July 6, 1994.88 Strictly speaking, the Lapu Lapu RTC Decision should have attained finality at that stage; however, LLDHC filed with the Court of Appeals its Petition for Annulment of Judgment (CA-G.R. SP No. 34696) on July 27, 1994 and it used therein the Manila RTC Decision as its main ground for annulment of the Lapu-Lapu RTC decision. The Court of Appeals nonetheless dismissed LLDHCs Petition for Annulment of Judgment, in CA-G.R. SP No. 34696,89 and that became final and executory on January 28, 1995,90 after LLDHC interposed no appeal. The entry of judgment in this case was issued on August 18, 1995.91 Moreover, the similar petition of LLDHC before this Court in G.R. No. 118633 was decided on September 6, 1996 and became final and executory on December 23, 1996. Therefore, the ruling by the Manila RTC is evidently not a supervening event. It was already in existence even before the decision in Civil Case No. 2203-L attained finality. Just as LLDHC and GSIS, as the losing parties, had the right to file their respective appeals within the prescribed period, GMC, as the winning party in Civil Case No. 2203-L, equally had the correlative right to benefit from the finality of the resolution of its case, 92 to wit: A final judgment vests in the prevailing party a right recognized and protected by law under the due process clause of the Constitution. A final judgment is "a vested interest which it is right and equitable that the government should recognize and protect, and of which the individual could not be deprived arbitrarily without injustice."93 (Citations omitted.) Since the Manila RTC decision does not constitute a supervening event, there is therefore neither reason nor justification to alter, modify or annul the Lapu-Lapu RTC Decision and Orders, which have long become final and executory. Thus, in the present case, GMC must not be deprived of its right to enjoy the fruits of a final verdict. It is settled in jurisprudence that to stay execution of a final judgment, a supervening event "must create a substantial change in the rights or relations of the parties which would render execution of a final judgment unjust, impossible or inequitable making it imperative to stay immediate execution in the interest of justice."94 However, what would be unjust and inequitable is for the Court to accord preference to the Manila RTC Decision on this occasion when in the past, the Court of Appeals and this Court have repeatedly, consistently, and with finality rejected LLDHCs moves to use the Mani la RTC Decision as a ground to annul, and/or to bar the execution of, the Lapu Lapu RTC Decision. To be sure, in the Decision dated September 9, 2002 in G.R. No. 141407, penned by former Chief Justice Artemio V. Panganiban, the Court already passed upon the lack of effect of the Manila RTC Decision on the finality of the Lapu Lapu RTC decision in this wise: The records of the case clearly show that the Lapulapu Decision has become final and executory and is thus valid and binding upon the parties. Obviously, petitioner [LLDHC] is again trying another backdoor attempt to annul the final and executory Decision of the Lapul apu RTC. First, it was petitioner that filed on March 11, 1992 a Notice of Appeal contesting the Lapulapu RTC Judgment in Civil Case No. 2203-L rendered on February 24, 1992. The Notice was however rejected by the said RTC for being frivolous and dilatory. Since petitioner had done nothing thereafter, the Decision clearly became final and executory. However, upon receipt of the Manila RTC Decision, petitioner found a new tool to evade the already final Lapulapu Decision by seeking the annulment of the latter in a Petition with the CA. However, the appellate court dismissed the action, because petitioner had been unable to prove any of the grounds for annulment; namely lack of jurisdiction or extrinsic fraud. Because no appeal had been taken by petitioner, the ruling of the CA also became final and executory. Second, the Supreme Court likewise recognized the finality of the CA Decision when it threw out LLDHCs Petition for Certiorari in GR No. 118633. This Court ruled thus:

"Instead of filing this petition for certiorari under Rule 65, which is essentially another Petition to Annul Judgment, petitioner LLDHC should have filed a timely Petition for Review under Rule 45 of the Revised Rules of Court of the decision of the Court of Appeals, dated December 29, 1994, dismissing the Petition for Annulment of Judgment filed by the petitioner LLDHC before the court a quo. But this is all academic now. The appellate courts decision had become final and executory on January 28, 1995 ." Jurisprudence mandates that when a decision becomes final and executory, it becomes valid and binding upon the parties and their successors in interest. Such decision or order can no longer be disturbed or reopened no matter how erroneous it may have been. Petition ers failure to file an appeal within the reglementary period renders the judgment final and executory. The perfection of an appeal in the manner and within the period prescribed by law is mandatory. Failure to conform to the rules regarding appeal will render the judgment final and executory and, hence, unappealable. Therefore, since the Lapulapu Decision has become final and executory, its execution has become mandatory and ministerial on the part of the judge. The CA correctly ruled that the Lapulapu Judgment is binding upon petitioner [LLDHC] which, by its own motion, participated as an intervenor. In fact, the latter filed an Answer in Intervention and thereafter actively took part in the trial. Thus, having had an opportunity to be heard and to seek a reconsideration of the action or ruling it complained of, it cannot claim that it was denied due process of law. What the law prohibits is the absolute absence of the opportunity to be heard. Jurisprudence teaches that a party cannot feign denial of due process if it has been afforded the opportunity to present its side. Petitioner likewise claims that Private Respondent GMC cannot escape the adverse effects of the final and executory judgment of the Manila RTC. Again, we do not agree. A trial court has no power to stop an act that has been authorized by another trial court of equal rank. As correctly stated by the CA, the Decision rendered by the Manila RTC -- while final and executory -- cannot bind herein private respondent [GMC], which was not a party to the case before the said RTC. A personal judgment is binding only upon the parties, their agents, representatives and successors in interest.1avvphi1 Third, petitioner grievously errs in insisting that the judgment of the Manila RTC nullified that of the Lapulapu RTC. As already adverted to earlier, courts of coequal and coordinate jurisdiction may not interfere with or pass upon each others orders or processes, si nce they have the same power and jurisdiction. Except in extreme situations authorized by law, they are proscribed from doing so. 95(Emphases supplied.) It likewise does not escape the attention of this Court that the only reason the Manila RTC Decision was implemented ahead of the Lapu Lapu RTC Decision was that LLDHC successfully secured a TRO from the Court of Appeals through its petition for certiorari docketed as CA-G.R. SP No. 44052, which was eventually dismissed by the appellate court. The Court of Appeals ruled that the Manila RTC Decision did not constitute a supervening event that would forestall the execution of the Lapu Lapu RTC Decision. This decision of the Court of Appeals likewise became final and executory in 1998. It bears repeating that the issue of whether or not the Manila RTC Decision could nullify or render unenforceable the Lapu Lapu RTC Decision has been litigated many times over in different fora. It would be the height of inequity if the Court were to now reverse the Court of Appeals and its own final and executory rulings and allow GSIS to prevent the execution of the Lapu Lapu RTC Decision on the same legal grounds previously discredited by the courts. Second Issue: Res Judicata GMC asserts that the September 23, 2005 Decision of the Special Nineteenth Division of the Court of Appeals in CA-G.R. SP No. 84382 and the petition herein by GSIS in G.R. No. 167000 are barred by res judicata as the issues involved had been fully resolved not only by the lower courts but by this Court as well. GSIS and LLDHC both insist that res judicata does not apply as this Court "has not yet rendered a decision involving the same or any similar petition."96 The petitions by LLDHC before the Court of Appeals and GSIS before this Court both prayed for the annulment of the March 11, 2004 and May 7, 2004 Orders of the Lapu-Lapu RTC in Civil Case No. 2203-L. These assailed Orders were both issued to resolve the parties motions and to have the February 24, 1992 judgment implemented and executed. In Republic of the Philippines (Civil Aeronautics Administration) v. Yu, this wise:
97

this Court expounded on the concept of res judicata and explained it in

Res judicata literally means "a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment." Res judicata lays the rule that an existing final judgment or decree rendered on the merits, and without fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is conclusive of the rights of the parties or their privies, in all other actions or suits in the same or any other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit. 98 In Villanueva v. Court of Appeals,99 we enumerated the elements of res judicata as follows: a) The former judgment or order must be final; b) It must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence or stipulations submitted by the parties at the trial of the case; c) It must have been rendered by a court having jurisdiction over the subject matter and the parties; and d) There must be, between the first and second actions, identity of parties, of subject matter and of cause of action. This requisite is satisfied if the two (2) actions are substantially between the same parties. 100 All three parties herein are in agreement with the facts that led to the petitions in this case. However, not all of them agree that the matters involved in this case have already been judicially settled. While GMC contends that GSISs petition is barred by res judicata , both GSIS and LLDHC assert that this Court has not yet decided any similar petition, thus disputing the claim of res judicata. Res judicata has two concepts: (1) "bar by prior judgment" as enunciated in Rule 39, Section 47(b) of the 1997 Rules of Civil Procedure; and (2) "conclusiveness of judgment" in Rule 39, Section 47(c), which reads as follows: (b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. In explaining the two concepts of res judicata, this Court held that: There is "bar by prior judgment" when, as between the first case where the judgment was rendered, and the second case that is sought to be barred, there is identity of parties, subject matter, and causes of action. But where there is identity of parties and subject matter in the first and second cases, but no identity of causes of action, the first judgment is conclusive only as to those matters actually and directly controverted and determined and not as to matters merely involved therein. This is "conclusiveness of judgment." Under the doctrine of conclusiveness of judgment, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties, even if the latter suit may involve a different claim or cause of action. The identity of causes of action is not required but merely identity of issues.101 In Pealosa v. Tuason,102 we laid down the test in determining whether or not the causes of action in the first and second cases are identical: Would the same evidence support and establish both the present and former cause of action? If so, the former recovery is a bar; if otherwise, it does not stand in the way of the former action. 103 Res judicata clearly exists in G.R. No. 167000 and in CA-G.R. SP No. 84382 because both GSISs and LLDHCs actions put in issue the validity of the Lapu-Lapu RTC Decision and were based on the assumption that it has either been modified, altered or nullified by the Manila RTC Decision. In CA-G.R. SP No. 84382, LLDHC sought to annul the assailed Orders of the Lapu-Lapu RTC and to order the judge therein to desist from further proceeding in Civil Case No. 2203-L. LLDHC sought for the same reliefs in its Petition for Annulment of Judgment in CA-G.R. SP No. 34696 and G.R. No. 118633, in its Petition for Certiorari in CA-G.R. SP No. 44052, and in its Petition for Review on Certiorari in G.R. No. 141407, all of which have been decided with finality. In G.R. No. 167000, GSIS is praying for the reversal of the November 25, 2004 Decision and January 20, 2005 Resolution in CA-G.R. SP No. 85096, wherein the Court of Appeals affirmed the assailed Orders. The validity of these assailed Orders hinges on the validity of the Lapu-Lapu RTC Decision, which issue had already been decided with finality by both the Court of Appeals and this Court. Notwithstanding the difference in the forms of actions GSIS and LLDHC filed, the doctrine of res judicata still applies considering that the parties were litigating the same thing, i.e., the 78 lots in Marigondon, Lapu-Lapu City, and more importantly, the same contentions and evidence were used in all causes of action. As this Court held in Mendiola v. Court of Appeals104: The test of identity of causes of action lies not in the form of an action but on whether the same evidence would support and establish the former and the present causes of action. The difference of actions in the aforesaid cases is of no moment. x x x. 105 The doctrine of res judicata makes a final judgment on the merits rendered by a court of competent jurisdiction conclusive as to the rights of the parties and their privies and amounts to an absolute bar to subsequent actions involving the same claim, demand, or cause of action.106 Even a finding of conclusiveness of judgment operates as estoppel with respect to matters in issue or points controverted, on the determination of which the finding or judgment was anchored.107 Evidently, this Court could dispose of this case simply upon the application of the principle of res judicata. It is clear th at GSISs petition in G.R. No. 167000 and LLDHCs petition in CA-G.R. SP No. 84382 should have never reached those stages for having been barred by a final and executory judgment on their claims. However, considering the nature of the case before us, this Court is compelled to make a final determination of the issues in the interest of substantial justice and to end the wasteful use of our courts time and resour ces. Third Issue: GSISs Compliance with the Lapu-Lapu RTC Judgment and Orders GSIS asserts that the assailed Orders cannot be enforced upon it given the physical and legal impossibility for it to comply as the titles over the subject properties were transferred to LLDHC under the Manila RTC writ of execution. A closer perusal of the March 11, 2004 and May 7, 2004 Orders shows that GSISs argument holds no water. The May 7, 2004 Order denied GSISs and LLDHCs motions for reconsideration of the March 11, 2004 Order. The March 11, 2004 Order resolved GMCs urgent manifestation and motion to proceed with the implementation of the February 24, 1992 final and executory decision and GSISs and LLDHCs opposition thereto, as well as GSISs motion to stay the issuance of a writ of execution against it. The dispositive portion of the Order reads: WHEREFORE, in the light of the foregoing considerations, plaintiff Group Management Corporations motion is GRANTED, while defendant GSIS motion to stay the issuance of a writ of execution is denied for lack of merit. Consequently, the Sheriff of this Court is directed to proceed with the immediate implementation of this Courts decision dated February 24, 1992, by enforcing completely this Courts Order of Execution dated November 28, 1996, the writ of execution dated December 17, 1996, the Order dated July 21, 1997, the Order dated October 23, 1997, the Order dated November 28, 1997 and the Order dated December 22, 1997. 108 (Emphasis ours.) While the previous orders and writs of execution issued by the Lapu-Lapu RTC required the GSIS to execute the final deed of sale and to deliver the subject properties, the Lapu-Lapu RTC, in its subsequent Orders, modified this by directing its order to the Register of Deeds of Lapu-Lapu City. In its July 21, 1997 Order,109 the Lapu-Lapu RTC, seeing GSISs obstinate refusal to implement the courts previous orders, directed the Register of Deeds of Lapu-Lapu City to cancel the Transfer Certificates of Title of the subject properties and to issue new ones in the name of GMC, and to deliver the same to GMC. Moreover, in its October 23, 1997 Order, the Lapu-Lapu RTC, noting the implemented judgment of the Manila RTC, declared the issuance of new titles to LLDHC null and void for being contrary to the courts February 24, 1992 decision and directed the Register of Deeds to effect the transfer of the titles to GMC. Considering that the assailed Orders merely directed the Lapu-Lapu RTCs Sheriff to proceed with the implementation of the courts previous orders, that is, to make sure that the Register of Deeds of Lapu-Lapu City complied with the orders, GSIS had nothing to comply with insofar as the titles to, and possession of, the subject properties were concerned, the Orders being clearly directed towards the Sheriff of the Lapu-Lapu RTC and the Register of Deeds of Lapu-Lapu City. Hence, GSISs argument of legal and physical impossibility of compliance with the assailed Orders is baseless. GSIS also argues that it cannot be the "subject [of any] execution including [the] payment of any damage and other monetary judgments because all GSIS funds and properties are absolutely and expressly exempt from execution and other legal processes under Section 39 of Republic Act No. 8291."110 Section 39 of Republic Act No. 8291 provides:

SECTION 39. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the GSIS shall be preserved and maintained at all times and that contribution rates necessary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the GSIS and their employers. Taxes imposed on the GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding any laws to the contrary, the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the GSIS as of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed repealed, superseded and rendered ineffective and without legal force and effect. xxxx The funds and/or the properties referred to herein as well as the benefits, sums or monies corresponding to the benefits under this Act shall be exempt from attachment, garnishment, execution, levy or other processes issued by the courts, quasi judicial agencies or administrative bodies including Commission on Audit (COA) disallowances and from all financial obligations of the members, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in connection with his position or work except when his monetary liability, contractual or otherwise, is in favor of the GSIS. This Court, in Rubia v. Government Service Insurance System, 111 held that the exemption of GSIS is not absolute and does not encompass all of its funds, to wit: In so far as Section 39 of the GSIS charter exempts the GSIS from execution, suffice it to say that such exemption is not absolute and does not encompass all the GSIS funds. By way of illustration and as may be gleaned from the Implementing Rules and Regulation of the GSIS Act of 1997, one exemption refers to social security benefits and other benefits of GSIS members under Republic Act No. 8291 in connection with financial obligations of the members to other parties. The pertinent GSIS Rule provides: Rule XV. Funds of the GSIS Section 15.7 Exemption of Benefits of Members from Tax, Attachment, Execution, Levy or other Legal Processes. The social security benefits and other benefits of GSIS members under R.A. 8291 shall be exempt from tax, attachment, garnishment, execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative bodies in connection with all financial obligations of the member, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties or incurred in connection with his position or work, as well as COA disallowances. Monetary liability in favor of the GSIS, however, may be deducted from the benefits of the member. [Emphasis supplied] The processual exemption of the GSIS funds and properties under Section 39 of the GSIS Charter, in our view, should be read consistently with its avowed principal purpose: to maintain actuarial solvency of the GSIS in the protection of assets which are to be used to finance the retirement, disability and life insurance benefits of its members. Clearly, the exemption should be limited to the purposes and objects covered. Any interpretation that would give it an expansive construction to exempt all GSIS assets from legal processes absolutely would be unwarranted. Furthermore, the declared policy of the State in Section 39 of the GSIS Charter granting GSIS an exemption from tax, lien, attachment, levy, execution, and other legal processes should be read together with the grant of power to the GSIS to invest its "excess funds" under Section 36 of the same Act. Under Section 36, the GSIS is granted the ancillary power to invest in business and other ventures for the benefit of the employees, by using its excess funds for investment purposes. In the exercise of such function and power, the GSIS is allowed to assume a character similar to a private corporation. Thus, it may sue and be sued, as also, explicitly granted by its charter. Needless to say, where proper, under Section 36, the GSIS may be held liable for the contracts it has entered into in the course of its business investments. For GSIS cannot claim a special immunity from liability in regard to its business ventures under said Section. Nor can it deny contracting parties, in our view, the right of redress and the enforcement of a claim, particularly as it arises from a purely contractual relationship, of a private character between an individual and the GSIS.112 This ruling has been reiterated in the more recent case of Government Service Insurance System v. Regional Trial Court of Pasig City, Branch 71,113 wherein GSIS, which was also the petitioner in that case, asked to reverse this Courts findings in Rubia and grant GSIS abso lute immunity. This Court rejected that plea and held that GSIS should not be allowed to hide behind such immunity especially since its obligation arose from its own wrongful action in a business transaction. In this case, the monetary judgments against GSIS arose from its failure to comply with its private and contractual obligation to GMC. As such, GSIS cannot claim immunity from the enforcement of the final and executory judgment against it. 114 Fourth Issue: Forum Shopping On the issue of forum shopping, this Court already found LLDHC guilty of forum shopping and was adjudged to pay treble costs way back in 2002 in G.R. No. 141407115: There is forum shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) from another. In Gatmaytan v. CA, the petitioner therein repeatedly availed itself of several judicial remedies in different courts, simultaneously or successively. All those remedies were substantially founded on the same transactions and the same essential facts and circumstances; and all raised substantially the same issues either pending in, or already resolved adversely by, some other court. This Court held that therein petitioner was trying to increase his chances of obtaining a favorable decision by filing multiple suits in several courts. Hence, he was found guilty of forum shopping. In the present case, after the Lapulapu RTC had rendered its Decision in favor of private respondent, petitioner filed several petitions before this Court and the CA essentially seeking the annulment thereof. True, petitioner had filed its Complaint in the Manila RTC before private respondent filed its own suit in the Lapulapu RTC. Records, however, show that private respondent learned of the Manila case only when petitioner filed its Motion for Intervention in the Lapulapu RTC. When GMC filed its own Motion to Intervene in the Manila RTC, it was promptly rebuffed by the judge therein. On the other hand, petitioner was able to present its side and to participate fully in the proceedings before the Lapulapu RTC. On July 27, 1994, almost two years after the dismissal of its appeal by the Lapulapu RTC, petitioner filed in the CA a suit for the annulment of that RTC judgment. On December 29, 1994, this suit was rejected by the CA in a Decision which became final and executory on January 28, 1995, after no appeal was taken by petitioner. However, this action did not stop petitioner. On February 2, 1995, it filed with this Court another Petition deceptively cloaked as certiorari, but which in reality sought the annulment of the Lapulapu Decision. This Court dismissed the Petition on September 6, 1996. Petitioners Motion for Reconsideration was denied with finality on November 18, 1996. On November 28, 1996, Judge Risos of the Lapulapu RTC directed the execution of the judgment in the case filed before it. The Motion to Stay Execution filed by petitioner was denied on February 19, 1997. Undaunted, it filed in this Court another Petition for Certiorari, Prohibition and

Mandamus. On September 21, 1998, we referred the Petition to the CA for appropriate action. This new Petition again essentially sought to annul the final and executory Decision rendered by the Lapulapu RTC. Needless to say, the new suit was unsuccessful. Still, this rejection did not stop petitioner. It brought before this Court the present Petition for Review on Certiorari alleging the same facts and circumstances and raising the same issues already decided by this Court in G.R. No. 118633. First Philippine International Bank v. CA stresses that what is truly important to consider in determining whether forum shopping exists is the vexation caused the courts and the parties-litigants by one who asks different courts and/or administrative agencies to rule on the same or related facts and causes and/or to grant the same or substantially the same relief, in the process creating the possibility of conflicting rulings and decisions. Petitioner in the present case sued twice before the CA and thrice before this Court, alleging substantially the same facts and circumstances, raising essentially the same issues, and praying for almost identical reliefs for the annulment of the Decision rendered by the Lapulapu RTC. This insidious practice of repeatedly bringing essentially the same action -- albeit disguised in various nomenclatures -- before different courts at different times is forum shopping no less. Because of petitioners actions, the execution of the Lapulapu Decision has bee n needlessly delayed and several courts vexed.116 There is forum shopping when two or more actions or proceedings, other than appeal or certiorari, involving the same parties for the same cause of action, are instituted either simultaneously or successively to obtain a more favorable decision. 117 This Court, in Spouses De la Cruz v. Joaquin,118 explained why forum shopping is disapproved of: Forum shopping trifles with the courts, abuses their processes, degrades the administration of justice, and congests court dockets. Willful and deliberate violation of the rule against it is a ground for the summary dismissal of the case; it may also constitute direct contempt of court.119 It is undeniable that both LLDHC and GSIS are guilty of forum shopping, for having gone through several actions and proceedings from the lowest court to this Court in the hopes that they will obtain a decision favorable to them. In all those actions, only one issue was in contention: the ownership of the subject lots. In the process, the parties degraded the administration of justice, congested our court dockets, and abused our judicial system. Moreover, the simultaneous and successive actions filed below have resulted in conflicting decisions rendered by not only the trial courts but also by different divisions of the Court of Appeals. The very purpose of the rule against forum shopping was to stamp out the abominable practice of trifling with the administration of justice. 120 It is evident from the history of this case that not only were the parties and the courts vexed, but more importantly, justice was delayed. As this Court held in the earlier case of LLDHC against GMC: "[The] insidious practice of repeatedly bringing essentially the same action albeit disguised in various nomenclatures before different courts at different times is forum shopping no less."121 Conclusion Nonetheless, like we said, substantial justice requires the resolution of this controversy on its merits. It is the duty of this Court to put an end to this long-delayed litigation and render a decision, which will bind all parties with finality. Although it is settled that the Lapu-Lapu RTC Decision was not in any way nullified by the Manila RTC Decision, it is this Courts duty to resol ve the legal implications of having two conflicting, final, and executory decisions in existence. In Collantes v. Court of Appeals,122 this Court, faced with the similar issue of having two conflicting, final and executory decisions before it, offered three options to solve the dilemma: "the first is for the parties to assert their claims anew, the second is to determine which judgment came first, and the third is to determine which of the judgments had been rendered by a court of last resort."123 In Collantes, this Court applied the first option and resolved the conflicting issues anew. However, resorting to the first solution in the case at bar would entail disregarding not only the final and executory decisions of the Lapu-Lapu RTC and the Manila RTC, but also the final and executory decisions of the Court of Appeals and this Court. Moreover, it would negate two decades worth of litigating. Thus, we find it more equitable and practicable to apply the second and third options consequently maintaining the finality of one of the conflicting judgments. The primary criterion under the second option is the time when the decision was rendered and became final and executory, such that earlier decisions should prevail over the current ones since final and executory decisions vest rights in the winning party. In the third solution, the main criterion is the determination of which court or tribunal rendered the decision. Decisions of this Court should be accorded more respect than those made by the lower courts.124 Applying these criteria to the case at bar, the February 24, 1992 Decision of the Lapu-Lapu RTC in Civil Case No. 2203-L was not only promulgated first; it also attained finality on January 28, 1995, before the Manila RTCs May 10, 199 4 Decision in Civil Case No. R-82-3429 became final on May 30, 1997. It is especially noteworthy that months after the Lapu-Lapu RTC issued its writ of execution on December 17, 1996, the Manila RTC issued its own writ of execution on August 1, 1997. To recall, the Manila RTC writ was only satisfied first because the Court of Appeals in CA-G.R. SP No. 44052 deemed it appropriate to issue a temporary restraining order against the execution of the LapuLapu RTC Decision, pending the case before it. Hence, the fact that the Manila RTC Decision was implemented and executed first does not negate the fact that the Lapu-Lapu RTC Decision was not only rendered earlier, but had also attained finality earlier. Furthermore, while both judgments reached the Court of Appeals, only Civil Case No. 2203-L was passed upon on the merits by this Court. In G.R. No. 141407, this Court resolved LLDHCs petition for review on certiorari seeking to annul the Court of Appeals Decision in CA -G.R. SP No. 50650. This Court, in dismissing the petition, upheld the validity of the Lapu-Lapu RTC Decision and declared that the Manila RTC Decision cannot bind GMC. That decision became final and executory way back on March 10, 2003. While this Court cannot blame the parties for exhausting all available remedies to obtain a favorable judgment, the issues involved in this case should have been resolved upon the finality of this Courts decision in G.R. No. 141407. As pronounced by this Court in Villa nueva v. Court of Appeals125: The interest of the judicial system in preventing relitigation of the same dispute recognizes that judicial resources are finite and the number of cases that can be heard by the court is limited. Every dispute that is reheard means that another will be delayed. In modern times when court dockets are filled to overflowing, this concern is of critical importance. x x x. 126 In summary, this Court finds the execution of the Lapu-Lapu RTC Decision in Civil Case No. 2203-L to be in order. We affirm the assailed Orders of March 11, 2004 and May 7, 2004, which reiterate, among others, the October 23, 1997 Order issued by the Lapu-Lapu RTC, directing the Register of Deeds of Lapu-Lapu City to cancel the certificates of title of LLDHC and to issue new ones in GMCs name. Whatever rights are due LLDHC from GSIS as a result of the final judgment of the Manila RTC in Civil Case No. R-82-3429, which we have previously held to be binding between GSIS and LLDHC, may be threshed out in an appropriate proceeding. Such proceeding shall not further delay the execution of the Lapu-Lapu RTC Decision. WHEREFORE, in view of the foregoing, the petition in G.R. No. 167000 is DENIED and the Decision dated November 25, 2004 and Resolution dated January 20, 2005 of the Twentieth Division of the Court of Appeals are AFFIRMED. The petition in G.R. No. 169971 is GRANTED and the Decision dated September 23, 2005 of the Special Nineteenth Division of the Court of Appeals is hereby REVERSED AND SET ASIDE. SO ORDERED. G.R. No. 159912 August 17, 2007

UNITED COCONUT PLANTERS BANK, Petitioner, vs. SPOUSES SAMUEL and ODETTE BELUSO, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, which seeks to annul the Court of Appeals Decision1 dated 21 January 2003 and its Resolution2 dated 9 September 2003 in CA-G.R. CV No. 67318. The assailed Court of Appeals Decision and Resolution affirmed in turn the Decision3 dated 23 March 2000 and Order4 dated 8 May 2000 of the Regional Trial Court (RTC), Branch 65 of Makati City, in Civil Case No. 99-314, declaring void the interest rate provided in the promissory notes executed by the respondents Spouses Samuel and Odette Beluso (spouses Beluso) in favor of petitioner United Coconut Planters Bank (UCPB). The procedural and factual antecedents of this case are as follows: On 16 April 1996, UCPB granted the spouses Beluso a Promissory Notes Line under a Credit Agreement whereby the latter could avail from the former credit of up to a maximum amount of P1.2 Million pesos for a term ending on 30 April 1997. The spouses Beluso constituted, other than their promissory notes, a real estate mortgage over parcels of land in Roxas City, covered by Transfer Certificates of Title No. T-31539 and T-27828, as additional security for the obligation. The Credit Agreement was subsequently amended to increase the amount of the Promissory Notes Line to a maximum ofP2.35 Million pesos and to extend the term thereof to 28 February 1998. The spouses Beluso availed themselves of the credit line under the following Promissory Notes: PN # 8314-96-00083-3 8314-96-00085-0 8314-96-000292-2 Date of PN 29 April 1996 2 May 1996 20 November 1996 Maturity Date 27 August 1996 30 August 1996 20 March 1997 Amount Secured P 700,000 P 500,000 P 800,000

The three promissory notes were renewed several times. On 30 April 1997, the payment of the principal and interest of the latter two promissory notes were debited from the spouses Belusos account with UCPB; yet, a consolidated loan for P1.3 Million was again released to the spouses Beluso under one promissory note with a due date of 28 February 1998. To completely avail themselves of the P2.35 Million credit line extended to them by UCPB, the spouses Beluso executed two more promissory notes for a total of P350,000.00:

PN # 97-00363-1 98-00002-4

Date of PN 11 December 1997 2 January 1998

Maturity Date 28 February 1998 28 February 1998

Amount Secured P 200,000 P 150,000

However, the spouses Beluso alleged that the amounts covered by these last two promissory notes were never released or credited to their account and, thus, claimed that the principal indebtedness was only P2 Million. In any case, UCPB applied interest rates on the different promissory notes ranging from 18% to 34%. From 1996 to February 1998 the spouses Beluso were able to pay the total sum of P763,692.03. From 28 February 1998 to 10 June 1998, UCPB continued to charge interest and penalty on the obligations of the spouses Beluso, as follows: PN # 97-00363-1 97-00366-6 Amount Secured P 200,000 P 700,000 Interest 31% 30.17% (7 days) 28% (2 days) 33% (102 days) Penalty 36% 32.786% (102 days) 30.41% (102 days) 36% Total P 225,313.24 P 795,294.72

97-00368-2

P 1,300,000

P 1,462,124.54

98-00002-4

P 150,000

P 170,034.71

The spouses Beluso, however, failed to make any payment of the foregoing amounts. On 2 September 1998, UCPB demanded that the spouses Beluso pay their total obligation of P2,932,543.00 plus 25% attorneys fees, but the spouses Beluso failed to comply therewith. On 28 December 1998, UCPB foreclosed the properties mortgaged by the spouses Beluso to secure their credit line, which, by that time, already ballooned toP3,784,603.00. On 9 February 1999, the spouses Beluso filed a Petition for Annulment, Accounting and Damages against UCPB with the RTC of Makati City. On 23 March 2000, the RTC ruled in favor of the spouses Beluso, disposing of the case as follows: PREMISES CONSIDERED, judgment is hereby rendered declaring the interest rate used by [UCPB] void and the foreclosure and Sher iffs Certificate of Sale void. [UCPB] is hereby ordered to return to [the spouses Beluso] the properties subject of the foreclosure; to pay [the spouses Beluso] the amount of P50,000.00 by way of attorneys fees; and to pay the costs of suit. [The spouses Beluso] are hereby ordered to pay [UCPB] the sum of P1,560,308.00.5

On 8 May 2000, the RTC denied UCPBs Motion for Reconsideration, 6 prompting UCPB to appeal the RTC Decision with the Court of Appeals. The Court of Appeals affirmed the RTC Decision, to wit: WHEREFORE, premises considered, the decision dated March 23, 2000 of the Regional Trial Court, Branch 65, Makati City in Civil Case No. 99-314 is hereby AFFIRMED subject to the modification that defendant-appellant UCPB is not liable for attorneys fees or the costs of suit. 7 On 9 September 2003, the Court of Appeals denied UCPBs Motion f or Reconsideration for lack of merit. UCPB thus filed the present petition, submitting the following issues for our resolution: I WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH DECLARED VOID THE PROVISION ON INTEREST RATE AGREED UPON BETWEEN PETITIONER AND RESPONDENTS II WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE COMPUTATION BY THE TRIAL COURT OF RESPONDENTS INDEBTEDNESS AND ORDERED RESPONDENTS TO PAY PETITIONER THE AMOUNT OF ONLY ONE MILLION FIVE HUNDRED SIXTY THOUSAND THREE HUNDRED EIGHT PESOS (P1,560,308.00) III WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH ANNULLED THE FORECLOSURE BY PETITIONER OF THE SUBJECT PROPERTIES DUE TO AN ALLEGED "INCORRECT COMPUTATION" OF RESPONDENTS INDEBTEDNESS IV WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT WHICH FOUND PETITIONER LIABLE FOR VIOLATION OF THE TRUTH IN LENDING ACT V WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT FAILED TO ORDER THE DISMISSAL OF THE CASE BECAUSE THE RESPONDENTS ARE GUILTY OF FORUM SHOPPING8 Validity of the Interest Rates The Court of Appeals held that the imposition of interest in the following provision found in the promissory notes of the spouses Beluso is void, as the interest rates and the bases therefor were determined solely by petitioner UCPB: FOR VALUE RECEIVED, I, and/or We, on or before due date, SPS. SAMUEL AND ODETTE BELUSO (BORROWER), jointly and severally promise to pay to UNITED COCONUT PLANTERS BANK (LENDER) or order at UCPB Bldg., Makati Avenue, Makati City, Philippines, the sum of ______________ PESOS, (P_____), Philippine Currency, with interest thereon at the rate indicative of DBD retail rate or as determined by the Branch Head.9 UCPB asserts that this is a reversible error, and claims that while the interest rate was not numerically quantified in the face of the promissory notes, it was nonetheless categorically fixed, at the time of execution thereof, at the "rate indicative of the DBD retail rate." UCPB contends that said provision must be read with another stipulation in the promissory notes subjecting to review the interest rate as fixed: The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.10 In this regard, UCPB avers that these are valid reference rates akin to a "prevailing rate" or "prime rate" allowed by this Court in Polotan v. Court of Appeals.11 Furthermore, UCPB argues that even if the proviso "as determined by the branch head" is considered void, such a declaration would not ipso facto render the connecting clause "indicative of DBD retail rate" void in view of the separability clause of the Credit Agreement, which reads: Section 9.08 Separability Clause. If any one or more of the provisions contained in this AGREEMENT, or documents executed in connection herewith shall be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 12 According to UCPB, the imposition of the questioned interest rates did not infringe on the principle of mutuality of contracts, because the spouses Beluso had the liberty to choose whether or not to renew their credit line at the new interest rates pegged by petitioner. 13 UCPB also claims that assuming there was any defect in the mutuality of the contract at the time of its inception, such defect was cured by the subsequent conduct of the spouses Beluso in availing themselves of the credit line from April 1996 to February 1998 without airing any protest with respect to the interest rates imposed by UCPB. According to UCPB, therefore, the spouses Beluso are in estoppel. 14 We agree with the Court of Appeals, and find no merit in the contentions of UCPB. Article 1308 of the Civil Code provides: Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. We applied this provision in Philippine National Bank v. Court of Appeals, 15 where we held: In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that the P1.8 million loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in

contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the weaker party's (the debtor) participation being reduced to the alternative "to take it or leave it" (Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition. The provision stating that the interest shall be at the "rate indicative of DBD retail rate or as determined by the Branch Head" is indeed dependent solely on the will of petitioner UCPB. Under such provision, petitioner UCPB has two choices on what the interest rate shall be: (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head. As UCPB is given this choice, the rate should be categorically determinable in both choices. If either of these two choices presents an opportunity for UCPB to fix the rate at will, the bank can easily choose such an option, thus making the entire interest rate provision violative of the principle of mutuality of contracts. Not just one, but rather both, of these choices are dependent solely on the will of UCPB. Clearly, a rate "as determined by the Branch Head" gives the latter unfettered discretion on what the rate may be. The Branch Head may choose any rate he or she desires. As regards the rate "indicative of the DBD retail rate," the same cannot be considered as valid for being akin to a "prevailing rate" or "prime rate" allowed by this Court in Polotan. The interest rate in Polotan reads: The Cardholder agrees to pay interest per annum at 3% plus the prime rate of Security Bank and Trust Company. x x x. 16 In this provision in Polotan, there is a fixed margin over the reference rate: 3%. Thus, the parties can easily determine the interest rate by applying simple arithmetic. On the other hand, the provision in the case at bar does not specify any margin above or below the DBD retail rate. UCPB can peg the interest at any percentage above or below the DBD retail rate, again giving it unfettered discretion in determining the interest rate. The stipulation in the promissory notes subjecting the interest rate to review does not render the imposition by UCPB of interest rates on the obligations of the spouses Beluso valid. According to said stipulation: The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.17 It should be pointed out that the authority to review the interest rate was given UCPB alone as the lender. Moreover, UCPB may apply the considerations enumerated in this provision as it wishes. As worded in the above provision, UCPB may give as much weight as it desires to each of the following considerations: (1) the prevailing financial and monetary condition; (2) the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or (3) the resulting profitability to the LENDER (UCPB) after due consideration of all dealings with the BORROWER (the spouses Beluso). Again, as in the case of the interest rate provision, there is no fixed margin above or below these considerations. In view of the foregoing, the Separability Clause cannot save either of the two options of UCPB as to the interest to be imposed, as both options violate the principle of mutuality of contracts. UCPB likewise failed to convince us that the spouses Beluso were in estoppel. Estoppel cannot be predicated on an illegal act. As between the parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy.18 The interest rate provisions in the case at bar are illegal not only because of the provisions of the Civil Code on mutuality of contracts, but also, as shall be discussed later, because they violate the Truth in Lending Act. Not disclosing the true finance charges in connection with the extensions of credit is, furthermore, a form of deception which we cannot countenance. It is against the policy of the State as stated in the Truth in Lending Act: Sec. 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.19 Moreover, while the spouses Beluso indeed agreed to renew the credit line, the offending provisions are found in the promissory notes themselves, not in the credit line. In fixing the interest rates in the promissory notes to cover the renewed credit line, UCPB still reserved to itself the same two options (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head. Error in Computation UCPB asserts that while both the RTC and the Court of Appeals voided the interest rates imposed by UCPB, both failed to include in their computation of the outstanding obligation of the spouses Beluso the legal rate of interest of 12% per annum. Furthermore, the penalty charges were also deleted in the decisions of the RTC and the Court of Appeals. Section 2.04, Article II on "Interest and other Bank Charges" of the subject Credit Agreement, provides: Section 2.04 Penalty Charges. In addition to the interest provided for in Section 2.01 of this ARTICLE, any principal obligation of the CLIENT hereunder which is not paid when due shall be subject to a penalty charge of one percent (1%) of the amount of such obligation per month computed from due date until the obligation is paid in full. If the bank accelerates teh (sic) payment of availments hereunder pursuant to ARTICLE VIII hereof, the penalty charge shall be used on the total principal amount outstanding and unpaid computed from the date of acceleration until the obligation is paid in full. 20 Paragraph 4 of the promissory notes also states: In case of non-payment of this Promissory Note (Note) at maturity, I/We, jointly and severally, agree to pay an additional sum equivalent to twenty-five percent (25%) of the total due on the Note as attorneys fee, aside from the expenses and costs of collection whether actually incurred or not, and a penalty charge of one percent (1%) per month on the total amount due and unpaid from date of default until fully paid.21 Petitioner further claims that it is likewise entitled to attorneys fees, pursuant to Section 9.06 of the Credit Agreement, thus: If the BANK shall require the services of counsel for the enforcement of its rights under this AGREEMENT, the Note(s), the collaterals and other related documents, the BANK shall be entitled to recover attorneys fees equivalent to not less than twenty -five percent (25%) of the total amounts due and outstanding exclusive of costs and other expenses. 22 Another alleged computational error pointed out by UCPB is the negation of the Compounding Interest agreed upon by the parties under Section 2.02 of the Credit Agreement:

Section 2.02 Compounding Interest. Interest not paid when due shall form part of the principal and shall be subject to the same interest rate as herein stipulated.23 and paragraph 3 of the subject promissory notes: Interest not paid when due shall be added to, and become part of the principal and shall likewise bear interest at the same rate.24 UCPB lastly avers that the application of the spouses Belusos payments in the disputed computation does not reflect the parties agreement.1avvphi1 The RTC deducted the payment made by the spouses Beluso amounting to P763,693.00 from the principal of P2,350,000.00. This was allegedly inconsistent with the Credit Agreement, as well as with the agreement of the parties as to the facts of the case. In paragraph 7 of the spouses Belusos Manifestation and Motion on Proposed Stipulation of Facts and Issues vis --vis UCPBs Manifestation, the parties agreed that the amount of P763,693.00 was applied to the interest and not to the principal, in accord with Section 3.03, Article II of the Credit Agreement on "Order of the Application of Payments," which provides: Section 3.03 Application of Payment. Payments made by the CLIENT shall be applied in accordance with the following order of preference: 1. Accounts receivable and other out-of-pocket expenses 2. Front-end Fee, Origination Fee, Attorneys Fee and other expenses of collection; 3. Penalty charges; 4. Past due interest; 5. Principal amortization/Payment in arrears; 6. Advance interest; 7. Outstanding balance; and 8. All other obligations of CLIENT to the BANK, if any. 25 Thus, according to UCPB, the interest charges, penalty charges, and attorneys fees had been erroneously excluded by the RTC and the Court of Appeals from the computation of the total amount due and demandable from spouses Beluso. The spouses Belusos defense as to all these issues is that the demand made by UCPB is for a considerably bigger amoun t and, therefore, the demand should be considered void. There being no valid demand, according to the spouses Beluso, there would be no default, and therefore the interests and penalties would not commence to run. As it was likewise improper to foreclose the mortgaged properties or file a case against the spouses Beluso, attorneys fees were not warranted. We agree with UCPB on this score. Default commences upon judicial or extrajudicial demand. 26 The excess amount in such a demand does not nullify the demand itself, which is valid with respect to the proper amount. A contrary ruling would put commercial transactions in disarray, as validity of demands would be dependent on the exactness of the computations thereof, which are too often contested. There being a valid demand on the part of UCPB, albeit excessive, the spouses Beluso are considered in default with respect to the proper amount and, therefore, the interests and the penalties began to run at that point. As regards the award of 12% legal interest in favor of petitioner, the RTC actually recognized that said legal interest should be imposed, thus: "There being no valid stipulation as to interest, the legal rate of interest shall be charged."27 It seems that the RTC inadvertently overlooked its non-inclusion in its computation. The spouses Beluso had even originally asked for the RTC to impose this legal rate of interest in both the body and the prayer of its petition with the RTC: 12. Since the provision on the fixing of the rate of interest by the sole will of the respondent Bank is null and void, only the legal rate of interest which is 12% per annum can be legally charged and imposed by the bank, which would amount to only about P599,000.00 since 1996 up to August 31, 1998. WHEREFORE, in view of the foregoing, petiitoners pray for judgment or order: 2. By way of example for the public good against the Banks taking unfair advantage of the weaker party to their contract, declaring the le gal rate of 12% per annum, as the imposable rate of interest up to February 28, 1999 on the loan of 2.350 million. 28 All these show that the spouses Beluso had acknowledged before the RTC their obligation to pay a 12% legal interest on their loans. When the RTC failed to include the 12% legal interest in its computation, however, the spouses Beluso merely defended in the appellate courts this noninclusion, as the same was beneficial to them. We see, however, sufficient basis to impose a 12% legal interest in favor of petitioner in the case at bar, as what we have voided is merely the stipulated rate of interest and not the stipulation that the loan shall earn interest. We must likewise uphold the contract stipulation providing the compounding of interest. The provisions in the Credit Agreement and in the promissory notes providing for the compounding of interest were neither nullified by the RTC or the Court of Appeals, nor assailed by the spouses Beluso in their petition with the RTC. The compounding of interests has furthermore been declared by this Court to be legal. We have held in Tan v. Court of Appeals,29 that: Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest. As regards the imposition of penalties, however, although we are likewise upholding the imposition thereof in the contract, we find the rate iniquitous. Like in the case of grossly excessive interests, the penalty stipulated in the contract may also be reduced by the courts if it is iniquitous or unconscionable.30 We find the penalty imposed by UCPB, ranging from 30.41% to 36%, to be iniquitous considering the fact that this penalty is already over and above the compounded interest likewise imposed in the contract. If a 36% interest in itself has been declared unconscionable by this Court,31 what more a 30.41% to 36% penalty, over and above the payment of compounded interest? UCPB itself must have realized this, as it gave us a sample computation of the spouses Belusos obligation if both the interest and the penalty charge are reduced to 12 %.

As regards the attorneys fees, the spouses Beluso can actually be liable therefor even if there had been no demand. Filing a case in court is the judicial demand referred to in Article 116932 of the Civil Code, which would put the obligor in delay. The RTC, however, also held UCPB liable for attorneys fees in this case, as the spouses Beluso were forced to litigate the i ssue on the illegality of the interest rate provision of the promissory notes. The award of attorneys fees, it must be recalled, falls under the sound discretion of the court.33 Since both parties were forced to litigate to protect their respective rights, and both a re entitled to the award of attorneys fees from the other, practical reasons dictate that we set off or compensate both parties liabilities for attorneys fees. Theref ore, instead of awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion of the award of attorneys fees to the spouses Beluso. In sum, we hold that spouses Beluso should still be held liable for a compounded legal interest of 12% per annum and a penalty charge of 12% per annum. We also hold that, instead of awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion of the award of attorneys fees to the spouses Beluso. Annulment of the Foreclosure Sale Properties of spouses Beluso had been foreclosed, titles to which had already been consolidated on 19 February 2001 and 20 March 2001 in the name of UCPB, as the spouses Beluso failed to exercise their right of redemption which expired on 25 March 2000. The RTC, however, annulled the foreclosure of mortgage based on an alleged incorrect computation of the spouses Belusos indebtedness. UCPB alleges that none of the grounds for the annulment of a foreclosure sale are present in the case at bar. Furthermore, the annulment of the foreclosure proceedings and the certificates of sale were mooted by the subsequent issuance of new certificates of title in the name of said bank. UCPB claims that the spouses Belusos action for annulment of foreclosure constitutes a collateral attack on its certificates of title, an act proscribed by Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, which provides: Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled except in a direct proceeding in accordance with law. The spouses Beluso retort that since they had the right to refuse payment of an excessive demand on their account, they cannot be said to be in default for refusing to pay the same. Consequently, according to the spouses Beluso, the "enforcement of such illegal and overcharged demand through foreclosure of mortgage" should be voided. We agree with UCPB and affirm the validity of the foreclosure proceedings. Since we already found that a valid demand was made by UCPB upon the spouses Beluso, despite being excessive, the spouses Beluso are considered in default with respect to the proper amount of their obligation to UCPB and, thus, the property they mortgaged to secure such amounts may be foreclosed. Consequently, proceeds of the foreclosure sale should be applied to the extent of the amounts to which UCPB is rightfully entitled. As argued by UCPB, none of the grounds for the annulment of a foreclosure sale are present in this case. The grounds for the proper annulment of the foreclosure sale are the following: (1) that there was fraud, collusion, accident, mutual mistake, breach of trust or misconduct by the purchaser; (2) that the sale had not been fairly and regularly conducted; or (3) that the price was inadequate and the inadequacy was so great as to shock the conscience of the court. 34 Liability for Violation of Truth in Lending Act The RTC, affirmed by the Court of Appeals, imposed a fine of P26,000.00 for UCPBs alleged violation of Republic Act No. 3765, otherwise known as the Truth in Lending Act. UCPB challenges this imposition, on the argument that Section 6(a) of the Truth in Lending Act which mandates the filing of an action to recover such penalty must be made under the following circumstances: Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. x x x (Emphasis ours.) According to UCPB, the Court of Appeals even stated that "[a]dmittedly the original complaint did not explicitly allege a violation of the Truth in Lending Act and no action to formally admit the amended petition [which expressly alleges violation of the Truth in Lending Act] was made either by [respondents] spouses Beluso and the lower court. x x x." 35 UCPB further claims that the action to recover the penalty for the violation of the Truth in Lending Act had been barred by the one-year prescriptive period provided for in the Act. UCPB asserts that per the records of the case, the latest of the subject promissory notes had been executed on 2 January 1998, but the original petition of the spouses Beluso was filed before the RTC on 9 February 1999, which was after the expiration of the period to file the same on 2 January 1999. On the matter of allegation of the violation of the Truth in Lending Act, the Court of Appeals ruled: Admittedly the original complaint did not explicitly allege a violation of the Truth in Lending Act and no acti on to formally admit the amended petition was made either by [respondents] spouses Beluso and the lower court. In such transactions, the debtor and the lending institutions do not deal on an equal footing and this law was intended to protect the public from hidden or undisclosed charges on their loan obligations, requiring a full disclosure thereof by the lender. We find that its infringement may be inferred or implied from allegations that when [respondents] spouses Beluso executed the promissory notes, the interest rate chargeable thereon were left blank. Thus, [petitioner] UCPB failed to discharge its duty to disclose in full to [respondents] Spouses Beluso the charges applicable on their loans. 36 We agree with the Court of Appeals. The allegations in the complaint, much more than the title thereof, are controlling. Other than that stated by the Court of Appeals, we find that the allegation of violation of the Truth in Lending Act can also be inferred from the same allegation in the complaint we discussed earlier: b.) In unilaterally imposing an increased interest rates (sic) respondent bank has relied on the provision of their promissory note granting respondent bank the power to unilaterally fix the interest rates, which rate was not determined in the promissory note but was left solely to the will of the Branch Head of the respondent Bank, x x x. 37 The allegation that the promissory notes grant UCPB the power to unilaterally fix the interest rates certainly also means that the promissory notes do not contain a "clear statement in writing" of "(6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation."38 Furthermore, the spouses Belusos prayer "for such other reliefs just and equitable in the premises" should be deemed to incl ude the civil penalty provided for in Section 6(a) of the Truth in Lending Act.

UCPBs contention that this action to recover the penalty for the violation of the Truth in Lending Act has already prescribe d is likewise without merit. The penalty for the violation of the act is P100 or an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is greater, except that such liability shall not exceed P2,000.00 on any credit transaction.39 As this penalty depends on the finance charge required of the borrower, the borrowers cause of action would only accrue when such finance ch arge is required. In the case at bar, the date of the demand for payment of the finance charge is 2 September 1998, while the foreclosure was made on 28 December 1998. The filing of the case on 9 February 1999 is therefore within the one-year prescriptive period. UCPB argues that a violation of the Truth in Lending Act, being a criminal offense, cannot be inferred nor implied from the allegations made in the complaint.40 Pertinent provisions of the Act read: Sec. 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorneys fees and court costs as determine d by the court. (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,000 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. As can be gleaned from Section 6(a) and (c) of the Truth in Lending Act, the violation of the said Act gives rise to both criminal and civil liabilities. Section 6(c) considers a criminal offense the willful violation of the Act, imposing the penalty therefor of fine, imprisonment or both. Section 6(a), on the other hand, clearly provides for a civil cause of action for failure to disclose any information of the required information to any person in violation of the Act. The penalty therefor is an amount of P100 or in an amount equal to twice the finance charge required by the creditor in connection with such transaction, whichever is greater, except that the liability shall not exceed P2,000.00 on any credit transaction. The action to recover such penalty may be instituted by the aggrieved private person separately and independently from the criminal case for the same offense. In the case at bar, therefore, the civil action to recover the penalty under Section 6(a) of the Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in the promissory notes void, and (2) the action to declare the foreclosure void. This joinder is allowed under Rule 2, Section 5 of the Rules of Court, which provides: SEC. 5. Joinder of causes of action.A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions: (a) The party joining the causes of action shall comply with the rules on joinder of parties; (b) The joinder shall not include special civil actions or actions governed by special rules; (c) Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein; and (d) Where the claims in all the causes of action are principally for recovery of money, the aggregate amount claimed shall be the test of jurisdiction. In attacking the RTCs disposition on the violation of the Truth in Lending Act since the same was not alleged in the complai nt, UCPB is actually asserting a violation of due process. Indeed, due process mandates that a defendant should be sufficiently apprised of the matters he or she would be defending himself or herself against. However, in the 1 July 1999 pre-trial brief filed by the spouses Beluso before the RTC, the claim for civil sanctions for violation of the Truth in Lending Act was expressly alleged, thus: Moreover, since from the start, respondent bank violated the Truth in Lending Act in not informing the borrower in writing before the execution of the Promissory Notes of the interest rate expressed as a percentage of the total loan, the respondent bank instead is liable to pay petitioners double the amount the bank is charging petitioners by way of sanction for its violation. 41 In the same pre-trial brief, the spouses Beluso also expressly raised the following issue: b.) Does the expression indicative rate of DBD retail (sic) comply with the Truth in Lending Act provision to express the interest rate as a simple annual percentage of the loan?42 These assertions are so clear and unequivocal that any attempt of UCPB to feign ignorance of the assertion of this issue in this case as to prevent it from putting up a defense thereto is plainly hogwash. Petitioner further posits that it is the Metropolitan Trial Court which has jurisdiction to try and adjudicate the alleged violation of the Truth in Lending Act, considering that the present action allegedly involved a single credit transaction as there was only one Promissory Note Line. We disagree. We have already ruled that the action to recover the penalty under Section 6(a) of the Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in the promissory notes void, and (2) the action to declare the foreclosure void. There had been no question that the above actions belong to the jurisdiction of the RTC. Subsection (c) of the above-quoted Section 5 of the Rules of Court on Joinder of Causes of Action provides: (c) Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein. Furthermore, opening a credit line does not create a credit transaction of loan or mutuum, since the former is merely a preparatory contract to the contract of loan or mutuum. Under such credit line, the bank is merely obliged, for the considerations specified therefor, to lend to the other party amounts not exceeding the limit provided. The credit transaction thus occurred not when the credit line was opened, but rather when the credit line was availed of. In the case at bar, the violation of the Truth in Lending Act allegedly occurred not when the parties executed the Credit Agreement, where no interest rate was mentioned, but when the parties executed the promissory notes, where the allegedly offending interest rate was stipulated. UCPB further argues that since the spouses Beluso were duly given copies of the subject promissory notes after their execution, then they were duly notified of the terms thereof, in substantial compliance with the Truth in Lending Act. Once more, we disagree. Section 4 of the Truth in Lending Act clearly provides that the disclosure statement must be furnished prior to the consummation of the transaction:

SEC. 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2) (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. The rationale of this provision is to protect users of credit from a lack of awareness of the true cost thereof, proceeding from the experience that banks are able to conceal such true cost by hidden charges, uncertainty of interest rates, deduction of interests from the loaned amount, and the like. The law thereby seeks to protect debtors by permitting them to fully appreciate the true cost of their loan, to enable them to give full consent to the contract, and to properly evaluate their options in arriving at business dec isions. Upholding UCPBs claim of substantial compliance would defeat these purposes of the Truth in Lending Act. The belated discovery of the true cost of credit will too often not be able to reverse the ill effects of an already consummated business decision. In addition, the promissory notes, the copies of which were presented to the spouses Beluso after execution, are not sufficient notification from UCPB. As earlier discussed, the interest rate provision therein does not sufficiently indicate with particularity the interest rate to be applied to the loan covered by said promissory notes. Forum Shopping UCPB had earlier moved to dismiss the petition (originally Case No. 99-314 in RTC, Makati City) on the ground that the spouses Beluso instituted another case (Civil Case No. V-7227) before the RTC of Roxas City, involving the same parties and issues. UCPB claims that while Civil Case No. V-7227 initially appears to be a different action, as it prayed for the issuance of a temporary restraining order and/or injunction to stop foreclosure of spouses Belusos properties, it poses issues which are similar to those of the present case.43 To prove its point, UCPB cited the spouses Belusos Amended Petition in Civil Case No. V -7227, which contains similar allegations as those in the present case. The RTC of Makati denied UCPBs Motion to Dismiss Case No. 99-314 for lack of merit. Petitioner UCPB raised the same issue with the Court of Appeals, and is raising the same issue with us now. The spouses Beluso claim that the issue in Civil Case No. V-7227 before the RTC of Roxas City, a Petition for Injunction Against Foreclosure, is the propriety of the foreclosure before the true account of spouses Beluso is determined. On the other hand, the issue in Case No. 99-314 before the RTC of Makati City is the validity of the interest rate provision. The spouses Beluso claim that Civil Case No. V-7227 has become moot because, before the RTC of Roxas City could act on the restraining order, UCPB proceeded with the foreclosure and auction sale. As the act sought to be restrained by Civil Case No. V-7227 has already been accomplished, the spouses Beluso had to file a different action, that of Annulment of the Foreclosure Sale, Case No. 99-314 with the RTC, Makati City. Even if we assume for the sake of argument, however, that only one cause of action is involved in the two civil actions, namely, the violation of the right of the spouses Beluso not to have their property foreclosed for an amount they do not owe, the Rules of Court nevertheless allows the filing of the second action. Civil Case No. V-7227 was dismissed by the RTC of Roxas City before the filing of Case No. 99-314 with the RTC of Makati City, since the venue of litigation as provided for in the Credit Agreement is in Makati City. Rule 16, Section 5 bars the refiling of an action previously dismissed only in the following instances: SEC. 5. Effect of dismissal.Subject to the right of appeal, an order granting a motion to dismiss based on paragraphs (f), (h) and (i) of section 1 hereof shall bar the refiling of the same action or claim. (n) Improper venue as a ground for the dismissal of an action is found in paragraph (c) of Section 1, not in paragraphs (f), (h) and (i): SECTION 1. Grounds.Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds: (a) That the court has no jurisdiction over the person of the defending party; (b) That the court has no jurisdiction over the subject matter of the claim; (c) That venue is improperly laid; (d) That the plaintiff has no legal capacity to sue; (e) That there is another action pending between the same parties for the same cause; (f) That the cause of action is barred by a prior judgment or by the statute of limitations; (g) That the pleading asserting the claim states no cause of action; (h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished ; (i) That the claim on which the action is founded is unenforceable under the provisions of the statute of frauds; and (j) That a condition precedent for filing the claim has not been complied with. 44 (Emphases supplied.)

When an action is dismissed on the motion of the other party, it is only when the ground for the dismissal of an action is found in paragraphs (f), (h) and (i) that the action cannot be refiled. As regards all the other grounds, the complainant is allowed to file same action, but should take care that, this time, it is filed with the proper court or after the accomplishment of the erstwhile absent condition precedent, as the case may be. UCPB, however, brings to the attention of this Court a Motion for Reconsideration filed by the spouses Beluso on 15 January 1999 with the RTC of Roxas City, which Motion had not yet been ruled upon when the spouses Beluso filed Civil Case No. 99-314 with the RTC of Makati. Hence, there were allegedly two pending actions between the same parties on the same issue at the time of the filing of Civil Case No. 99-314 on 9 February 1999 with the RTC of Makati. This will still not change our findings. It is indeed the general rule that in cases where there are two pending actions between the same parties on the same issue, it should be the later case that should be dismissed. However, this rule is not absolute. According to this Court in Allied Banking Corporation v. Court of Appeals 45 : In these cases, it is evident that the first action was filed in anticipation of the filing of the later action and the purpose is to preempt the later suit or provide a basis for seeking the dismissal of the second action. Even if this is not the purpose for the filing of the first action, it may nevertheless be dismissed if the later action is the more appropriate vehicle for the ventilation of the issues between the parties. Thus, in Ramos v. Peralta, it was held: [T]he rule on litis pendentia does not require that the later case should yield to the earlier case. What is required merely is that there be another pending action, not a prior pending action. Considering the broader scope of inquiry involved in Civil Case No. 4102 and the location of the property involved, no error was committed by the lower court in deferring to the Bataan court's jurisdiction. Given, therefore, the pendency of two actions, the following are the relevant considerations in determining which action should be dismissed: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties. In the case at bar, Civil Case No. V-7227 before the RTC of Roxas City was an action for injunction against a foreclosure sale that has already been held, while Civil Case No. 99-314 before the RTC of Makati City includes an action for the annulment of said foreclosure, an action certainly more proper in view of the execution of the foreclosure sale. The former case was improperly filed in Roxas City, while the latter was filed in Makati City, the proper venue of the action as mandated by the Credit Agreement. It is evident, therefore, that Civil Case No. 99-314 is the more appropriate vehicle for litigating the issues between the parties, as compared to Civil Case No. V-7227. Thus, we rule that the RTC of Makati City was not in error in not dismissing Civil Case No. 99-314. WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED with the following MODIFICATIONS: 1. In addition to the sum of P2,350,000.00 as determined by the courts a quo, respondent spouses Samuel and Odette Beluso are also liable for the following amounts: a. Penalty of 12% per annum on the amount due46 from the date of demand; and b. Compounded legal interest of 12% per annum on the amount due 47 from date of demand; 2. The following amounts shall be deducted from the liability of the spouses Samuel and Odette Beluso: a. Payments made by the spouses in the amount of P763,692.00. These payments shall be applied to the date of actual payment of the following in the order that they are listed, to wit: i. penalty charges due and demandable as of the time of payment; ii. interest due and demandable as of the time of payment; iii. principal amortization/payment in arrears as of the time of payment; iv. outstanding balance. b. Penalty under Republic Act No. 3765 in the amount of P26,000.00. This amount shall be deducted from the liability of the spouses Samuel and Odette Beluso on 9 February 1999 to the following in the order that they are listed, to wit: i. penalty charges due and demandable as of time of payment; ii. interest due and demandable as of the time of payment; iii. principal amortization/payment in arrears as of the time of payment; iv. outstanding balance. 3. The foreclosure of mortgage is hereby declared VALID. Consequently, the amounts which the Regional Trial Court and the Court of Appeals ordered respondents to pay, as modified in this Decision, shall be deducted from the proceeds of the foreclosure sale. SO ORDERED.

G.R. No. 161397

June 30, 2005

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. FELIPE P. ARCILLA, JR., Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 161426 June 30, 2005

FELIPE P. ARCILLA, JR., Petitioner, vs. DEVELOPMENT BANK OF THE PHILIPPINES, Respondent. Atty. Felipe P. Arcilla, Jr. was employed by the Development Bank of the Philippines (DBP) in October 1981. About five or six months thereafter, he was assigned to the legal department, and thereafter, decided to avail of a loan under the Individual Housing Project (IHP) of the bank.1 On September 12, 1983, DBP and Arcilla executed a Deed of Conditional Sale 2 over a parcel of land, as well as the house to be constructed thereon, for the price of P160,000.00. Arcilla borrowed the said amount from DBP for the purchase of the lot and the construction of a residential building thereon. He obliged himself to pay the loan in 25 years, with a monthly amortization of P1,417.91, with 9% interest per annum, to be deducted from his monthly salary. 3 DBP obliged itself to transfer the title of the property upon the payment of the loan, including any increments thereof. It was also agreed therein that if Arcilla availed of optional retirement, he could elect to continue paying the loan, provided that the loan/amount would be converted into a regular real estate loan account with the prevailing interest assigned on real estate loans, payable within the remaining term of the loan account.4 Arcilla was notified of the periodic release of his loan. 5 During the period of July 1984 to December 31, 1986, the monthly amortizations for the said account were deducted from his monthly salary, for which he was issued receipts. 6 The monthly amortization was increased to P1,468.92 in November 1984, and to P1,691.51 beginning January 1985. However, Arcilla opted to resign from the bank in December 1986. Conformably with the Deed of Conditional Sale, the bank informed him, on June 11, 1987, that the balance of his loan account with the bank had been converted to a regular housing loan, thus: Amount converted to PHLoan P 155,218.79 - 1 Remaining Term 22 yrs. & 6 mos< 21 yrs. & 10 mos. 22 yrs. Monthly Amortization P1,342.72

Interest Rate

9%

6,802.45 - 2 24,342.91 - 3

9% 9% Plus: MRI at PC. 41/thousand

59.41 212.07

P1,614.20

76.41

P186,364.15

Total

P1,690.617 =========

On July 24, 1987, Arcilla signed three Promissory Notes 8 for the total amount of P186,364.15. He was also obliged to pay service charge and interests, as follows:

a.1 On the amount advanced or balance thereof that remains unpaid for 30 days* or less: i. ii. iii. Interest on advances at 7% p.a. over DBP's borrowing cost: No 2% service charge No 8% penalty charge

a.2 On the amount advanced or balance thereof that remains unpaid for more than 30 days: i. Interest on the advance at 7% p.a. over DBP's borrowing cost; One time 2% service charge Interest on the service charge 8% penalty charge on the balances of the advances and service charge.9 ] ] ] ] ] -- To be computed from the start of the 30-day period

ii. iii. iv.

Arcilla also agreed to pay to DBP the following: *Insurance Premiums - 30-day period to be computed from date of advances Other Advances - 30-day period to be computed from date of notification

b. b.1 b.2

Taxes One time service charge Interest and penalty charge 2% of the amount advanced Interest - 7% p.a. over borrowing cost Penalty charge 8% p.a. if unpaid after 30 days from date of advance ] ]

i.

Interest of the advance at 7% p.a. over DBP's

borrowing costs; ii. iii. iv. One time 2% service charge Interest on the service charge 8% penalty charge on the balances of the advance and service charge.

]-] ] ] ] ]

To be computed from start of 30-day period

*Insurance Premiums - 30-day period to be computed from date of advances. Other Advances - 30-day period to be computed from date of notification.

b. b.1 b.2

Taxes One time service charge Interest and penalty charge 2% of the amount advanced Interest - 7% p.a. over borrowing cost Penalty charge 8% p.a. if unpaid after 30 days from date of advance

However, Arcilla also agreed to the reservation by the DBP of its right to increase (with notice to him) the "rate of interest on the loan, as well as all other fees and charges on loans and advances pursuant to such policy as it may adopt from time to time during the period of the loan; Provided, that the rate of interest on the loan shall be reduced by law or by the Monetary Board; Provided, further, that the adjustment in the rate of interest shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest." 10 Upon his request, DBP agreed to grant Arcilla an additional cash advance of P32,000.00. Thereafter, on May 23, 1984, a Supplement to the Conditional Sale Agreement was executed in which DBP and Arcilla agreed on the following terms of the loan:

Amount P32,000.00

Interest Rate Per Annum Nine (9%) per cent MRI for P32,000.00 at P0.40/1,000.00 same to be consolidated with the original advance in accordance with Condition No. 8 hereof.11

Terms 24 years

Amortization P271.57 12.80

P32,000.00

(Est. Amort.)

P 284.37 =========

The additional advance was, thus, consolidated to the outstanding balance of Arcilla's original advance, payable within the remaining term thereof at 9% per annum. However, he failed to pay his loan account, advances, penalty charges and interests which, as of October 31, 1990, amounted to P241,940.93.12 DBP rescinded the Deed of Conditional Sale by notarial act on November 27, 1990. 13 Nevertheless, it wrote Arcilla, on January 3, 1992, giving him until October 24, 1992, within which to repurchase the property upon full payment of the current appraisal or updated total, whichever is lesser; in case of failure to do so, the property would be advertised for bidding. 14 DBP reiterated the said offer on October 7, 1992.15Arcilla failed to respond. Consequently, the property was advertised for sale at public bidding on February 14, 1994.16 Arcilla filed a complaint against DBP with the Regional Trial Court (RTC) of Antipolo, Rizal, on February 21, 1994. He alleged that DBP failed to furnish him with the disclosure statement required by Republic Act (R.A.) No. 3765 and Central Bank (CB) Circular No. 158 prior to the execution of the deed of conditional sale and the conversion of his loan account with the bank into a regular housing loan account. Despite this, DBP immediately deducted the account from his salary as early as 1984. Moreover, the bank applied its own formula and imposed its usurious interests, penalties and charges on his loan account and advances. He further alleged, thus: 13. That when plaintiff could no longer cope-up with defendant's illegal and usurious impositions, the DBP unilaterally increased further the rate of interest, without notice to the latter, and heaped-up usurious interests, penalties and charges; --14. That to further bend the back of the plaintiff, defendant rescinded the subject deed of conditional sale on 4 December 1990 without giving due notice to plaintiff; 15. That much later, on 10 October 1993, plaintiff received a letter from defendant dated 19 September 1993, informing plaintiff that the subject deed of conditional sale was already rescinded on 4 December 1990 (xerox copy of the same is hereto attached and made an integral part hereof as Annex "C";17 In its answer to the complaint, the DBP alleged that it substantially complied with R.A. No. 3765 and CB Circular No. 158 because the details required in said statements were particularly disclosed in the promissory notes, deed of conditional sale and the required notices sent to Arcilla. In any event, its failure to comply strictly with R.A. No. 3765 did not affect the validity and enforceability of the subject contracts or transactions. DBP interposed a counterclaim for the possession of the property. On April 27, 2001, the trial court rendered judgment in favor of Arcilla and nullified the notarial rescission of the deeds executed by the parties. The fallo of the decision reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant. 1avvphil.zw+Defendant is hereby directed to furnish the disclosure statement to the plaintiff within five (5) days upon receipt hereof in the manner and form provided by

R.A. No. 3765 and submit to this Court for approval the total obligation of the plaintiff as of this date, within ten (10) days from receipt of this order. The Notarial Rescission (Exh. "16") dated November 27, 1990 is hereby declared null and void. Costs against the defendant. SO ORDERED.18 DBP appealed the decision to the Court of Appeals (CA) wherein it made the following assignment of errors: 4.1. The trial court erred in ruling that the provision of the details of the loan without the issuance of a "Disclosure Statement" is not compliance with the "Truth in Lending Act;" 4.2. The trial court erred in declaring the Notarial Rescission null and void; and 4.3. The trial court erred in denying DBP's counterclaims for recovery of possession, back rentals and litigation expenses.19 On May 29, 2003, the CA rendered judgment setting aside and reversing the decision of the RTC. In ordering the dismissal of the complaint, the appellate court ruled that DBP substantially complied with R.A. No. 3765 and CB Circular No. 158. Arcilla filed a motion for reconsideration of the decision. For its part, DBP filed a motion for partial reconsideration of the decision, praying that Arcilla be ordered to vacate the property. However, the appellate court denied both motions. The parties filed separate petitions for review on certiorari with this Court. The first petition, entitled Development Bank of the Philippines v. Court of Appeals, was docketed as G.R. No. 161397; the second petition, entitled Felipe Arcilla, Jr. v. Court of Appeals , was docketed as G.R. No. 161426. The Court resolved to consolidate the two cases. The issues raised in the two petitions are the following: a) whether or not petitioner DBP complied with the disclosure requirement of R.A. No. 3765 and CB Circular No. 158, Series of 1978, in the execution of the deed of conditional sale, the supplemental deed of conditional sale, as well as the promissory notes; and b) whether or not respondent Felipe Arcilla, Jr. is mandated to vacate the property and pay rentals for his occupation thereof after the notarial rescission of the deed of conditional sale was rescinded by notarial act, as well as the supplement executed by DBP. On the first issue, Arcilla avers that under R.A. No. 3765 and CB Circular No. 158, the DBP, as the creditor bank, was mandated to furnish him with the requisite information in such form prescribed by the Central Bank before the commutation of the loan transaction. He avers that the disclosure of the details of the loan contained in the deed of conditional sale and the supplement thereto, the promissory notes and release sheet, do not constitute substantial compliance with the law and the CB Circular. He avers that the required disclosure did not include the following: [T]he percentage of Finance Charges to Total Amount Financed (Computed in accordance with Sec. 2(i) of CB Circular 158; the Additional Charges in case certain stipulations in the contract are not met by the debtor; Total Non-Finance Charges; Total Finance Charges, Effective Interest Rate, etc. 20 Arcilla further posits that the failure of DBP to comply with its obligation under R.A. No. 3765 and CB Circular No. 158 forecloses its right to rescind the transaction between them, and to demand compliance of his obligation arising from said transaction. Moreover, the bank had no right to deduct the monthly amortizations from his salary without first complying with the mandate of R.A. No. 3765. DBP, on the other hand, avers that all the information required by R.A. No. 3765 was already contained in the loan transaction documents. It posits that even if it failed to comply strictly with the disclosure requirement of R.A. No. 3765, nevertheless, under Section 6(b) of the law, the validity and enforceability of any action or transaction is not affected. It asserts that Arcilla was estopped from invoking R.A. No. 3765 because he failed to demand compliance with R.A. No. 3765 from the bank before the consummation of the loan transaction, until the time his complaint was filed with the trial court. In its petition in G.R. No. 161397, DBP asserts that the RTC erred in not rendering judgment on its counterclaim for the possession of the subject property, and the liability of Arcilla for rentals while in the possession of the property after the notarial rescission of the deeds of conditional sale. For his part, Arcilla (in G.R. No. 161426) insists that the respondent failed to comply with its obligation under R.A. No. 3765; hence, the notarial rescission of the deed of conditional sale and the supplement thereof was null and void. Until DBP complies with its obligation, he is not obliged to comply with his. The petition of Arcilla has no merit. Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, the bank, as creditor, is obliged to furnish a client with a clear statement, in writing, setting forth, to the extent applicable and in accordance with the rules and regulations prescribed by the Monetary Board of the Central Bank of the Philippines, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charges expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. Under Circular No. 158 of the Central Bank, the information required by R.A. No. 3765 shall be included in the contract covering the credit transaction or any other document to be acknowledged and signed by the debtor, thus: The contract covering the credit transaction, or any other document to be acknowledged and signed by the debtor, shall indicate the above seven items of information. In addition, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor.

Furthermore, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor.21 If the borrower is not duly informed of the data required by the law prior to the consummation of the availment or drawdown, the lender will have no right to collect such charge or increases thereof, even if stipulated in the promissory note. 22 However, such failure shall not affect the validity or enforceability of any contract or transaction. 23 In the present case, DBP failed to disclose the requisite information in the disclosure statement form authorized by the Central Bank, but did so in the loan transaction documents between it and Arcilla. There is no evidence on record that DBP sought to collect or collected any interest, penalty or other charges, from Arcilla other than those disclosed in the said deeds/documents. 1avvphi1.zw+ The Court is convinced that Arcilla's claim of not having been furnished the data/information required by R.A. No. 3765 and CB Circular No. 158 was but an afterthought. Despite the notarial rescission of the conditional sale in 1990, and DBP's subsequent repeated offers to repurchase the property, the latter maintained his silence. Arcilla filed his complaint only on February 21, 1994, or four years after the said notarial rescission. The Court finds and so holds that the following findings and ratiocinations of the CA are correct: After a careful perusal of the records, We find that the appellee had been sufficiently informed of the terms and the requisite charges necessarily included in the subject loan. It must be stressed that the Truth in Lending Act ( R.A. No. 3765), was enacted primarily "to protect its citizens from a lack of awareness of the true cost of credit to the user by using a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy" (Emata vs. Intermediate Appellate Court, 174, SCRA 464 [1989]; Sec. 2, R.A. No. 3765). Contrary to appellee's claim that he was not sufficiently informed of the details of the loan, the records disclose that the required informations were readily available in the three (3) promissory notes he executed. Precisely, the said promissory notes were executed to apprise appellee of the remaining balance on his loan when the same was converted into a regular housing loan. And on its face, the promissory notes signed by no less than the appellee readily shows all the data required by the Truth in Lending Act ( R.A. No. 3765). Apropos, We agree with the appellant that appellee, a lawyer, would not be so gullible or negligent as to sign documents without knowing fully well the legal implications and consequences of his actions, and that appellee was a former employee of appellant. As such employee, he is as well presumed knowledgeable with matters relating to appellant's business and fully cognizant of the terms of the loan he applied for, including the charges that had to be paid. It might have been different if the borrower was, say, an ordinary employee eager to buy his first house and is easily lured into accepting onerous terms so long as the same is payable on installments. In such cases, the Court would be disposed to be stricter in the application of the Truth in Lending Act, insisting that the borrower be fully informed of what he is entering into. But in the case at bar, considering appellee's education and training, We must hold, in the light of the evidence at hand, that he was duly informed of the necessary charges and fully understood their implications and effects. Consequently, the trial court's annulment of the rescission anchored on this ground was unjustified.24 Anent the prayer of DBP to order Arcilla to vacate the property and pay rentals therefor from 1990, a review of the records has shown that it failed to adduce evidence on the reasonable amount of rentals for Arcilla's occupancy of the property. Hence, the Court orders a remand of the case to the court of origin, for the parties to adduce their respective evidence on the bank's counterclaim. IN LIGHT OF ALL THE FOREGOING, the petition in G.R. No. 161426 is DENIED for lack of merit. The petition in G.R. No. 161397 is PARTIALLY GRANTED. The case is hereby REMANDED to the Regional Trial Court of Antipolo, Rizal, Branch 73, for itto resolve the counterclaim of the Development Bank of the Philippines for possession of the property, and for the reasonable rentals for Felipe P. Arcilla, Jr.'s occupancy thereof after the notarial rescission of the Deed of Conditional Sale in 1990. Costs against petitioner Felipe P. Arcilla, Jr. SO ORDERED.

G.R. No. 95533

November 20, 2000

REPUBLIC OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK (Santa Ana Branch Davao City), * respondents. On December 28, 1988, a complaint for escheat 1 was filed by petitioner, Republic of the Philippines, with the Regional Trial Court of Davao City against several banks which had branches within the jurisdiction of the said court. 2 The complaint alleged that pursuant to Act No. 3936 as amended by P.D. 679, 3 the respective managers of the defendant banks submitted to the Treasurer of the Republic of the Philippines separate statements prepared under oath which listed all deposits and credits held by them in favor of depositors or creditors either known to be dead, have not been heard from, or have not made depositors or withdrawals for ten years or more since December 31, 1970. The complaint prayed that after due notice to the defendant banks, and after hearing, judgment be rendered declaring that the deposits, credits and unpaid balances in question be escheated to petitioner, commanding defendant banks to forthwith deposit the same with the Treasurer of the Philippines.4 On April 12, 1989, the lower court issued an order directing petitioner to show cause why the complaint should not be dismissed for failure to state a cause of action. According to the order, the complaint contained no allegation that defendant banks have complied with two of the conditions in Section 2 of Act No. 3936, 5 compliance with the requirements being necessary for the complaint to prosper. 6 On April 27, 1989, petitioner submitted its manifestation and motion to allow amendment of the petition to allege compliance with the conditions set forth in Section 2 of Act. No. 3936 as amended by P.D. 679 (" Unclaimed Balances Law").7 The amended complaint prayed that judgment be rendered ordering that the amount of P97,263.38, deposited with the defendant banks by depositors who are known to be dead or have not made further deposits or withdrawals during the preceding ten years or more be escheated in favor of the Republic of the Philippines in accordance with Section 1, Act 3936 as amended by P.D. 679. The trial court found the amendment sufficient and issued an order dated June 7, 1989 requiring petitioner to publish a notice in the Mindanao Forum Standard once a week for two consecutive weeks, containing the summons, notice to the public, the amended petition incorporated in

the summons and the list of unclaimed balances. The notice was estimated to occupy 27 pages of the said newspaper at an estimated cost of P50,000.00.8 On July 11, 1989, petitioner submitted a manifestation to the lower court praying that the publication of the list of the unclaimed balances be dispensed with. Petitioner posited that under Section 3, Act No. 3936, only the following are required to be published: (1) summons to respondent banks; and (2) notice to all persons other than those named defendants therein. Petitioner submitted that to require it to publish the names and list of unclaimed balances would only result in additional and unnecessary expense to the government. 9 On August 1, 1989, the trial court issued the following Order: "WHEREFORE, this Court will not dispense with the publication of the list of unclaimed balances and, unless the plaintiff, through the Office of the Solicitor General, agrees to the publication thereof as stated in the Order of this Court dated June 7, 1989, and shoulder the cost thereof as also mentioned in said Order, and manifests its agreement to this Court in writing within thirty (30) days from receipt thereof, this case will be DISMISSED WITHOUT PREJUDICE. SO ORDERED." Petitioner filed a motion for reconsideration of the above Order, 10 which was denied by the lower court for lack of merit.11 Subsequently, the trial court issued an Order dated October 31, 1989 dismissing Civil Case No. 19488-89 without prejudice for plaintiffs failure to agree to the required publication and shoulder the costs thereof. 12 Petitioner received a copy of the aforesaid Order on November 15, 1989. On January 10, 1990, petitioner filed with the Court of Appeals a petition for mandamus and certiorari, alleging grave abuse of discretion on the part of respondent judge in ordering the publication of the list of unclaimed balances.13 The petition for certiorari and mandamus was dismissed by the Court of Appeals, on the ground that the proper remedy was ordinary appeal. Thus:14 It is axiomatic that the extraordinary remedy of certiorari is available only in the absence of a plain, speedy and adequate remedy like appeal. The order of the respondent court dated October 31, 1989 dismissing the case is final and appealable (Monares vs. CWA Enterpises, 105 Phil. 1333; Vol. I, Francisco, Rules of Court, at pp. 967-968). No timely appeal having been taken therefrom, the same became final and executory and this petition for certiorari filed on January 10, 1989 to review the interlocutory orders issued by the court before the case was dismissed can no longer be entertained. WHEREFORE, the petition for certiorari is dismissed for lack of merit. SO ORDERED. Aggrieved, petitioner filed an appeal under Rule 45 of the Rules of Court raising the following issues: 15 (1) Whether or not respondent RTC judge committed grave abuse of discretion tantamount to lack of jurisdiction in ordering the publication of the list of unclaimed balances listed under annexes "A" to "P" of the complaint. (2) Whether or not the remedy of appeal, though available, was the speedy and adequate remedy. (3) Whether or not respondent RTC judge in issuing the interlocutory orders dated June 7, 1989 and August 1, 1990 which are contrary to Sec. 1, Act 3936, as amended by PD 679, otherwise known as the "Unclaimed Balances Law" acted in excess of and without jurisdiction; consequently thus making the Orders of Sept. 1, 1989 (denying the motion for reconsideration) and the Order dated October 31, 1989 dismissing the case, patently null and void. (4) Whether or not the decision of the Honorable Court of Appeals is in accord with law. The petition is without merit. The Order of the trial court dismissing the complaint, albeit without prejudice, was a final order in the sense that it finally disposed of the case. As such, petitioners remedy was to file an ordinary appeal to the Court of Appeals within fifteen (15) days from receipt hereof. This Court has previously held that an order dismissing a case without prejudice is a final order if no motion for reconsideration or appeal therefrom is timely filed. In Olympia International vs. Court of Appeals ,16 we stated thus: The dismissal without prejudice of a complaint does not however mean that said dismissal order was any less final.1vvph!1 Such order of dismissal is complete in all details, and though without prejudice, nonetheless finally disposed of the matter. It was not merely an interlocutory order but a final disposition of the complaint. The law grants an aggrieved party a period of fifteen (15) days from his receipt of the courts decision or order disposing of the action or proceeding to appeal or move to reconsider the same. After the lapse of the fifteen-day period, an order becomes final and executory and is beyond the power or jurisdiction of the court which rendered it to further amend or revoke. A final judgment or order cannot be modified in any respect, even if the modification sought is for the purpose of correcting an erroneous conclusion by the court which rendered the same. Hence, the Court of Appeals did not err when it dismissed the petition for certiorari and mandamus, on the ground that the proper remedy was to appeal within fifteen (15) days. The lapse of the reglementary period was of no moment. A basic requisite for the special civil action of certiorari to lie is that there be no appeal nor plain, speedy and adequate remedy in the ordinary course of law. Certiorari is a remedy of last recourse and is a limited form of review. Its principal function is to keep inferior tribunals within their jurisdiction. It cannot be used as a substitute for a lost appeal. It is not intended to correct errors of procedure or mistakes in the judges findings or conclu sions.17 In a more recent case,this Court held: xxx xxx xxx. Apparently, petitioner resorted to this special civil action because it had failed to take an appeal within the 15-day reglementary period which expired on June 20, 1997. This, of course, cannot be done. The special civil action of certiorari cannot be used as a substitute for an appeal which petitioner has lost. Nor can it be contended that the only question raised in this case is a jurisdictional question. Certiorari lies only where there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law. There is no reason why the question

being raised by petitioner, i.e., whether the appellate court committed a grave abuse of discretion in dismissing petitions, could not have been raised by it on appeal.18 Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, has the discretion to treat a petition for certiorari as having been filed under Rule 45, especially if filed within the reglementary period for filing a petition for review.19 In the case at bar, there is no compelling reason for the Court of Appeals to have treated the petition for certiorari and mandamus as an ordinary appeal. Aside from being filed beyond the fifteen (15) day period, the petition failed to show that the trial court committed grave abuse of discretion or want or excess of jurisdiction in issuing the assailed Order dismissing the complaint. If at all, any mistake therein was an error of judgment or procedure, which is correctible in an ordinary appeal filed in due time. The publication of the list of unclaimed balances is intended to safeguard the right of the depositors, their heirs and successors to due process.20 This was made clear by the lower court in its assailed Order, to wit: 21 Moreover, how would other persons who may have an interest in any of the unclaimed balances know what this case is all about and whether they have an interest in this case if the amended complaint and list of unclaimed balances are not published? Such other persons may be heirs of the bank depositors named in the list of unclaimed balances. xxx xxx xxx

The fact that the government is in a tight financial situation is not a justification for this Court to dispense with the elementary rule of due process. As declared by the trial court in its Order dated August 1, 1989, the dismissal of the petition for escheat is without prejudice.1wphi1 In other words, the State can refile the said petition, notwithstanding the lapse of time. Prescription of action does not run against the government.22 WHEREFORE, the petition is DENIED. The decision of the Court of Appeals dated August 14, 1990 is AFFIRMED. SO ORDERED.

G.R. No. 192413

June 13, 2012

Rizal Commercial Banking Corporation, Petitioner, vs. Hi-Tri Development Corporation and Luz R. Bakunawa, Respondents. Before the Court is a Rule 45 Petition for Review on Certiorari filed by petitioner Rizal Commercial Banking Corporation (RCBC) against respondents Hi-Tri Development Corporation (Hi-Tri) and Luz R. Bakunawa (Bakunawa). Petitioner seeks to appeal from the 26 November 2009 Decision and 27 May 2010 Resolution of the Court of Appeals (CA), 1 which reversed and set aside the 19 May 2008 Decision and 3 November 2008 Order of the Makati City Regional Trial Court (RTC) in Civil Case No. 06-244.2 The case before the RTC involved the Complaint for Escheat filed by the Republic of the Philippines (Republic) pursuant to Act No. 3936, as amended by Presidential Decree No. 679 (P.D. 679), against certain deposits, credits, and unclaimed balances held by the branches of various banks in the Philippines. The trial court declared the amounts, subject of the special proceedings, escheated to the Republic and ordered them deposited with the Treasurer of the Philippines (Treasurer) and credited in favor of the Republic. 3 The assailed RTC judgments included an unclaimed balance in the amount of P 1,019,514.29, maintained by RCBC in its Ermita Business Center branch. We quote the narration of facts of the CA4 as follows: x x x Luz [R.] Bakunawa and her husband Manuel, now deceased ("Spouses Bakunawa") are registered owners of six (6) parcels of land covered by TCT Nos. 324985 and 324986 of the Quezon City Register of Deeds, and TCT Nos. 103724, 98827, 98828 and 98829 of the Marikina Register of Deeds. These lots were sequestered by the Presidential Commission on Good Government [(PCGG)]. Sometime in 1990, a certain Teresita Millan ("Millan"), through her representative, Jerry Montemayor, offered to buy said lots for "P 6,724,085.71", with the promise that she will take care of clearing whatever preliminary obstacles there may[]be to effect a "completion of the sale". The Spouses Bakunawa gave to Millan the Owners Copies of said TCTs and in turn, Millan made a down[]payment of " P 1,019,514.29" for the intended purchase. However, for one reason or another, Millan was not able to clear said obstacles. As a result, the Spouses Bakunawa rescinded the sale and offered to return to Millan her down[]payment of P 1,019,514.29. However, Millan refused to accept back the P 1,019,514.29 down[]payment. Consequently, the Spouses Bakunawa, through their company, the Hi-Tri Development Corporation ("HiTri") took out on October 28, 1991, a Managers Check from RCBC -Ermita in the amount of P 1,019,514.29, payable to Millans company Rosmil Realty and Development Corporation ("Rosmil") c/o Teresita Millan and used this as one of their basis for a complaint against Millan and Montemayor which they filed with the Regional Trial Court of Quezon City, Branch 99, docketed as Civil Case No. Q-91-10719 [in 1991], praying that: 1. That the defendants Teresita Mil[l]an and Jerry Montemayor may be ordered to return to plaintiffs spouses the Owners Copies of Transfer Certificates of Title Nos. 324985, 324986, 103724, 98827, 98828 and 98829; 2. That the defendant Teresita Mil[l]an be correspondingly ordered to receive the amount of One Million Nineteen Thousand Five Hundred Fourteen Pesos and Twenty Nine Centavos (P 1,019,514.29); 3. That the defendants be ordered to pay to plaintiffs spouses moral damages in the amount of P 2,000,000.00; and 4. That the defendants be ordered to pay plaintiffs attorneys fees in the amount of P 50,000.00. Being part and parcel of said complaint, and consistent with their prayer in Civil Case No. Q-91-10719 that "Teresita Mil[l]an be correspondingly ordered to receive the amount of One Million Nineteen Thousand Five Hundred Fourteen Pesos and Twenty Nine [Centavos] ("P 1,019,514.29")["], the Spouses Bakunawa, upon advice of their counsel, retained custody of RCBC Managers Check No. ER 034469 and refrained from canceling or negotiating it. All throughout the proceedings in Civil Case No. Q-91-10719, especially during negotiations for a possible settlement of the case, Millan was informed that the Managers Check was available for her withdrawal, she being the payee. On January 31, 2003, during the pendency of the abovementioned case and without the knowledge of [Hi-Tri and Spouses Bakunawa], x x x RCBC reported the "P 1,019,514.29-credit existing in favor of Rosmil" to the Bureau of Treasury as among its "unclaimed balances" as of

January 31, 2003. Allegedly, a copy of the Sworn Statement executed by Florentino N. Mendoza, Manager and Head of RCBCs Asset Management, Disbursement & Sundry Department ("AMDSD") was posted within the premises of RCBC-Ermita. On December 14, 2006, x x x Republic, through the [Office of the Solicitor General (OSG)], filed with the RTC the action below for Escheat [(Civil Case No. 06-244)]. On April 30, 2008, [Spouses Bakunawa] settled amicably their dispute with Rosmil and Millan. Instead of only the amount of "P 1,019,514.29", [Spouses Bakunawa] agreed to pay Rosmil and Millan the amount of "P 3,000,000.00", [which is] inclusive [of] the amount of ["]P 1,019,514.29". But during negotiations and evidently prior to said settlement, [Manuel Bakunawa, through Hi-Tri] inquired from RCBCErmita the availability of the P 1,019,514.29 under RCBC Managers Check No. ER 034469. [Hi -Tri and Spouses Bakunawa] were however dismayed when they were informed that the amount was already subject of the escheat proceedings before the RTC. On April 17, 2008, [Manuel Bakunawa, through Hi-Tri] wrote x x x RCBC, viz: "We understand that the deposit corresponding to the amount of Php 1,019,514.29 stated in the Managers Check is currently th e subject of escheat proceedings pending before Branch 150 of the Makati Regional Trial Court. Please note that it was our impression that the deposit would be taken from [Hi-Tris] RCBC bank account once an order to debit is issued upon the payees presentation of the Managers Check. Since the payee rejected the negotiated Managers Check, presentation of the Managers Check was never made. Consequently, the deposit that was supposed to be allocated for the payment of the Managers Check was supposed to remain par t of the Corporation[s] RCBC bank account, which, thereafter, co ntinued to be actively maintained and operated. For this reason, We hereby demand your confirmation that the amount of Php 1,019,514.29 continues to form part of the funds in the Corporations RCBC bank acco unt, since payout of said amount was never ordered. We wish to point out that if there was any attempt on the part of RCBC to consider the amount indicated in the Managers Check separate from the Corporations bank account, RCBC would have issued a statement to that effect, and r epeatedly reminded the Corporation that the deposit would be considered dormant absent any fund movement. Since the Corporation never received any statements of account from RCBC to that effect, and more importantly, never received any single letter from RCBC noting the absence of fund movement and advising the Corporation that the deposit would be treated as dormant." On April 28, 2008, [Manuel Bakunawa] sent another letter to x x x RCBC reiterating their position as above-quoted. In a letter dated May 19, 2008, x x x RCBC replied and informed [Hi-Tri and Spouses Bakunawa] that: "The Banks Ermita BC informed Hi-Tri and/or its principals regarding the inclusion of Managers Check No. ER034469 in the escheat proceedings docketed as Civil Case No. 06-244, as well as the status thereof, between 28 January 2008 and 1 February 2008. Contrary to what Hi-Tri hopes for, the funds covered by the Managers Check No. ER034469 does not form part of the Banks own account. By simple operation of law, the funds covered by the managers check in issue became a deposit/credit susceptible for inclusion in the escheat case initiated by the OSG and/or Bureau of Treasury. Granting arguendo that the Bank was duty-bound to make good the check, the Banks obligation to do so prescribed as early as Octobe r 2001." (Emphases, citations, and annotations were omitted.) The RTC Ruling The escheat proceedings before the Makati City RTC continued. On 19 May 2008, the trial court rendered its assailed Decision declaring the deposits, credits, and unclaimed balances subject of Civil Case No. 06-244 escheated to the Republic. Among those included in the order of forfeiture was the amount of P 1,019,514.29 held by RCBC as allocated funds intended for the payment of the Managers Check issued in favor of Rosmil. The trial court ordered the deposit of the escheated balances with the Treasurer and credited in favor of the Republic. Respondents claim that they were not able to participate in the trial, as they were not informed of the ongoing escheat proceedings. Consequently, respondents filed an Omnibus Motion dated 11 June 2008, seeking the partial reconsideration of the RTC Decision insofar as it escheated the fund allocated for the payment of the Managers Check. They asked that they be included as party -defendants or, in the alternative, allowed to intervene in the case and their motion considered as an answer-in-intervention. Respondents argued that they had meritorious grounds to ask reconsideration of the Decision or, alternatively, to seek intervention in the case. They alleged that the deposit was subject of an ongoing dispute (Civil Case No. Q-91-10719) between them and Rosmil since 1991, and that they were interested parties to that case.5 On 3 November 2008, the RTC issued an Order denying the motion of respondents. The trial court explained that the Republic had proven compliance with the requirements of publication and notice, which served as notice to all those who may be affected and prejudiced by the Complaint for Escheat. The RTC also found that the motion failed to point out the findings and conclusions that were not supported by the law or the evidence presented, as required by Rule 37 of the Rules of Court. Finally, it ruled that the alternative prayer to intervene was filed out of time. The CA Ruling On 26 November 2009, the CA issued its assailed Decision reversing the 19 May 2008 Decision and 3 November 2008 Order of the RTC. According to the appellate court,6 RCBC failed to prove that the latter had communicated with the purchaser of the Managers Check (Hi -Tri and/or Spouses Bakunawa) or the designated payee (Rosmil) immediately before the bank filed its Sworn Statement on the dormant accounts held therein. The CA ruled that the banks failure to notify respondents deprived them of an opportunity to intervene in the escheat proceedings and to present evidence to substantiate their claim, in violation of their right to due process. Furthermore, the CA pronounced that the Makati City RTC Clerk of Court failed to issue individual notices directed to all persons claiming interest in the unclaimed balances, as well as to require them to appear after publication and show cause why the unclaimed balances should not be deposited with the Treasurer of the Philippines. It explained that the jurisdictional requirement of individual notice by personal service was distinct from the requirement of notice by publication. Consequently, the CA held that the Decision and Order of the RTC were void for want of jurisdiction. Issue After a perusal of the arguments presented by the parties, we cull the main issues as follows: I. Whether the Decision and Order of the RTC were void for failure to send separate notices to respondents by personal service II. Whether petitioner had the obligation to notify respondents immediately before it filed its Sworn Statement with the Treasurer

III. Whether or not the allocated funds may be escheated in favor of the Republic Discussion Petitioner bank assails7 the CA judgments insofar as they ruled that notice by personal service upon respondents is a jurisdictional requirement in escheat proceedings. Petitioner contends that respondents were not the owners of the unclaimed balances and were thus not entitled to notice from the RTC Clerk of Court. It hinges its claim on the theory that the funds represented by the Managers Check were deemed transferred to the credit of the payee or holder upon its issuance. We quote the pertinent provision of Act No. 3936, as amended, on the rule on service of processes, to wit: Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he shall commence an action or actions in the name of the People of the Republic of the Philippines in the Court of First Instance of the province or city where the bank, building and loan association or trust corporation is located, in which shall be joined as parties the bank, building and loan association or trust corporation and all such creditors or depositors. All or any of such creditors or depositors or banks, building and loan association or trust corporations may be included in one action. Service of process in such action or actions shall be made by delivery of a copy of the complaint and summons to the president, cashier, or managing officer of each defendant bank, building and loan association or trust corporation and by publication of a copy of such summons in a newspaper of general circulation, either in English, in Filipino, or in a local dialect, published in the locality where the bank, building and loan association or trust corporation is situated, if there be any, and in case there is none, in the City of Manila, at such time as the court may order. Upon the trial, the court must hear all parties who have appeared therein, and if it be determined that such unclaimed balances in any defendant bank, building and loan association or trust corporation are unclaimed as hereinbefore stated, then the court shall render judgment in favor of the Government of the Republic of the Philippines, declaring that said unclaimed balances have escheated to the Government of the Republic of the Philippines and commanding said bank, building and loan association or trust corporation to forthwith deposit the same with the Treasurer of the Philippines to credit of the Government of the Republic of the Philippines to be used as the National Assembly may direct. At the time of issuing summons in the action above provided for, the clerk of court shall also issue a notice signed by him, giving the title and number of said action, and referring to the complaint therein, and directed to all persons, other than those named as defendants therein, claiming any interest in any unclaimed balance mentioned in said complaint, and requiring them to appear within sixty days after the publication or first publication, if there are several, of such summons, and show cause, if they have any, why the unclaimed balances involved in said action should not be deposited with the Treasurer of the Philippines as in this Act provided and notifying them that if they do not appear and show cause, the Government of the Republic of the Philippines will apply to the court for the relief demanded in the complaint. A copy of said notice shall be attached to, and published with the copy of, said summons required to be published as above, and at the end of the copy of such notice so published, there shall be a statement of the date of publication, or first publication, if there are several, of said summons and notice. Any person interested may appear in said action and become a party thereto. Upon the publication or the completion of the publication, if there are several, of the summons and notice, and the service of the summons on the defendant banks, building and loan associations or trust corporations, the court shall have full and complete jurisdiction in the Republic of the Philippines over the said unclaimed balances and over the persons having or claiming any interest in the said unclaimed balances, or any of them, and shall have full and complete jurisdiction to hear and determine the issues herein, and render the appropriate judgment thereon. (Emphasis supplied.) Hence, insofar as banks are concerned, service of processes is made by delivery of a copy of the complaint and summons upon the president, cashier, or managing officer of the defendant bank.8 On the other hand, as to depositors or other claimants of the unclaimed balances, service is made by publication of a copy of the summons in a newspaper of general circulation in the locality where the institution is situated. 9 A notice about the forthcoming escheat proceedings must also be issued and published, directing and requiring all persons who may claim any interest in the unclaimed balances to appear before the court and show cause why the dormant accounts should not be deposited with the Treasurer. Accordingly, the CA committed reversible error when it ruled that the issuance of individual notices upon respondents was a jurisdictional requirement, and that failure to effect personal service on them rendered the Decision and the Order of the RTC void for want of jurisdiction. Escheat proceedings are actions in rem,10 whereby an action is brought against the thing itself instead of the person. 11 Thus, an action may be instituted and carried to judgment without personal service upon the depositors or other claimants. 12 Jurisdiction is secured by the power of the court over the res.13 Consequently, a judgment of escheat is conclusive upon persons notified by advertisement, as publication is considered a general and constructive notice to all persons interested. 14 Nevertheless, we find sufficient grounds to affirm the CA on the exclusion of the funds allocated for the payment of the Managers Check in the escheat proceedings. Escheat proceedings refer to the judicial process in which the state, by virtue of its sovereignty, steps in and claims abandoned, left vacant, or unclaimed property, without there being an interested person having a legal claim thereto. 15 In the case of dormant accounts, the state inquires into the status, custody, and ownership of the unclaimed balance to determine whether the inactivity was brought about by the fact of death or absence of or abandonment by the depositor. 16If after the proceedings the property remains without a lawful owner interested to claim it, the property shall be reverted to the state "to forestall an open invitation to self-service by the first comers."17 However, if interested parties have come forward and lain claim to the property, the courts shall determine whether the credit or deposit should pass to the claimants or be forfeited in favor of the state.18 We emphasize that escheat is not a proceeding to penalize depositors for failing to deposit to or withdraw from their accounts. It is a proceeding whereby the state compels the surrender to it of unclaimed deposit balances when there is substantial ground for a belief that they have been abandoned, forgotten, or without an owner. 19 Act No. 3936, as amended, outlines the proper procedure to be followed by banks and other similar institutions in filing a sworn statement with the Treasurer concerning dormant accounts: Sec. 2. Immediately after the taking effect of this Act and within the month of January of every odd year, all banks, building and loan associations, and trust corporations shall forward to the Treasurer of the Philippines a statement, under oath, of their respective managing officers, of all credits and deposits held by them in favor of persons known to be dead, or who have not made further deposits or withdrawals during the preceding ten years or more, arranged in alphabetical order according to the names of creditors and depositors, and showing: (a) The names and last known place of residence or post office addresses of the persons in whose favor such unclaimed balances stand; (b) The amount and the date of the outstanding unclaimed balance and whether the same is in money or in security, and if the latter, the nature of the same; (c) The date when the person in whose favor the unclaimed balance stands died, if known, or the date when he made his last deposit or withdrawal; and (d) The interest due on such unclaimed balance, if any, and the amount thereof. A copy of the above sworn statement shall be posted in a conspicuous place in the premises of the bank, building and loan association, or trust corporation concerned for at least sixty days from the date of filing thereof: Provided, That immediately before filing the above sworn statement,

the bank, building and loan association, and trust corporation shall communicate with the person in whose favor the unclaimed balance stands at his last known place of residence or post office address. It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to time the existence of unclaimed balances held by banks, building and loan associations, and trust corporations. (Emphasis supplied.) As seen in the afore-quoted provision, the law sets a detailed system for notifying depositors of unclaimed balances. This notification is meant to inform them that their deposit could be escheated if left unclaimed. Accordingly, before filing a sworn statement, banks and other similar institutions are under obligation to communicate with owners of dormant accounts. The purpose of this initial notice is for a bank to determine whether an inactive account has indeed been unclaimed, abandoned, forgotten, or left without an owner. If the depositor simply does not wish to touch the funds in the meantime, but still asserts ownership and dominion over the dormant account, then the bank is no longer obligated to include the account in its sworn statement. 20 It is not the intent of the law to force depositors into unnecessary litigation and defense of their rights, as the state is only interested in escheating balances that have been abandoned and left without an owner. In case the bank complies with the provisions of the law and the unclaimed balances are eventually escheated to the Republic, the bank "shall not thereafter be liable to any person for the same and any action which may be brought by any person against in any bank xxx for unclaimed balances so deposited xxx shall be defended by the Solicitor General without cost to such bank." 21 Otherwise, should it fail to comply with the legally outlined procedure to the prejudice of the depositor, the bank may not raise the defense provided under Section 5 of Act No. 3936, as amended. Petitioner asserts22 that the CA committed a reversible error when it required RCBC to send prior notices to respondents about the forthcoming escheat proceedings involving the funds allocated for the payment of the Managers Ch eck. It explains that, pursuant to the law, only those "whose favor such unclaimed balances stand" are entitled to receive notices. Petitioner argues that, since the funds represented by the Managers Check were deemed transferred to the credit of the paye e upon issuance of the check, the proper party entitled to the notices was the payee Rosmil and not respondents. Petitioner then contends that, in any event, it is not liable for failing to send a separate notice to the payee, because it did not have the address of Rosmil. Petitioner avers that it was not under any obligation to record the address of the payee of a Managers Check. In contrast, respondents Hi-Tri and Bakunawa allege23 that they have a legal interest in the fund allocated for the payment of the Managers Check. They reason that, since the funds were part of the Compromise Agreement between respondents and Rosmil in a separate civil case, the approval and eventual execution of the agreement effectively reverted the fund to the credit of respondents. Respondents further posit that their ownership of the funds was evidenced by their continued custody of the Managers Check. An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank (drawee), 24 requesting the latter to pay a person named therein (payee) or to the order of the payee or to the bearer, a named sum of money.25 The issuance of the check does not of itself operate as an assignment of any part of the funds in the bank to the credit of the drawer.26Here, the bank becomes liable only after it accepts or certifies the check.27 After the check is accepted for payment, the bank would then debit the amount to be paid to the holder of the check from the account of the depositor-drawer. There are checks of a special type called managers or cashiers checks. These are bills of exchange drawn by the banks manager or cashier, in the name of the bank, against the bank itself. 28 Typically, a managers or a cashiers check is procured from the bank by allocating a particular amount of funds to be debited from the depositors account or by directly paying or depositing to the bank the val ue of the check to be drawn. Since the bank issues the check in its name, with itself as the drawee, the check is deemed accepted in advance. 29 Ordinarily, the check becomes the primary obligation of the issuing bank and constitutes its written promise to pay upon demand.30 Nevertheless, the mere issuance of a managers check does not ipso facto work as an automatic transfer of funds to the account of the payee. In case the procurer of the managers or cashiers check retains custody of the instrument, does not tender it to the intende d payee, or fails to make an effective delivery, we find the following provision on undelivered instruments under the Negotiable Instruments Law applicable: 31 Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved. (Emphasis supplied.) Petitioner acknowledges that the Managers Check was procured by respondents, and that the amount to be paid for the check w ould be sourced from the deposit account of Hi-Tri.32 When Rosmil did not accept the Managers Check offered by respondents, the latter retained custody of the instrument instead of cancelling it. As the Managers Check neither went to the hands of Rosmil nor was it further negotiated to other persons, the instrument remained undelivered. Petitioner does not dispute the fact that respondents retained custody of the instrument.33 Since there was no delivery, presentment of the check to the bank for payment did not occur. An order to debit the account of respondents was never made. In fact, petitioner confirms that the Managers Check was never negotiated or presented for payment to its Ermita Branch, and that the allocated fund is still held by the bank. 34 As a result, the assigned fund is deemed to remain part of the account of Hi-Tri, which procured the Managers Check. The doctrine that the deposit represented by a managers check automatically passes to the payee is inapplic able, because the instrument although accepted in advance remains undelivered. Hence, respondents should have been informed that the deposit had been left inactive for more than 10 years, and that it may be subjected to escheat proceedings if left unclaimed.1wphi1 After a careful review of the RTC records, we find that it is no longer necessary to remand the case for hearing to determine whether the claim of respondents was valid. There was no contention that they were the procurers of the Managers Ch eck. It is undisputed that there was no effective delivery of the check, rendering the instrument incomplete. In addition, we have already settled that respondents retained ownership of the funds. As it is obvious from their foregoing actions that they have not abandoned their claim over the fund, we rule that the allocated deposit, subject of the Managers Check, should be excluded from the escheat proceedings. We reiterate our pronouncement that the objective of escheat proceedings is state forfeiture of unclaimed balances. We further note that there is nothing in the records that would show that the OSG appealed the assailed CA judgments. We take this failure to appeal as an indication of disinterest in pursuing the escheat proceedings in favor of the Republic. WHEREFORE the Petition is DENIED. The 26 November 2009 Decision and 27 May 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 107261 are hereby AFFIRMED. SO ORDERED.

G.R. No. 126911

April 30, 2003

PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR ABAD, SABINA ABAD, JOSEPHINE "JOSIE" BEATA ABADORLINA, CECILIA ABAD, PIO ABAD, DOMINIC ABAD, TEODORA ABAD, respondents. The present petition for review assails the decision of the Court of Appeals affirming that of the Regional Trial Court of Iloilo City, Branch 30, finding petitioner Philippine Deposit Insurance Corporation (PDIC) liable, as statutory insurer, for the value of 20 Golden Time Deposits belonging to respondents Jose Abad, Leonor Abad, Sabina Abad, Josephine "Josie" Beata Abad-Orlina, Cecilia Abad, Pio Abad, Dominic Abad, and Teodora Abad at the Manila Banking Corporation (MBC), Iloilo Branch. Prior to May 22, 1997, respondents had, individually or jointly with each other, 71 certificates of time deposits denominated as "Golden Time Deposits" (GTD) with an aggregate face value of P1,115,889.96. 1 On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 5052 prohibiting MBC to do business in the Philippines, and placing its assets and affairs under receivership. The Resolution, however, was not served on MBC until Tuesday the following week, or on May 26, 1987, when the designated Receiver took over.3 On May 25, 1987, the next banking day following the issuance of the MB Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the 71 aforementioned GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of P40,000.00 or less under the names of herein respondents individually or jointly with each other. 4 Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total amount of P320,000.00.5 Respondents thereafter filed their claims with the PDIC for the payment of the remaining 20 insured GTDs. 6 On February 11, 1988, PDIC paid respondents the value of 3 claims in the total amount of P120,000.00. PDIC, however, withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of MBC-Iloilo, submitted a report to the PDIC7 that there was massive conversion and substitution of trust and deposit accounts on May 25, 1987 at MBC-Iloilo.8 The pertinent portions of the report stated: On May 25, 1987 (Monday) or a day prior to the official announcement and take-over by CB of the assets and liabilities of The Manila Banking Corporation, the Iloilo Branch was found to have recorded an unusually heavy movements in terms of volume and amount for all types of deposits and trust accounts. It appears that the impending receivership of TMBC was somehow already known to many depositors on account of the massive withdrawals paid on this day which practically wiped out the branch's entire cash position. . . . . . . The intention was to maximize the availment of PDIC coverage limited to P40,000 by spreading out big accounts to as many certificates under various nominees. . . .9 Because of the report, PDIC entertained serious reservation in recognizing respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, on August 30, 1991, it filed a petition for declaratory relief against respondents with the Regional Trial Court (RTC) of Iloilo City, for a judicial declaration determination of the insurability of respondents' GTDs at MBC-Iloilo.10 In their Answer filed on October 24, 1991 and Amended Answer 11 filed on January 9, 1992, respondents set up acounterclaim against PDIC whereby they asked for payment of their insured deposits. 12 In its Decision of February 22, 1994,13 Branch 30 of the Iloilo RTC declared the 20 GTDs of respondents to be deposit liabilities of MBC, hence, are liabilities of PDIC as statutory insurer. It accordingly disposed as follows: WHEREFORE, premises considered, judgment is hereby rendered: 1. Declaring the 28 GTDs of the Abads which were issued by the TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of the bank as the term is defined under Section 3 (f) of R.A. No. 3591, as amended; 2. Declaring PDIC, being the statutory insurer of bank deposits, liable to the Abads for the value of the remaining 20 GTDs, the other 8 having been paid already by TMBC Iloilo on May 25,1987; 3. Ordering PDIC to pay the Abads the value of said 20 GTDs less the value of 3 GTDs it paid on February 11, 1988, and the amounts it may have paid the Abads pursuant to the Order of this Court dated September 8, 1992; 4. Ordering PDIC to pay immediately the Abads the balance of its admitted liability as contained in the aforesaid Order of September 8, 1992, should there be any, subject to liquidation when this case shall have been finally decide; and 5. Ordering PDIC to pay legal interest on the remaining insured deposits of the Abads from February 11, 1988 until they are fully paid. SO ORDERED. On appeal, the Court of Appeals, by the assailed Decision of October 21, 1996, 14 affirmed the trial court's decision except as to the award of legal interest which it deleted. Hence, PDIC's present Petition for Review which sets forth this lone assignment of error: THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL COURT THAT THE AMOUNT REPRESENTED IN THE FACES OF THE SO CALLED "GOLDEN TIME DEPOSITS" WERE INSURED DEPOSITS EVEN AS THEY WERE MERE DERIVATIVES OF RESPONDENTS' PREVIOUS ACCOUNT BALANCES WHICH WERE PRE-TERMINATED/TERMINATED AT THE TIME THE MANILA BANKING CORPORATION WAS ALREADY IN SERIOUS FINANCIAL DISTRESS. In its supplement to the petition, PDIC adds the following assignment of error: THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL COURT ORDERING PETITIONER TO PAY RESPONDENTS' CLAIMS FOR PAYMENT OF INSURED DEPOSITS FOR THE REASON THAT AN ACTION FOR DECLARATORY RELIEF DOES NOT ESSENTIALLY ENTAIL AN EXECUTORY PROCESS AS THE ONLY RELIEF THAT SHOULD HAVE BEEN GRANTED BY THE TRIAL COURT IS A DECLARATION OF THE RIGHTS AND DUTIES OF PETITIONER UNDER R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F) THEREOF AS CONSIDERED AGAINST THE SURROUNDING CIRCUMSTANCES OF THE MATTER IN ISSUE SOUGHT TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER MATTERS THAT NEED TO BE CONSIDERED BY PETITIONER IN THE PROCESSING OF RESPONDENTS' CLAIMS.

Under its charter,15 PDIC (hereafter petitioner) is liable only for deposits received by a bank "in the usual course of business." 16 Being of the firm conviction that, as the reported May 25, 1987 bank transactions were so massive, hence, irregular, petitioner essentially seeks a judicial declaration that such transactions were not made "in the usual course of business" and, therefore, it cannot be made liable for deposits subject thereof.17 Petitioner points that as MBC was prohibited from doing further business by MB Resolution 505 as of May 22, 1987, all transactions subsequent to such date were not done "in the usual course of business." Petitioner further posits that there was no consideration for the 20 GTDs subject of respondents' claim. In support of this submission, it states that prior to March 25, 1987, when the 20 GTDs were made, MBC had been experiencing liquidity problems, e.g., at the start of banking operations on March 25, 1987, it had only P2,841,711.90 cash on hand and at the end of the day it was left with P27,805.81 consisting mostly of mutilated bills and coins.18 Hence, even if respondents had wanted to convert the face amounts of the GTDs to cash, MBC could not have complied with it. Petitioner theorizes that after MBC had exhausted its cash and could no longer sustain further withdrawal transactions, it instead issued new GTDs as "payment" for the pre-terminated GTDs of respondents to make sure that all the newly-issued GTDs have face amounts which are within the statutory coverage of deposit insurance. Petitioner concludes that since no cash was given by respondents and none was received by MBC when the new GTDs were transacted, there was no consideration therefor and, thus, they were not validly transacted "in the usual course of business" and no liability for deposit insurance was created.19 Petitioner's position does not persuade. While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served on MBC only on May 26, 1987. MBC and its clients could be given the benefit of the doubt that they were not aware that the MB resolution had been passed, given the necessity of confidentiality of placing a banking institution under receivership.20 The evident implication of the law, therefore, is that the appointment of a receiver may be made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure the protection of the banking institution. Stated otherwise, due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out, and disillusionment will run the gamut of the entire banking community . (Emphasis supplied).21 Mere conjectures that MBC had actual knowledge of its impending closure do not suffice. The MB resolution could not thus have nullified respondents' transactions which occurred prior to May 26, 1987. That no actual money in bills and/or coins was handed by respondents to MBC does not mean that the transactions on the new GTDs did not involve money and that there was no consideration therefor. For the outstanding balance of respondents' 71 GTDs in MBC prior to May 26, 198722 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand more than double the outstanding balance of respondent's 71 GTDs at the start of the banking day on May 25, 1987. Since respondent Jose Abad was at MBC soon after it opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no cash to cover the new GTDs of respondents and conclude that there was no consideration for said GTDs. Petitioner having failed to overcome the presumption that the ordinary course of business was followed, 23 this Court finds that the 28 new GTDs were deposited "in the usual course of business" of MBC. In its second assignment of error, petitioner posits that the trial court erred in ordering it to pay the balance of the deposit insurance to respondents, maintaining that the instant petition stemmed from a petition for declaratory relief which does not essentially entail an executory process, and the only relief that should have been granted by the trial court is a declaration of the parties' rights and duties. As such, petitioner continues, no order of payment may arise from the case as this is beyond the office of declaratory relief proceedings. 24 Without doubt, a petition for declaratory relief does not essentially entail an executory process. There is nothing in its nature, however, that prohibits a counterclaim from being set-up in the same action.25 Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions. 26 Petitioner additionally submits that the issue of determining the amount of deposit insurance due respondents was never tried on the merits since the trial dwelt only on the "determination of the viability or validity of the deposits" and no evidence on record sustains the holding that the amount of deposit due respondents had been finally determined. 27 This issue was not raised in the court a quo, however, hence, it cannot be raised for the first time in the petition at bar. 28 Finally, petitioner faults respondents for availing of the statutory limits of the PDIC law, presupposing that, based on the conduct of respondent Jose Abad on March 25, 1987, he and his co respondents "somehow knew" of the impending closure of MBC. Petitioner ascribes bad faith to respondent Jose Abad in transacting the questioned deposits, and seeks to disqualify him from availing the benefits under the law. 29 Good faith is presumed. This, petitioner failed to overcome since it offered mere presumptions as evidence of bad faith. WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED.

G.R. No. 170290

April 11, 2012

PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, vs. CITIBANK, N.A. and BANK OF AMERICA, S.T. & N.A., Respondents.

This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure, assailing the October 27, 2005 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 61316, entitled "Citibank, N.A. and Bank of America, S.T. & N.A. v. Philippine Deposit Insurance Corporation." The Facts Petitioner Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality created by virtue of Republic Act (R.A.) No. 3591, as amended by R.A. No. 9302.2 Respondent Citibank, N.A. (Citibank) is a banking corporation while respondent Bank of America, S.T. & N.A. (BA)is a national banking association, both of which are duly organized and existing under the laws of the United States of America and duly licensed to do business in the Philippines, with offices in Makati City.3 In 1977, PDIC conducted an examination of the books of account of Citibank. It discovered that Citibank, in the course of its banking business, from September 30, 1974 to June 30, 1977, received from its head office and other foreign branches a total of P11,923,163,908.00 in dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with corresponding maturity dates.4 These funds, which were lodged in the books of Citibank under the account "Their Account-Head Office/Branches-Foreign Currency," were not reported to PDIC as deposit liabilities that were subject to assessment for insurance. 5 As such, in a letter dated March 16, 1978, PDIC assessed Citibank for deficiency in the sum of P1,595,081.96.6 Similarly, sometime in 1979, PDIC examined the books of accounts of BA which revealed that from September 30, 1976 to June 30, 1978, BA received from its head office and its other foreign branches a total of P629,311,869.10 in dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with corresponding maturity dates and lodged in their books under the account "Due to Head Office/Branches."7 Because BA also excluded these from its deposit liabilities, PDIC wrote to BA on October 9, 1979, seeking the remittance of P109,264.83 representing deficiency premium assessments for dollar deposits. 8 Believing that litigation would inevitably arise from this dispute, Citibank and BA each filed a petition for declaratory relief before the Court of First Instance (now the Regional Trial Court) of Rizal on July 19, 1979 and December 11, 1979, respectively. 9 In their petitions, Citibank and BA sought a declaratory judgment stating that the money placements they received from their head office and other foreign branches were not deposits and did not give rise to insurable deposit liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC Charter) and, as a consequence, the deficiency assessments made by PDIC were improper and erroneous. 10 The cases were then consolidated.11 On June 29, 1998, the Regional Trial Court, Branch 163, Pasig City (RTC) promulgated its Decision12 in favor of Citibank and BA, ruling that the subject money placements were not deposits and did not give rise to insurable deposit liabilities, and that the deficiency assessments issued by PDIC were improper and erroneous. Therefore, Citibank and BA were not liable to pay the same. The RTC reasoned out that the money placements subject of the petitions were not assessable for insurance purposes under the PDIC Charter because said placements were deposits made outside of the Philippines and, under Section 3.05(b) of the PDIC Rules and Regulations, 13 such deposits are excluded from the computation of deposit liabilities. Section 3(f) of the PDIC Charter likewise excludes from the definition of the term "deposit" any obligation of a bank payable at the office of the bank located outside the Philippines. The RTC further stated that there was no depositor-depository relationship between the respondents and their head office or other branches. As a result, such deposits were not included as third-party deposits that must be insured. Rather, they were considered inter-branch deposits which were excluded from the assessment base, in accordance with the practice of the United States Federal Deposit Insurance Corporation (FDIC) after which PDIC was patterned. Aggrieved, PDIC appealed to the CA which affirmed the ruling of the RTC in its October 27, 2005 Decision. In so ruling, the CA found that the money placements were received as part of the banks internal dealings by Citibank and BA as agents of their respective head offices. This showed that the head office and the Philippine branch were considered as the same entity. Thus, no bank deposit could have arisen from the transactions between the Philippine branch and the head office because there did not exist two separate contracting parties to act as depositor and depositary.14 Secondly, the CA called attention to the purpose for the creation of PDIC which was to protect the deposits of depositors in the Philippines and not the deposits of the same bank through its head office or foreign branches. 15 Thirdly, because there was no law or jurisprudence on the treatment of inter-branch deposits between the Philippine branch of a foreign bank and its head office and other branches for purposes of insurance, the CA was guided by the procedure observed by the FDIC which considered inter-branch deposits as nonassessable.16 Finally, the CA cited Section 3(f) of R.A. No. 3591, which specifically excludes obligations payable at the office of the bank located outside the Philippines from the definition of a deposit or an insured deposit. Since the subject money placements were made in the respective head offices of Citibank and BA located outside the Philippines, then such placements could not be subject to assessment under the PDIC Charter.17 Hence, this petition. The Issues PDIC raises the issue of whether or not the subject dollar deposits are assessable for insurance purposes under the PDIC Charter with the following assigned errors: A. The appellate court erred in ruling that the subject dollar deposits are money placements, thus, they are not subject to the provisions of Republic Act No. 6426 otherwise known as the "Foreign Currency Deposit Act of the Philippines." B. The appellate court erred in ruling that the subject dollar deposits are not covered by the PDIC insurance. 18 Respondents similarly identify only one issue in this case: Whether or not the money placements subject matter of these petitions are assessable for insurance purposes under the PDIC Act. 19 The sole question to be resolved in this case is whether the funds placed in the Philippine branch by the head office and foreign branches of Citibank and BA are insurable deposits under the PDIC Charter and, as such, are subject to assessment for insurance premiums. The Courts Ruling The Court rules in the negative. A branch has no separate legal personality; Purpose of the PDIC

PDIC argues that the head offices of Citibank and BA and their individual foreign branches are separate and independent entities. It insists that under American jurisprudence, a banks head office and its branches have a principal -agent relationship only if they operate in the same jurisdiction. In the case of foreign branches, however, no such relationship exists because the head office and said foreign branches are deemed to be two distinct entities.20 Under Philippine law, specifically, Section 3(b) of R.A. No. 3591, which defines the terms "bank" and "banking institutions," PDIC contends that the law treats a branch of a foreign bank as a separate and independent banking unit. 21 The respondents, on the other hand, initially point out that the factual findings of the RTC and the CA, with regard to the nature of the money placements, the capacity in which the same were received by the respondents and the exclusion of inter-branch deposits from assessment, can no longer be disturbed and should be accorded great weight by this Court.22 They also argue that the money placements are not deposits. They postulate that for a deposit to exist, there must be at least two parties a depositor and a depository each with a legal personality distinct from the other. Because the respondents respective head offices and their branches form only a single legal entity, there is no creditor-debtor relationship and the funds placed in the Philippine branch belong to one and the same bank. A bank cannot have a deposit with itself. 23 This Court is of the opinion that the key to the resolution of this controversy is the relationship of the Philippine branches of Citibank and BA to their respective head offices and their other foreign branches. The Court begins by examining the manner by which a foreign corporation can establish its presence in the Philippines. It may choose to incorporate its own subsidiary as a domestic corporation, in which case such subsidiary would have its own separate and independent legal personality to conduct business in the country. In the alternative, it may create a branch in the Philippines, which would not be a legally independent unit, and simply obtain a license to do business in the Philippines. 24 In the case of Citibank and BA, it is apparent that they both did not incorporate a separate domestic corporation to represent its business interests in the Philippines. Their Philippine branches are, as the name implies, merely branches, without a separate legal personality from their parent company, Citibank and BA. Thus, being one and the same entity, the funds placed by the respondents in their respective branches in the Philippines should not be treated as deposits made by third parties subject to deposit insurance under the PDIC Charter. For lack of judicial precedents on this issue, the Court seeks guidance from American jurisprudence. 1wphi1 In the leading case of Sokoloff v. The National City Bank of New York,25 where the Supreme Court of New York held: Where a bank maintains branches, each branch becomes a separate business entity with separate books of account. A depositor in one branch cannot issue checks or drafts upon another branch or demand payment from such other branch, and in many other respects the branches are considered separate corporate entities and as distinct from one another as any other bank. Nevertheless, when considered with relation to the parent bank they are not independent agencies; they are, what their name imports, merely branches, and are subject to the supervision and control of the parent bank, and are instrumentalities whereby the parent bank carries on its business, and are established for its own particular purposes, and their business conduct and policies are controlled by the parent bank and their property and assets belong to the parent bank, although nominally held in the names of the particular branches. Ultimate liability for a debt of a branch would rest upon the parent bank. [Emphases supplied] This ruling was later reiterated in the more recent case of United States v. BCCI Holdings Luxembourg26 where the United States Court of Appeals, District of Columbia Circuit, emphasized that "while individual bank branches may be treated as independent of one another, each branch, unless separately incorporated, must be viewed as a part of the parent bank rather than as an independent entity." In addition, Philippine banking laws also support the conclusion that the head office of a foreign bank and its branches are considered as one legal entity. Section 75 of R.A. No. 8791 (The General Banking Law of 2000) and Section 5 of R.A. No. 7221 (An Act Liberalizing the Entry of Foreign Banks) both require the head office of a foreign bank to guarantee the prompt payment of all the liabilities of its Philippine branch, to wit: Republic Act No. 8791: Sec. 75. Head Office Guarantee. In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. Residents and citizens of the Philippines who are creditors of a branch in the Philippines of foreign bank shall have preferential rights to the assets of such branch in accordance with the existing laws. Republic Act No. 7721: Sec. 5. Head Office Guarantee. The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine branches. Moreover, PDIC must be reminded of the purpose for its creation, as espoused in Section 1 of R.A. No. 3591 (The PDIC Charter) which provides: Section 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the "Corporation" which shall insure, as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted. The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits. R.A. No. 9576, which amended the PDIC Charter, reaffirmed the rationale for the establishment of the PDIC: Section 1. Statement of State Policy and Objectives. - It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country's banking system, and protect it from illegal schemes and machinations. Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at all times. The purpose of the PDIC is to protect the depositing public in the event of a bank closure. It has already been sufficiently established by US jurisprudence and Philippine statutes that the head office shall answer for the liabilities of its branch. Now, suppose the Philippine branch of Citibank suddenly closes for some reason. Citibank N.A. would then be required to answer for the deposit liabilities of Citibank Philippines. If the Court were to adopt the posture of PDIC that the head office and the branch are two separate entities and that the funds placed by the head office and its foreign branches with the Philippine branch are considered deposits within the meaning of the PDIC Charter, it would result to the incongruous situation where Citibank, as the head office, would be placed in the ridiculous position of having to reimburse itself, as depositor,

for the losses it may incur occasioned by the closure of Citibank Philippines. Surely our law makers could not have envisioned such a preposterous circumstance when they created PDIC. Finally, the Court agrees with the CA ruling that there is nothing in the definition of a "bank" and a "banking institution" in Section 3(b) of the PDIC Charter27 which explicitly states that the head office of a foreign bank and its other branches are separate and distinct from their Philippine branches. There is no need to complicate the matter when it can be solved by simple logic bolstered by law and jurisprudence. Based on the foregoing, it is clear that the head office of a bank and its branches are considered as one under the eyes of the law. While branches are treated as separate business units for commercial and financial reporting purposes, in the end, the head office remains responsible and answerable for the liabilities of its branches which are under its supervision and control. As such, it is unreasonable for PDIC to require the respondents, Citibank and BA, to insure the money placements made by their home office and other branches. Deposit insurance is superfluous and entirely unnecessary when, as in this case, the institution holding the funds and the one which made the placements are one and the same legal entity. Funds not a deposit under the definition of the PDIC Charter; Excluded from assessment PDIC avers that the funds are dollar deposits and not money placements. Citing R.A. No. 6848, it defines money placement as a deposit which is received with authority to invest. Because there is no evidence to indicate that the respondents were authorized to invest the subject dollar deposits, it argues that the same cannot be considered money placements. 28 PDIC then goes on to assert that the funds received by Citibank and BA are deposits, as contemplated by Section 3(f) of R.A. No. 3591, for the following reasons: (1) the dollar deposits were received by Citibank and BA in the course of their banking operations from their respective head office and foreign branches and were recorded in their books as "Account-Head Office/Branches-Time Deposits" pursuant to Central Bank Circular No. 343 which implements R.A. No. 6426; (2) the dollar deposits were credited as dollar time accounts and were covered by Certificates of Dollar Time Deposit which were interest-bearing and payable upon maturity, and (3) the respondents maintain 100% foreign currency cover for their deposit liability arising from the dollar time deposits as required by Section 4 of R.A. No. 6426. 29 To refute PDICs allegations, the respondents explain the inter-branch transactions which necessitate the creation of the accounts or placements subject of this case. When the Philippine branch needs to procure foreign currencies, it will coordinate with a branch in another country which handles foreign currency purchases. Both branches have existing accounts with their head office and when a money placement is made in relation to the acquisition of foreign currency from the international market, the amount is credited to the account of the Philippine branch with its head office while the same is debited from the account of the branch which facilitated the purchase. This is further documented by the issuance of a certificate of time deposit with a stated interest rate and maturity date. The interest rate represents the cost of obtaining the funds while the maturity date represents the date on which the placement must be returned. On the maturity date, the amount previously credited to the account of the Philippine branch is debited, together with the cost for obtaining the funds, and credited to the account of the other branch. The respondents insist that the interest rate and maturity date are simply the basis for the debit and credit entries made by the head office in the accounts of its branches to reflect the inter-branch accommodation.30 As regards the maintenance of currency cover over the subject money placements, the respondents point out that they maintain foreign currency cover in excess of what is required by law as a matter of prudent banking practice.31 PDIC attempts to define money placement in order to impugn the respondents claim that the funds received from their head office and other branches are money placements and not deposits, as defined under the PDIC Charter. In the process, it loses sight of the important issue in this case, which is the determination of whether the funds in question are subject to assessment for deposit insurance as required by the PDIC Charter. In its struggle to find an adequate definition of "money placement," PDIC desperately cites R.A. No. 6848, The Charter of the AlAmanah Islamic Investment Bank of the Philippines. Reliance on the said law is unfounded because nowhere in the law is the term "money placement" defined. Additionally, R.A. No. 6848 refers to the establishment of an Islamic bank subject to the rulings of Islamic Sharia to assist in the development of the Autonomous Region of Muslim Mindanao (ARMM), 32 making it utterly irrelevant to the case at bench. Since Citibank and BA are neither Islamic banks nor are they located anywhere near the ARMM, then it should be painfully obvious that R.A. No. 6848 cannot aid us in deciding this case. Furthermore, PDIC heavily relies on the fact that the respondents documented the money placements with certificates of time deposit to simply conclude that the funds involved are deposits, as contemplated by the PDIC Charter, and are consequently subject to assessment for deposit insurance. It is this kind of reasoning that creates non-existent obscurities in the law and obstructs the prompt resolution of what is essentially a straightforward issue, thereby causing this case to drag on for more than three decades. 1wphi1 Noticeably, PDIC does not dispute the veracity of the internal transactions of the respondents which gave rise to the issuance of the certificates of time deposit for the funds the subject of the present dispute. Neither does it question the findings of the RTC and the CA that the money placements were made, and were payable, outside of the Philippines, thus, making them fall under the exclusions to deposit liabilities. PDIC also fails to impugn the truth of the testimony of John David Shaffer, then a Fiscal Agent and Head of the Assessment Section of the FDIC, that inter-branch deposits were excluded from the assessment base. Therefore, the determination of facts of the lower courts shall be accepted at face value by this Court, following the well-established principle that factual findings of the trial court, when adopted and confirmed by the CA, are binding and conclusive on this Court, and will generally not be reviewed on appeal. 33 As explained by the respondents, the transfer of funds, which resulted from the inter-branch transactions, took place in the books of account of the respective branches in their head office located in the United States. Hence, because it is payable outside of the Philippines, it is not considered a deposit pursuant to Section 3(f) of the PDIC Charter: Sec. 3(f) The term "deposit" means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account or which is evidenced by its certificate of deposit, and trust funds held by such bank whether retained or deposited in any department of said bank or deposit in another bank, together with such other obligations of a bank as the Board of Directors shall find and shall prescribe by regulations to be deposit liabilities of the Bank; Provided, that any obligation of a bank which is payable at the office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of this Act or included as part of the total deposits or of the insured deposits ; Provided further, that any insured bank which is incorporated under the laws of the Philippines may elect to include for insurance its deposit obligation payable only at such branch. [Emphasis supplied] The testimony of Mr. Shaffer as to the treatment of such inter-branch deposits by the FDIC, after which PDIC was modelled, is also persuasive. Inter-branch deposits refer to funds of one branch deposited in another branch and both branches are part of the same parent company and it is the practice of the FDIC to exclude such inter-branch deposits from a banks total deposit liabilities subject to assessment. 34 All things considered, the Court finds that the funds in question are not deposits within the definition of the PDIC Charter and are, thus, excluded from assessment. WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the Court of Appeals in CA-G.R. CV No. 61316 is AFFIRMED.

G.R. No. 174629

February 14, 2008

REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY LAUNDERING COUNCIL (AMLC), petitioner, vs. HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG, respondents. The present petition for certiorari and prohibition under Rule 65 assails the orders and resolutions issued by two different courts in two different cases. The courts and cases in question are the Regional Trial Court of Manila, Branch 24, which heard SP Case No. 06-1142001 and the Court of Appeals, Tenth Division, which heared CA-G.R. SP No. 95198.2 Both cases arose as part of the aftermath of the ruling of this Court in Agan v. PIATCO3 nullifying the concession agreement awarded to the Philippine International Airport Terminal Corporation (PIATCO) over the Ninoy Aquino International Airport International Passenger Terminal 3 (NAIA 3) Project. I. Following the promulgation of Agan, a series of investigations concerning the award of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman and the Compliance and Investigation Staff (CIS) of petitioner Anti-Money Laundering Council (AMLC). On 24 May 2005, the Office of the Solicitor General (OSG) wrote the AMLC requesting the latters assistance "in obtaining more evidence to comple tely reveal the financial trail of corruption surrounding the [NAIA 3] Project," and also noting that petitioner Republic of the Philippines was presently defending itself in two international arbitration cases filed in relation to the NAIA 3 Project. 4 The CIS conducted an intelligence database search on the financial transactions of certain individuals involved in the award, including respondent Pantaleon Alvarez (Alvarez) who had been the Chairman of the PBAC Technical Committee, NAIA-IPT3 Project.5 By this time, Alvarez had already been charged by the Ombudsman with violation of Section 3(j) of R.A. No. 3019. 6 The search revealed that Alvarez maintained eight (8) bank accounts with six (6) different banks. 7 On 27 June 2005, the AMLC issued Resolution No. 75, Series of 2005, 8 whereby the Council resolved to authorize the Executive Director of the AMLC "to sign and verify an application to inquire into and/or examine the [deposits] or investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and Cheng Yong, and their related web of accounts wherever these may be found, as defined under Rule 10.4 of the Revised Implementing Rules and Regulations;" and to authorize the AMLC Secretariat "to conduct an inquiry into subject accounts once the Regional Trial Court grants the application to inquire into and/or examine the bank accounts" of those four individuals. 9 The resolution enumerated the particular bank accounts of Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong which were to be the subject of the inquiry.10 The rationale for the said resolution was founded on the cited findings of the CIS that amounts were transferred from a Hong Kong bank account owned by Jetstream Pacific Ltd. Account to bank accounts in the Philippines maintained by Liongson and Cheng Yong.11 The Resolution also noted that "[b]y awarding the contract to PIATCO despite its lack of financial capacity, Pantaleon Alvarez caused undue injury to the government by giving PIATCO unwarranted benefits, advantage, or preference in the discharge of his official administrative functions through manifest partiality, evident bad faith, or gross inexcusable negligence, in violation of Section 3(e) of Republic Act No. 3019."12 Under the authority granted by the Resolution, the AMLC filed an application to inquire into or examine the deposits or investments of Alvarez, Trinidad, Liongson and Cheng Yong before the RTC of Makati, Branch 138, presided by Judge (now Court of Appeals Justice) Sixto Marella, Jr. The application was docketed as AMLC No. 05-005.13 The Makati RTC heard the testimony of the Deputy Director of the AMLC, Richard David C. Funk II, and received the documentary evidence of the AMLC.14 Thereafter, on 4 July 2005, the Makati RTC rendered an Order (Makati RTC bank inquiry order) granting the AMLC the authority to inquire and examine the subject bank accounts of Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being satisfied that there existed "[p]robable cause [to] believe that the deposits in various bank accounts, details of which appear in paragraph 1 of the Application, are related to the offense of violation of Anti-Graft and Corrupt Practices Act now the subject of criminal prosecution before the Sandiganbayan as attested to by the Informations, Exhibits C, D, E, F, and G." 15 Pursuant to the Makati RTC bank inquiry order, the CIS proceeded to inquire and examine the deposits, investments and related web accounts of the four. 16 Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis Villa-Ignacio, wrote a letter dated 2 November 2005, requesting the AMLC to investigate the accounts of Alvarez, PIATCO, and several other entities involved in the nullified contract. The letter adverted to probable cause to believe that the bank accounts "were used in the commission of unlawful activities that were committed" in relation to the criminal cases then pending before the Sandiganbayan.17Attached to the letter was a memorandum "on why the investigation of the [accounts] is necessary in the prosecution of the above criminal cases before the Sandiganbayan."18 In response to the letter of the Special Prosecutor, the AMLC promulgated on 9 December 2005 Resolution No. 121 Series of 2005,19 which authorized the executive director of the AMLC to inquire into and examine the accounts named in the letter, including one maintained by Alvarez with DBS Bank and two other accounts in the name of Cheng Yong with Metrobank. The Resolution characterized the memorandum attached to the Special Prosecutors letter as "extensively justif[ying] the existence of probable cause that the bank accoun ts of the persons and entities mentioned in the letter are related to the unlawful activity of violation of Sections 3(g) and 3(e) of Rep. Act No. 3019, as amended."20 Following the December 2005 AMLC Resolution, the Republic, through the AMLC, filed an application 21 before the Manila RTC to inquire into and/or examine thirteen (13) accounts and two (2) related web of accounts alleged as having been used to facilitate corruption in the NAIA 3 Project. Among said accounts were the DBS Bank account of Alvarez and the Metrobank accounts of Cheng Yong. The case was raffled to Manila RTC, Branch 24, presided by respondent Judge Antonio Eugenio, Jr., and docketed as SP Case No. 06-114200. On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank inquiry order) granting the Ex Parte Application expressing therein "[that] the allegations in said application to be impressed with merit, and in conformity with Section 11 of R.A. No. 9160, as amended, otherwise known as the Anti-Money Laundering Act (AMLA) of 2001 and Rules 11.1 and 11.2 of the Revised Implementing Rules and Regulations."22 Authority was thus granted to the AMLC to inquire into the bank accounts listed therein. On 25 January 2006, Alvarez, through counsel, entered his appearance23 before the Manila RTC in SP Case No. 06-114200 and filed an Urgent Motion to Stay Enforcement of Order of January 12, 2006. 24 Alvarez alleged that he fortuitously learned of the bank inquiry order, which was issued following an ex parte application, and he argued that nothing in R.A. No. 9160 authorized the AMLC to seek the authority to inquire into bank accounts ex parte.25 The day after Alvarez filed his motion, 26 January 2006, the Manila RTC issued an Order26 staying the enforcement of its bank inquiry order and giving the Republic five (5) days to respond to Alvarezs motion. The Republic filed an Omnibus Motion for Reconsideration27 of the 26 January 2006 Manila RTC Order and likewise sought to strike out Alvarezs motion that led to the issuance of said order. Fo r his part, Alvarez filed a Reply and Motion to Dismiss28 the application for bank inquiry order. On 2 May 2006, the Manila RTC issued an Omnibus Order 29 granting the Republics Motion for Reconsideration, denying Alvarezs motion to dismiss and reinstating "in full force and effect" the Order dated 12 January 2006. In the omnibus order, the Manila RTC reiterated that the material allegations in the application for bank inquiry order filed by the Republic stood as "the probable cause for the investigation and examination of the bank accounts and investments of the respondents."30 Alvarez filed on 10 May 2006 an Urgent Motion31 expressing his apprehension that the AMLC would immediately enforce the omnibus order and would thereby render the motion for reconsideration he intended to file as moot and academic; thus he sought that the Republic be refrained from enforcing the omnibus order in the meantime. Acting on this motion, the Manila RTC, on 11 May 2006, issued an Order32 requiring the OSG to file a comment/opposition and reminding the parties that judgments and orders become final and executory upon the expiration of fifteen (15) days from receipt thereof, as it is the period within which a motion for reconsideration could be filed. Alvarez filed his Motion for Reconsideration33 of the omnibus order on 15 May 2006, but the motion was denied by the Manila RTC in an Order 34 dated 5 July 2006.

On 11 July 2006, Alvarez filed an Urgent Motion and Manifestation 35 wherein he manifested having received reliable information that the AMLC was about to implement the Manila RTC bank inquiry order even though he was intending to appeal from it. On the premise that only a final and executory judgment or order could be executed or implemented, Alvarez sought that the AMLC be immediately ordered to refrain from enforcing the Manila RTC bank inquiry order. On 12 July 2006, the Manila RTC, acting on Alvarezs latest motion, issued an Order 36 directing the AMLC "to refrain from enforcing the order dated January 12, 2006 until the expiration of the period to appeal, without any appeal having been filed." On the same day, Alvarez filed a Notice of Appeal37 with the Manila RTC. On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for Clarification.38 Therein, he alleged having learned that the AMLC had began to inquire into the bank accounts of the other persons mentioned in the application for bank inquiry order filed by the Republic.39 Considering that the Manila RTC bank inquiry order was issued ex parte, without notice to those other persons, Alvarez prayed that the AMLC be ordered to refrain from inquiring into any of the other bank deposits and alleg ed web of accounts enumerated in AMLCs application with the RTC; and that the AMLC be directed to refrain from using, disclosing or publishing in any proceeding or venue any information or document obtained in violation of the 11 May 2006 RTC Order. 40 On 25 July 2006, or one day after Alvarez filed his motion, the Manila RTC issued an Order 41 wherein it clarified that "theEx Parte Order of this Court dated January 12, 2006 can not be implemented against the deposits or accounts of any of the persons enumerated in the AMLC Application until the appeal of movant Alvarez is finally resolved, otherwise, the appeal would be rendered moot and academic or even nugatory."42 In addition, the AMLC was ordered "not to disclose or publish any information or document found or obtained in [v]iolation of the May 11, 2006 Order of this Court."43 The Manila RTC reasoned that the other persons mentioned in AMLCs application were not served with the courts 12 January 2006 Order. This 25 July 2006 Manila RTC Order is the first of the four rulings being assailed through this petition. In response, the Republic filed an Urgent Omnibus Motion for Reconsideration44 dated 27 July 2006, urging that it be allowed to immediately enforce the bank inquiry order against Alvarez and that Alvarezs notice of appeal be expunged from the records since appeal from an order of inquiry is disallowed under the Anti money Laundering Act (AMLA). Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with Application for TRO and/or Writ of Preliminary Injunction45 dated 10 July 2006, directed against the Republic of the Philippines through the AMLC, Manila RTC Judge Eugenio, Jr. and Makati RTC Judge Marella, Jr.. She identified herself as the wife of Cheng Yong 46 with whom she jointly owns a conjugal bank account with Citibank that is covered by the Makati RTC bank inquiry order, and two conjugal bank accounts with Metrobank that are covered by the Manila RTC bank inquiry order. Lilia Cheng imputed grave abuse of discretion on the part of the Makati and Manila RTCs in granting AMLCsex parte applications for a bank inquiry order, arguing among others that the ex parte applications violated her constitutional right to due process, that the bank inquiry order under the AMLA can only be granted in connection with violations of the AMLA and that the AMLA can not apply to bank accounts opened and transactions entered into prior to the effectivity of the AMLA or to bank accounts located outside the Philippines.47 On 1 August 2006, the Court of Appeals, acting on Lilia Chengs petition, issued a Temporary Restraining Order 48enjoining the Manila and Makati trial courts from implementing, enforcing or executing the respective bank inquiry orders previously issued, and the AMLC from enforcing and implementing such orders. On even date, the Manila RTC issued an Order 49 resolving to hold in abeyance the resolution of the urgent omnibus motion for reconsideration then pending before it until the resolution of Lilia Chengs petition for certiorar i with the Court of Appeals. The Court of Appeals Resolution directing the issuance of the temporary restraining order is the second of the four rulings assailed in the present petition. The third assailed ruling50 was issued on 15 August 2006 by the Manila RTC, acting on the Urgent Motion for Clarification 51 dated 14 August 2006 filed by Alvarez. It appears that the 1 August 2006 Manila RTC Order had amended its previous 25 July 2006 Order by deleting the last paragraph which stated that the AMLC "should not disclose or publish any information or document found or obtained in violation of the May 11, 2006 Order of this Court."52 In this new motion, Alvarez argued that the deletion of that paragraph would allow the AMLC to implement the bank inquiry orders and publish whatever information it might obtain thereupon even before the final orders of the Manila RTC could become final and executory.53 In the 15 August 2006 Order, the Manila RTC reiterated that the bank inquiry order it had issued could not be implemented or enforced by the AMLC or any of its representatives until the appeal therefrom was finally resolved and that any enforcement thereof would be unauthorized.54 The present Consolidated Petition55 for certiorari and prohibition under Rule 65 was filed on 2 October 2006, assailing the two Orders of the Manila RTC dated 25 July and 15 August 2006 and the Temporary Restraining Order dated 1 August 2006 of the Court of Appeals. Through an Urgent Manifestation and Motion56 dated 9 October 2006, petitioner informed the Court that on 22 September 2006, the Court of Appeals hearing Lilia Chengs petition had granted a writ of preliminary injunction in her favor. 57 Thereafter, petitioner sought as well the nullification of the 22 September 2006 Resolution of the Court of Appeals, thereby constituting the fourth ruling assailed in the instant petition. 58 The Court had initially granted a Temporary Restraining Order 59 dated 6 October 2006 and later on a Supplemental Temporary Restraining Order60 dated 13 October 2006 in petitioners favor, enjoining the implementation of the assailed rulings of the Manila RTC and the Co urt of Appeals. However, on respondents motion, the Court, through a Resolution 61dated 11 December 2006, suspended the implementation of the restraining orders it had earlier issued. Oral arguments were held on 17 January 2007. The Court consolidated the issues for argument as follows: 1. Did the RTC-Manila, in issuing the Orders dated 25 July 2006 and 15 August 2006 which deferred the implementation of its Order dated 12 January 2006, and the Court of Appeals, in issuing its Resolution dated 1 August 2006, which ordered the status quo in relation to the 1 July 2005 Order of the RTC-Makati and the 12 January 2006 Order of the RTC-Manila, both of which authorized the examination of bank accounts under Section 11 of Rep. Act No. 9160 (AMLA), commit grave abuse of discretion? (a) Is an application for an order authorizing inquiry into or examination of bank accounts or investments under Section 11 of the AMLA ex-parte in nature or one which requires notice and hearing? (b) What legal procedures and standards should be observed in the conduct of the proceedings for the issuance of said order? (c) Is such order susceptible to legal challenges and judicial review? 2. Is it proper for this Court at this time and in this case to inquire into and pass upon the validity of the 1 July 2005 Order of the RTCMakati and the 12 January 2006 Order of the RTC-Manila, considering the pendency of CA G.R. SP No. 95-198 (Lilia Cheng v. Republic) wherein the validity of both orders was challenged? 62 After the oral arguments, the parties were directed to file their respective memoranda, which they did, 63 and the petition was thereafter deemed submitted for resolution. II.

Petitioners general advocacy is that the bank inquiry orders issued by the Manila and Makati RTCs are valid and immediately enforceable whereas the assailed rulings, which effectively stayed the enforcement of the Manila and Makati RTCs bank inquiry orders, are sullied with grave abuse of discretion. These conclusions flow from the posture that a bank inquiry order, issued upon a finding of probable cause, may be issued ex parte and, once issued, is immediately executory. Petitioner further argues that the information obtained following the bank inquiry is necessarily beneficial, if not indispensable, to the AMLC in discharging its awesome responsibility regarding the effective implementation of the AMLA and that any restraint in the disclosure of such information to appropriate agencies or other judicial fora would render meaningless the relief supplied by the bank inquiry order. Petitioner raises particular arguments questioning Lilia Chengs right to seek in junctive relief before the Court of Appeals, noting that not one of the bank inquiry orders is directed against her. Her "cryptic assertion" that she is the wife of Cheng Yong cannot, according to petitioner, "metamorphose into the requisite legal standing to seek redress for an imagined injury or to maintain an action in behalf of another." In the same breath, petitioner argues that Alvarez cannot assert any violation of the right to financial privacy in behalf of other persons whose bank accounts are being inquired into, particularly those other persons named in the Makati RTC bank inquiry order who did not take any step to oppose such orders before the courts. Ostensibly, the proximate question before the Court is whether a bank inquiry order issued in accordance with Section 10 of the AMLA may be stayed by injunction. Yet in arguing that it does, petitioner relies on what it posits as the final and immediately executory character of the bank inquiry orders issued by the Manila and Makati RTCs. Implicit in that position is the notion that the inquiry orders are valid, and such notion is susceptible to review and validation based on what appears on the face of the orders and the applications which triggered their issuance, as well as the provisions of the AMLA governing the issuance of such orders. Indeed, to test the viability of petitioners argument, the Court will have to be satisfied that the subject inquiry orders are valid in the first place. However, even from a cursory examination of the applications for inquiry order and the orders themselves, it is evident that the orders are not in accordance with law. III. A brief overview of the AMLA is called for. Money laundering has been generally defined by the International Criminal Police Organization (Interpol) `as "any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources."64 Even before the passage of the AMLA, the problem was addressed by the Philippine government through the issuance of various circulars by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative proscription was necessary, especially with the inclusion of the Philippines in the Financial Action Task Forces list of non-cooperative countries and territories in the fight against money laundering. 65 The original AMLA, Republic Act (R.A.) No. 9160, was passed in 2001. It was amended by R.A. No. 9194 in 2003. Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the proceeds of an unlawful activity as [defined in the law] are transacted, thereby making them appear to have originated from legitimate sources." 66 The section further provides the three modes through which the crime of money laundering is committed. Section 7 creates the AMLC and defines its powers, which generally relate to the enforcement of the AMLA provisions and the initiation of legal actions authorized in the AMLA such as civil forefeiture proceedings and complaints for the prosecution of money laundering offenses. 67 In addition to providing for the definition and penalties for the crime of money laundering, the AMLA also authorizes certain provisional remedies that would aid the AMLC in the enforcement of the AMLA. These are the "freeze order" authorized under Section 10, and the "bank inquiry order" authorized under Section 11. Respondents posit that a bank inquiry order under Section 11 may be obtained only upon the pre-existence of a money laundering offense case already filed before the courts.68 The conclusion is based on the phrase "upon order of any competent court in cases of violation of this Act," the word "cases" generally understood as referring to actual cases pending with the courts. We are unconvinced by this proposition, and agree instead with the then Solicitor General who conceded that the use of the phrase "in cases of" was unfortunate, yet submitted that it should be interpreted to mean "in the event there are violations" of the AMLA, and not that there are already cases pending in court concerning such violations. 69 If the contrary position is adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the government to ascertain whether there is sufficient evidence to sustain an intended prosecution of the account holder for violation of the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders. After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing of complaints under the AMLA with the hope or expectation that the evidence of money laundering would somehow surface during the trial. Since the AMLC could not make use of the bank inquiry order to determine whether there is evidentiary basis to prosecute the suspected malefactors, not filing any case at all would not be an alternative. Such unwholesome set-up should not come to pass. Thus Section 11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the unfounded initiation of complaints for money laundering. Still, even if the bank inquiry order may be availed of without need of a pre-existing case under the AMLA, it does not follow that such order may be availed of ex parte. There are several reasons why the AMLA does not generally sanction ex parteapplications and issuances of the bank inquiry order. IV. It is evident that Section 11 does not specifically authorize, as a general rule, the issuance ex parte of the bank inquiry order. We quote the provision in full: SEC. 11. Authority to Inquire into Bank Deposits. Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(i)1, (2) and (12). To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.70 (Emphasis supplied) Of course, Section 11 also allows the AMLC to inquire into bank accounts without having to obtain a judicial order in cases where there is probable cause that the deposits or investments are related to kidnapping for ransom, 71 certain violations of the Comprehensive Dangerous Drugs Act of 2002,72 hijacking and other violations under R.A. No. 6235, destructive arson and murder. Since such special circumstances do not apply in this case, there is no need for us to pass comment on this proviso. Suffice it to say, the proviso contemplates a situation distinct from that which presently confronts us, and for purposes of the succeeding discussion, our reference to Section 11 of the AMLA excludes said proviso.

In the instances where a court order is required for the issuance of the bank inquiry order, nothing in Section 11 specifically authorizes that such court order may be issued ex parte. It might be argued that this silence does not preclude the ex parte issuance of the bank inquiry order since the same is not prohibited under Section 11. Yet this argument falls when the immediately preceding provision, Section 10, is examined. SEC. 10. Freezing of Monetary Instrument or Property. The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.73 Although oriented towards different purposes, the freeze order under Section 10 and the bank inquiry order under Section 11 are similar in that they are extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute money laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the provisional relief therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize ex parte proceedings for the issuance of the bank inquiry order, then it could have easily expressed such intent in the law, as it did with the freeze order under Section 10. Even more tellingly, the current language of Sections 10 and 11 of the AMLA was crafted at the same time, through the passage of R.A. No. 9194. Prior to the amendatory law, it was the AMLC, not the Court of Appeals, which had authority to issue a freeze order, whereas a bank inquiry order always then required, without exception, an order from a competent court. 74 It was through the same enactment that ex parte proceedings were introduced for the first time into the AMLA, in the case of the freeze order which now can only be issued by the Court of Appeals. It certainly would have been convenient, through the same amendatory law, to allow a similar ex parte procedure in the case of a bank inquiry order had Congress been so minded. Yet nothing in the provision itself, or even the available legislative record, explicitly points to an ex parte judicial procedure in the application for a bank inquiry order, unlike in the case of the freeze order. That the AMLA does not contemplate ex parte proceedings in applications for bank inquiry orders is confirmed by the present implementing rules and regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With respect to freeze orders under Section 10, the implementing rules do expressly provide that the applications for freeze orders be filed ex parte,75 but no similar clearance is granted in the case of inquiry orders under Section 11.76 These implementing rules were promulgated by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission, 77 and if it was the true belief of these institutions that inquiry orders could be issued ex parte similar to freeze orders, language to that effect would have been incorporated in the said Rules. This is stressed not because the implementing rules could authorize ex parte applications for inquiry orders despite the absence of statutory basis, but rather because the framers of the law had no intention to allow such ex parte applications. Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC78 to enforce the provisions of the AMLA specifically authorize ex parte applications with respect to freeze orders under Section 10 79 but make no similar authorization with respect to bank inquiry orders under Section 11. The Court could divine the sense in allowing ex parte proceedings under Section 10 and in proscribing the same under Section 11. A freeze order under Section 10 on the one hand is aimed at preserving monetary instruments or property in any way deemed related to unlawful activities as defined in Section 3(i) of the AMLA. The owner of such monetary instruments or property would thus be inhibited from utilizing the same for the duration of the freeze order. To make such freeze order anteceded by a judicial proceeding with notice to the account holder would allow for or lead to the dissipation of such funds even before the order could be issued. On the other hand, a bank inquiry order under Section 11 does not necessitate any form of physical seizure of property of the account holder. What the bank inquiry order authorizes is the examination of the particular deposits or investments in banking institutions or non-bank financial institutions. The monetary instruments or property deposited with such banks or financial institutions are not seized in a physical sense, but are examined on particular details such as the account holders record of deposits and transactions. Unlike the assets subject of the freeze order, the records to be inspected under a bank inquiry order cannot be physically seized or hidden by the account holder. Said records are in the possession of the bank and therefore cannot be destroyed at the instance of the account holder alone as that would require the extraordinary cooperation and devotion of the bank. Interestingly, petitioners memorandum does not attempt to demonstrate before the Court that the bank inquiry order under Sec tion 11 may be issued ex parte, although the petition itself did devote some space for that argument. The petition argues that the bank inquiry order is "a special and peculiar remedy, drastic in its name, and made necessary because of a public necessity [t]hus, by its very natur e, the application for an order or inquiry must necessarily, be ex parte." This argument is insufficient justification in light of the clear disinclination of Congress to allow the issuance ex parte of bank inquiry orders under Section 11, in contrast to the legislatures clear inclination to allow the ex parte grant of freeze orders under Section 10. Without doubt, a requirement that the application for a bank inquiry order be done with notice to the account holder will alert the latter that there is a plan to inspect his bank account on the belief that the funds therein are involved in an unlawful activity or money laundering offense.80 Still, the account holder so alerted will in fact be unable to do anything to conceal or cleanse his bank account records of suspicious or anomalous transactions, at least not without the whole-hearted cooperation of the bank, which inherently has no vested interest to aid the account holder in such manner. V. The necessary implication of this finding that Section 11 of the AMLA does not generally authorize the issuance ex parte of the bank inquiry order would be that such orders cannot be issued unless notice is given to the owners of the account, allowing them the opportunity to contest the issuance of the order. Without such a consequence, the legislated distinction between ex parte proceedings under Section 10 and those which are not ex parte under Section 11 would be lost and rendered useless. There certainly is fertile ground to contest the issuance of an ex parte order. Section 11 itself requires that it be established that "there is probable cause that the deposits or investments are related to unlawful activities," and it obviously is the court which stands as arbiter whether there is indeed such probable cause. The process of inquiring into the existence of probable cause would involve the function of determination reposed on the trial court. Determination clearly implies a function of adjudication on the part of the trial court, and not a mechanical application of a standard pre-determination by some other body. The word "determination" implies deliberation and is, in normal legal contemplation, equivalent to "the decision of a court of justice." 81 The court receiving the application for inquiry order cannot simply take the AMLCs word that probable cause exists that the deposits or investments are related to an unlawful activity. It will have to exercise its own determinative function in order to be convinced of such fact. The account holder would be certainly capable of contesting such probable cause if given the opportunity to be apprised of the pending application to inquire into his account; hence a notice requirement would not be an empty spectacle. It may be so that the process of obtaining the inquiry order may become more cumbersome or prolonged because of the notice requirement, yet we fail to see any unreasonable burden cast by such circumstance. After all, as earlier stated, requiring notice to the account holder should not, in any way, compromise the integrity of the bank records subject of the inquiry which remain in the possession and control of the bank.

Petitioner argues that a bank inquiry order necessitates a finding of probable cause, a characteristic similar to a search warrant which is applied to and heard ex parte. We have examined the supposed analogy between a search warrant and a bank inquiry order yet we remain to be unconvinced by petitioner. The Constitution and the Rules of Court prescribe particular requirements attaching to search warrants that are not imposed by the AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge personally examine under oath or affirmation the complainant and the witnesses he may produce,82 such examination being in the form of searching questions and answers. 83 Those are impositions which the legislative did not specifically prescribe as to the bank inquiry order under the AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest as it contemplates a direct object but not the seizure of persons or property. Even as the Constitution and the Rules of Court impose a high procedural standard for the determination of probable cause for the issuance of search warrants which Congress chose not to prescribe for the bank inquiry order under the AMLA, Congress nonetheless disallowed ex parte applications for the inquiry order. We can discern that in exchange for these procedural standards normally applied to search warrants, Congress chose instead to legislate a right to notice and a right to be heard characteristics of judicial proceedings which are not ex parte. Absent any demonstrable constitutional infirmity, there is no reason for us to dispute such legislative policy choices. VI. The Courts construction of Section 11 of the AMLA is undoubtedly influenced by right to privacy considerations. If sustained, petitioners argument that a bank account may be inspected by the government following an ex parteproceeding about which the depositor would know nothing would have significant implications on the right to privacy, a right innately cherished by all notwithstanding the legally recognized exceptions thereto. The notion that the government could be so empowered is cause for concern of any individual who values the right to privacy which, after all, embodies even the right to be "let alone," the most comprehensive of rights and the right most valued by civilized people.84 One might assume that the constitutional dimension of the right to privacy, as applied to bank deposits, warrants our present inquiry. We decline to do so. Admittedly, that question has proved controversial in American jurisprudence. Notably, the United States Supreme Court in U.S. v. Miller85 held that there was no legitimate expectation of privacy as to the bank records of a depositor. 86 Moreover, the text of our Constitution has not bothered with the triviality of allocating specific rights peculiar to bank deposits. However, sufficient for our purposes, we can assert there is a right to privacy governing bank accounts in the Philippines, and that such right finds application to the case at bar. The source of such right is statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy is enshrined in Section 2 of that law, to wit: SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. (Emphasis supplied) Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in the Philippines. 87Subsequent laws, including the AMLA, may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the general rule. It falls within the zones of privacy recognized by our laws.88 The framers of the 1987 Constitution likewise recognized that bank accounts are not covered by either the right to information89 under Section 7, Article III or under the requirement of full public disclosure 90 under Section 28, Article II.91 Unless the Bank Secrecy Act is repealed or amended, the legal order is obliged to conserve the absolutely confidential nature of Philippine bank deposits. Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby these bank accounts may be examined by "any person, government official, bureau or office"; namely when: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) the money deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this Court as constituting an additional exception to the rule of absolute confidentiality,92 and there have been other similar recognitions as well.93 The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may inquire into a bank account upon order of any competent court in cases of violation of the AMLA, it having been established that there is probable cause that the deposits or investments are related to unlawful activities as defined in Section 3(i) of the law, or a money laundering offense under Section 4 thereof. Further, in instances where there is probable cause that the deposits or investments are related to kidnapping for ransom,94 certain violations of the Comprehensive Dangerous Drugs Act of 2002,95 hijacking and other violations under R.A. No. 6235, destructive arson and murder, then there is no need for the AMLC to obtain a court order before it could inquire into such accounts. It cannot be successfully argued the proceedings relating to the bank inquiry order under Section 11 of the AMLA is a "litigation" encompassed in one of the exceptions to the Bank Secrecy Act which is when "the money deposited or invested is the subject matter of the litigation." The orientation of the bank inquiry order is simply to serve as a provisional relief or remedy. As earlier stated, the application for such does not entail a full-blown trial. Nevertheless, just because the AMLA establishes additional exceptions to the Bank Secrecy Act it does not mean that the later law has dispensed with the general principle established in the older law that "[a]ll deposits of whatever nature with banks or banking institutions in the Philippines x x x are hereby considered as of an absolutely confidential nature."96Indeed, by force of statute, all bank deposits are absolutely confidential, and that nature is unaltered even by the legislated exceptions referred to above. There is disfavor towards construing these exceptions in such a manner that would authorize unlimited discretion on the part of the government or of any party seeking to enforce those exceptions and inquire into bank deposits. If there are doubts in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former. Such a stance would persist unless Congress passes a law reversing the general state policy of preserving the absolutely confidential nature of Philippine bank accounts. The presence of this statutory right to privacy addresses at least one of the arguments raised by petitioner, that Lilia Cheng had no personality to assail the inquiry orders before the Court of Appeals because she was not the subject of said orders. AMLC Resolution No. 75, which served as the basis in the successful application for the Makati inquiry order, expressly adverts to Citibank Account No. 88576248 "owned by Cheng Yong and/or Lilia G. Cheng with Citibank N.A.,"97whereas Lilia Chengs petition before the Court of Appeals is accompanied by a certificati on from Metrobank that Account Nos. 300852436-0 and 700149801-7, both of which are among the subjects of the Manila inquiry order, are accounts in the name of "Yong Cheng or Lilia Cheng." 98 Petitioner does not specifically deny that Lilia Cheng holds rights of ownership over the three said accounts, laying focus instead on the fact that she was not named as a subject of either the Makati or Manila RTC inquiry orders. We are reasonably convinced that Lilia Cheng has sufficiently demonstrated her joint ownership of the three accounts, and such conclusion leads us to acknowledge that she has the standing to assail via certiorari the inquiry orders authorizing the examination of her bank accounts as the orders interfere with her statutory right to maintain the secrecy of said accounts.

While petitioner would premise that the inquiry into Lilia Chengs accounts finds root in Section 11 of the AMLA, it cannot b e denied that the authority to inquire under Section 11 is only exceptional in character, contrary as it is to the general rule preserving the secrecy of bank deposits. Even though she may not have been the subject of the inquiry orders, her bank accounts nevertheless were, and she thus has the standing to vindicate the right to secrecy that attaches to said accounts and their owners. This statutory right to privacy will not prevent the courts from authorizing the inquiry anyway upon the fulfillment of the requirements set forth under Section 11 of the AMLA or Section 2 of the Bank Secrecy Act; at the same time, the owner of the accounts have the right to challenge whether the requirements were indeed complied with. VII. There is a final point of concern which needs to be addressed. Lilia Cheng argues that the AMLA, being a substantive penal statute, has no retroactive effect and the bank inquiry order could not apply to deposits or investments opened prior to the effectivity of Rep. Act No. 9164, or on 17 October 2001. Thus, she concludes, her subject bank accounts, opened between 1989 to 1990, could not be the subject of the bank inquiry order lest there be a violation of the constitutional prohibition against ex post facto laws. No ex post facto law may be enacted,99 and no law may be construed in such fashion as to permit a criminal prosecution offensive to the ex post facto clause. As applied to the AMLA, it is plain that no person may be prosecuted under the penal provisions of the AMLA for acts committed prior to the enactment of the law on 17 October 2001. As much was understood by the lawmakers since they deliberated upon the AMLA, and indeed there is no serious dispute on that point. Does the proscription against ex post facto laws apply to the interpretation of Section 11, a provision which does not provide for a penal sanction but which merely authorizes the inspection of suspect accounts and deposits? The answer is in the affirmative. In this jurisdiction, we have defined an ex post facto law as one which either: (1) makes criminal an act done before the passage of the law and which was innocent when done, and punishes such an act; (2) aggravates a crime, or makes it greater than it was, when committed; (3) changes the punishment and inflicts a greater punishment than the law annexed to the crime when committed; (4) alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense; (5) assuming to regulate civil rights and remedies only, in effect imposes penalty or deprivation of a right for something which when done was lawful; and (6) deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection of a former conviction or acquittal, or a proclamation of amnesty. (Emphasis supplied)100 Prior to the enactment of the AMLA, the fact that bank accounts or deposits were involved in activities later on enumerated in Section 3 of the law did not, by itself, remove such accounts from the shelter of absolute confidentiality. Prior to the AMLA, in order that bank accounts could be examined, there was need to secure either the written permission of the depositor or a court order authorizing such examination, assuming that they were involved in cases of bribery or dereliction of duty of public officials, or in a case where the money deposited or invested was itself the subject matter of the litigation. The passage of the AMLA stripped another layer off the rule on absolute confidentiality that provided a measure of lawful protection to the account holder. For that reason, the application of the bank inquiry order as a means of inquiring into records of transactions entered into prior to the passage of the AMLA would be constitutionally infirm, offensive as it is to the ex post facto clause. Still, we must note that the position submitted by Lilia Cheng is much broader than what we are willing to affirm. She argues that the proscription against ex post facto laws goes as far as to prohibit any inquiry into deposits or investments included in bank accounts opened prior to the effectivity of the AMLA even if the suspect transactions were entered into when the law had already taken effect. The Court recognizes that if this argument were to be affirmed, it would create a horrible loophole in the AMLA that would in turn supply the means to fearlessly engage in money laundering in the Philippines; all that the criminal has to do is to make sure that the money laundering activity is facilitated through a bank account opened prior to 2001. Lilia Cheng admits that "actual money launderers could utilize the ex post facto provision of the Constitution as a shield" but that the remedy lay with Congress to amend the law. We can hardly presume that Congress intended to enact a self-defeating law in the first place, and the courts are inhibited from such a construction by the cardinal rule that "a law should be interpreted with a view to upholding rather than destroying it." 101 Besides, nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt from the bank inquiry order all bank accounts opened prior to the passage of the AMLA. There is a cited exchange between Representatives Ronaldo Zamora and Jaime Lopez where the latter confirmed to the former that "deposits are supposed to be exempted from scrutiny or monitoring if they are already in place as of the time the law is enacted." 102That statement does indicate that transactions already in place when the AMLA was passed are indeed exempt from scrutiny through a bank inquiry order, but it cannot yield any interpretation that records of transactions undertaken after the enactment of the AMLA are similarly exempt. Due to the absence of cited authority from the legislative record that unqualifiedly supports respondent Lilia Chengs thesis, there is no cause for us to sustain her interpretation of the AMLA, fa tal as it is to the anima of that law. IX. We are well aware that Lilia Chengs petition presently pending before the Court of Appe als likewise assails the validity of the subject bank inquiry orders and precisely seeks the annulment of said orders. Our current declarations may indeed have the effect of preempting that0 petition. Still, in order for this Court to rule on the petition at bar which insists on the enforceability of the said bank inquiry orders, it is necessary for us to consider and rule on the same question which after all is a pure question of law. WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs.