IPL 8 October 2018

SECOND DIVISION
JOSE C. GO, G.R. No. 178429

Petitioner,
Present:
QUISUMBING, J., Chairperson,

*
- versus - CARPIO,
CARPIO MORALES,
BRION, and
ABAD, JJ.
BANGKO SENTRAL NG PILIPINAS,

Respondent. Promulgated:
October 23, 2009

x ------------------------------------------------------------------------------------------ x
DECISION
BRION, J.:
Through the present petition for review on certiorari,[1] petitioner Jose C. Go (Go) assails the October 26,
2006 decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 79149, as well as its June 4, 2007 resolution.[3] The CA decision
and resolution annulled and set aside the May 20, 2003[4] and June 30, 2003[5]orders of the Regional Trial Court (RTC), Branch
26, Manila which granted Gos motion to quash the Information filed against him.
THE FACTS
On August 20, 1999, an Information[6] for violation of Section 83 of Republic Act No. 337 (RA 337) or the General Banking Act, as
amended by Presidential Decree No. 1795, was filed against Go before the RTC. The charge reads:
That on or about and during the period comprised between June 27, 1996 and September 15, 1997, inclusive, in the City of
Manila, Philippines, the said accused, being then the Director and the President and Chief Executive Officer of the Orient
Commercial Banking Corporation (Orient Bank), a commercial banking institution created, organized and existing under
Philippines laws, with its main branch located at C.M. Recto Avenue, this City, and taking advantage of his position as such
officer/director of the said bank, did then and there wilfully, unlawfully and knowingly borrow, either directly or indirectly, for
himself or as the representative of his other related companies, the deposits or funds of the said banking
institution and/or become a guarantor, indorser or obligor for loans from the said bank to others, by then and there using
said borrowed deposits/funds of the said bank in facilitating and granting and/or caused the facilitating and granting of
credit lines/loans and, among others, to the New Zealand Accounts loans in the total amount of TWO BILLION AND SEVEN
HUNDRED FIFTY-FOUR MILLION NINE HUNDRED FIVE THOUSAND AND EIGHT HUNDRED FIFTY-SEVEN AND
0/100 PESOS, Philippine Currency, said accused knowing fully well that the same has been done by him without the written
approval of the majority of the Board of Directors of said Orient Bank and which approval the said accused deliberately failed
to obtain and enter the same upon the records of said banking institution and to transmit a copy of which to the supervising
department of the said bank, as required by the General Banking Act.
CONTRARY TO LAW. [Emphasis supplied.]
On May 28, 2001, Go pleaded not guilty to the offense charged.
After the arraignment, both the prosecution and accused Go took part in the pre-trial conference where the marking of the
voluminous evidence for the parties was accomplished. After the completion of the marking, the trial court ordered the parties to
proceed to trial on the merits.
Before the trial could commence, however, Go filed on February 26, 2003[7] a motion to quash the Information, which motion Go
amended on March 1, 2003.[8] Go claimed that the Information was defective, as the facts charged therein do not constitute an
offense under Section 83 of RA 337 which states:
No director or officer of any banking institution shall either directly or indirectly, for himself or as the representative or agent of
another, borrow any of the deposits of funds of such banks, nor shall he become a guarantor, indorser, or surety for loans from such
bank, to others, or in any manner be an obligor for money borrowed from the bank or loaned by it, except with the written approval
Intellectual Property Law 10/8/18

of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records
of the corporation and a copy of such entry shall be transmitted forthwith to the appropriate supervising department. The office of
any director or officer of a bank who violates the provisions of this section shall immediately become vacant and the director or
officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one
thousand nor more than ten thousand pesos.
The Monetary Board may regulate the amount of credit accommodations that may be extended, directly or indirectly, by banking
institutions to their directors, officers, or stockholders.However, the outstanding credit accommodations which a bank may extend to
each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its directors, or its officers, shall be
limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the
bank. Provided, however, that loans and advances to officers in the form of fringe benefits granted in accordance with rules and
regulations as may be prescribed by Monetary Board shall not be subject to the preceding limitation. (As amended by PD 1795)
In addition to the conditions established in the preceding paragraph, no director or a building and loan association shall engage in
any of the operations mentioned in said paragraphs, except upon the pledge of shares of the association having a total withdrawal
value greater than the amount borrowed. (As amended by PD 1795)
In support of his motion to quash, Go averred that based on the facts alleged in the Information, he was being prosecuted
for borrowing the deposits or funds of the Orient Bank and/or acting as a guarantor, indorser or obligor for the banks loans to other
persons. The use of the word and/or meant that he was charged for being either a borrower or a guarantor, or for being both a
borrower and guarantor. Go claimed that the charge was not only vague, but also did not constitute an offense. He posited that
Section 83 of RA 337 penalized only directors and officers of banking institutions who acted either as borrower or as guarantor, but
not as both.
Go further pointed out that the Information failed to state that his alleged act of borrowing and/or guarantying was not
among the exceptions provided for in the law. According to Go, the second paragraph of Section 83 allowed banks to extend credit
accommodations to their directors, officers, and stockholders, provided it is limited to an amount equivalent to the respective
outstanding deposits and book value of the paid-in capital contribution in the bank. Extending credit accommodations to bank
directors, officers, and stockholders is not per se prohibited, unless the amount exceeds the legal limit. Since the Information failed
to state that the amount he purportedly borrowed and/or guarantied was beyond the limit set by law, Go insisted that the acts so
charged did not constitute an offense.
Finding Gos contentions persuasive, the RTC granted Gos motion to quash the Information on May 20, 2003. It denied
on June 30, 2003 the motion for reconsideration filed by the prosecution.
The prosecution did not accept the RTC ruling and filed a petition for certiorari to question it before the CA. The
Information, the prosecution claimed, was sufficient. The word and/or did not materially affect the validity of the Information, as it
merely stated a mode of committing the crime penalized under Section 83 of RA 337. Moreover, the prosecution asserted that the
second paragraph of Section 83 (referring to the credit accommodation limit) cannot be interpreted as an exception to what the first
paragraph provided. The second paragraph only sets borrowing limits that, if violated, render the bank, not the director-borrower,
liable. A violation of the second paragraph of Section 83 under which Go is being prosecuted is therefore separate and distinct from
a violation of the first paragraph. Thus, the prosecution prayed that the orders of the RTC quashing the Information be set aside and
the criminal case against Go be reinstated.
On October 26, 2006, the CA rendered the assailed decision granting the prosecutions petition for certiorari.[9] The CA
declared that the RTC misread the law when it decided to quash the Information against Go. It explained that the allegation that Go
acted either as a borrower or a guarantor or as both borrower and guarantor merely set forth the different modes by which the
offense was committed. It did not necessarily mean that Go acted both as borrower and guarantor for the same loan at the same
time. It agreed with the prosecutions stand that the second paragraph of Section 83 of RA 337 is not an exception to the first
paragraph. Thus, the failure of the Information to state that the amount of the loan Go borrowed or guaranteed exceeded the legal
limits was, to the CA, an irrelevant issue. For these reasons, the CA annulled and set aside the RTCs orders and ordered the
reinstatement of the criminal charge against Go. After the CAs denial of his motion for reconsideration,[10] Go filed the present
appeal by certiorari.
THE PETITION
In his petition, Go alleges that the appellate court legally erred in overturning the trial courts orders. He insists that the
Information failed to allege the acts or omissions complained of with sufficient particularity to enable him to know the offense being
charged; to allow him to properly prepare his defense; and likewise to allow the court to render proper judgment.
Repeating his arguments in his motion to quash, Go reads Section 83 of RA 337 as penalizing a director or officer of a
banking institution for either borrowing the deposits or funds of the bank, or guaranteeing or indorsing loans to others, but not for
assuming both capacities. He claimed that the prosecutions shotgun approach in alleging that he acted as borrower and/or guarantor
rendered the Information highly defective for failure to specify with certainty the specific act or omission complained of. To

petitioner Go, the prosecutions approach was a clear violation of his constitutional right to be informed of the nature and cause of
the accusation against him.
Additionally, Go reiterates his claim that credit accommodations by banks to their directors and officers are legal and valid,
provided that these are limited to their outstanding deposits and book value of the paid-in capital contribution in the bank. The
failure to state that he borrowed deposits and/or guaranteed loans beyond this limit rendered the Information defective. He thus asks
the Court to reverse the CA decision to reinstate the criminal charge.
In its Comment,[11] the prosecution raises the same defenses against Gos contentions. It insists on the sufficiency of the
allegations in the Information and prays for the denial of Gos petition.
THE COURTS RULING
The Court does not find the petition meritorious and accordingly denies it.
The Accuseds Right to be Informed
Under the Constitution, a person who stands charged of a criminal offense has the right to be informed of the nature and
cause of the accusation against him.[12]The Rules of Court, in implementing the right, specifically require that the acts or omissions
complained of as constituting the offense, including the qualifying and aggravating circumstances, must be stated in ordinary and
concise language, not necessarily in the language used in the statute, but in terms sufficient to enable a person of common
understanding to know what offense is being charged and the attendant qualifying and aggravating circumstances present, so that
the accused can properly defend himself and the court can pronounce judgment. [13] To broaden the scope of the right, the Rules
authorize the quashal, upon motion of the accused, of an Information that fails to allege the acts constituting the
offense.[14] Jurisprudence has laid down the fundamental test in appreciating a motion to quash an Information grounded on the
insufficiency of the facts alleged therein. We stated in People v. Romualdez[15] that:
The determinative test in appreciating a motion to quash xxx is the sufficiency of the averments in the information, that is, whether
the facts alleged, if hypothetically admitted, would establish the essential elements of the offense as defined by law without
considering matters aliunde. As Section 6, Rule 110 of the Rules of Criminal Procedure requires, the information only needs to
state the ultimate facts; the evidentiary and other details can be provided during the trial.
To restate the rule, an Information only needs to state the ultimate facts constituting the offense, not the finer details of why
and how the illegal acts alleged amounted to undue injury or damage matters that are appropriate for the trial. [Emphasis
supplied]
The facts and circumstances necessary to be included in the Information are determined by reference to the definition and elements
of the specific crimes. The Information must allege clearly and accurately the elements of the crime charged.[16]
Elements of Violation of
Section 83 of RA 337
Under Section 83, RA 337, the following elements must be present to constitute a violation of its first paragraph:
1. the offender is a director or officer of any banking institution;
2. the offender, either directly or indirectly, for himself or as representative or agent of another, performs any of the following acts:
a. he borrows any of the deposits or funds of such bank; or
b. he becomes a guarantor, indorser, or surety for loans from such bank to others, or
c. he becomes in any manner an obligor for money borrowed from bank or loaned by it;
3. the offender has performed any of such acts without the written approval of the majority of the directors of the bank, excluding the
offender, as the director concerned.
A simple reading of the above elements easily rejects Gos contention that the law penalizes a bank director or officer only
either for borrowing the banks deposits or funds or for guarantying loans by the bank, but not for acting in both capacities. The
essence of the crime is becoming an obligor of the bank without securing the necessary written approval of the majority of
the banks directors.
The second element merely lists down the various modes of committing the offense. The third mode, by declaring that [no
director or officer of any banking institution shall xxx] in any manner be an obligor for money borrowed from the bank or loaned
by it, in fact serves a catch-all phrase that covers any situation when a director or officer of the bank becomes its obligor. The
prohibition is directed against a bank director or officer who becomes in any manner an obligor for money borrowed from
or loaned by the bank without the written approval of the majority of the banks board of directors. To make a distinction
between the act of borrowing and guarantying is therefore unnecessary because in either situation, the director or officer concerned
becomes an obligor of the bank against whom the obligation is juridically demandable.

The language of the law is broad enough to encompass either act of borrowing or guaranteeing, or both. While the first
paragraph of Section 83 is penal in nature, and by principle should be strictly construed in favor of the accused, the Court is
unwilling to adopt a liberal construction that would defeat the legislatures intent in enacting the statute. The objective of the law
should allow for a reasonable flexibility in its construction. Section 83 of RA 337, as well as other banking laws adopting the same
prohibition,[17] was enacted to ensure that loans by banks and similar financial institutions to their own directors, officers, and
stockholders are above board.[18] Banks were not created for the benefit of their directors and officers; they cannot use the assets of
the bank for their own benefit, except as may be permitted by law. Congress has thus deemed it essential to impose restrictions on
borrowings by bank directors and officers in order to protect the public, especially the depositors. [19] Hence, when the law prohibits
directors and officers of banking institutions from becoming in any manner an obligor of the bank (unless with the approval of the
board), the terms of the prohibition shall be the standards to be applied to directors transactions such as those involved in the present
case.
Credit accommodation limit is not an exception nor is it an element of the

offense
Contrary to Gos claims, the second paragraph of Section 83, RA 337 does not provide for an exception to a violation of the
first paragraph thereof, nor does it constitute as an element of the offense charged. Section 83 of RA 337 actually imposes three
restrictions: approval, reportorial, and ceiling requirements.
The approval requirement (found in the first sentence of the first paragraph of the law) refers to the written approval of
the majority of the banks board of directors required before bank directors and officers can in any manner be an obligor for money
borrowed from or loaned by the bank. Failure to secure the approval renders the bank director or officer concerned liable for
prosecution and, upon conviction, subjects him to the penalty provided in the third sentence of first paragraph of Section 83.
The reportorial requirement, on the other hand, mandates that any such approval should be entered upon the records of
the corporation, and a copy of the entry be transmitted to the appropriate supervising department. The reportorial requirement is
addressed to the bank itself, which, upon its failure to do so, subjects it to quo warranto proceedings under Section 87 of RA 337.[20]
The ceiling requirement under the second paragraph of Section 83 regulates the amount of credit accommodations that
banks may extend to their directors or officers by limiting these to an amount equivalent to the respective outstanding deposits and
book value of the paid-in capital contribution in the bank. Again, this is a requirement directed at the bank. In this light, a
prosecution for violation of the first paragraph of Section 83, such as the one involved here, does not require an allegation that the
loan exceeded the legal limit. Even if the loan involved is below the legal limit, a written approval by the majority of the banks
directors is still required; otherwise, the bank director or officer who becomes an obligor of the bank is liable. Compliance with the
ceiling requirement does not dispense with the approval requirement.
Evidently, the failure to observe the three requirements under Section 83 paves the way for the prosecution of three
different offenses, each with its own set of elements. A successful indictment for failing to comply with the approval requirement
will not necessitate proof that the other two were likewise not observed.
Rules of Court allow amendment of insufficient Information

Assuming that the facts charged in the Information do not constitute an offense, we find it erroneous for the RTC to immediately
order the dismissal of the Information, without giving the prosecution a chance to amend it. Section 4 of Rule 117 states:
SEC. 4. Amendment of complaint or information.If the motion to quash is based on an alleged defect of the complaint or
information which can be cured by amendment, the court shall order that an amendment be made.
If it is based on the ground that the facts charged do not constitute an offense, the prosecution shall be given by the
court an opportunity to correct the defect by amendment. The motion shall be granted if the prosecution fails to make the
amendment, or the complaint or information still suffers from the same defect despite the amendment. [Emphasis supplied]
Although an Information may be defective because the facts charged do not constitute an offense, the dismissal of the case will not
necessarily follow. The Rules specifically require that the prosecution should be given a chance to correct the defect; the court can
order the dismissal only upon the prosecutions failure to do so.The RTCs failure to provide the prosecution this
opportunity twice[21] constitutes an arbitrary exercise of power that was correctly addressed by the CA through
the certiorari petition. This defect in the RTCs action on the case, while not central to the issue before us, strengthens our
conclusion that this criminal case should be resolved through full-blown trial on the merits.
WHEREFORE, we DENY the petitioners petition for review on certiorari and AFFIRM the decision of the Court of Appeals in
CA-G.R. SP No. 79149, promulgated on October 26, 2006, as well as its resolution of June 4, 2007. The Regional Trial Court,
Branch 26, Manila is directed to PROCEED with the hearing of Criminal Case No. 99-178551. Costs against the petitioner.

SO ORDERED.
ARTURO D. BRION
FIRST DIVISION
PHILIPPINE TRUST COMPANY (also known as G.R. No. 150318

Philtrust Bank),
Petitioner, Present:
CORONA, C.J.,
Chairperson,
- versus - VELASCO, JR.,
LEONARDO-DE CASTRO,
PERALTA,* and
PEREZ, JJ.
HON. COURT OF APPEALS and FORFOM
DEVELOPMENT CORPORATION, Promulgated:
Respondents.
November 22, 2010
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DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Certiorari assailing the Decision[1] of the Court of Appeals dated June 15, 2001 and the subsequent
Resolution[2] denying reconsideration dated August 21, 2001.
The facts of the case, as determined by the Court of Appeals, are as follows:
Plaintiff Forfom Development Corporation is engaged in agricultural business and real estate development and owns
several parcels of land in Pampanga. It is the registered owner of two (2) parcels of land subject of the present controversy, situated
in Angeles City, Pampanga, under Transfer Certificate of Title Nos. 10896 and 64884 consisting of 1,126,530 and 571,014 square
meters, respectively. Sometime in 1989, plaintiff received a letter from the Department of Agrarian Reform with the names Ma.
Teresa Limcauco and Ellenora Limcauco as addressees.Upon verification with the DAR and the Register of Deeds made by
plaintiffs Vice-President at that time, Mr. Jose Marie L. Ramos, plaintiff discovered that the subject properties had already been
transferred in the names of said Ma. Teresa Limcauco and Ellenora Limcauco who were never known to plaintiff or its
employees. Plaintiffs Board of Directors decided to seek the assistance of the National Bureau of Investigation (NBI) to conduct an
investigation on the matter. On November 23, 1989, plaintiff caused the annotation of its adverse claim on TCT No. 75533 of the
Registry of Deeds of Angeles City.
The results of the NBI Investigation and plaintiffs own inquiry revealed the following acts through which the subject
parcels of land were transferred in the names of Ma. Teresa Limcauco and Ellenora Vda. De Limcauco, fictitious names which were
used by defendant Honorata Dizon in the questioned transactions:
(1) A Deed of Absolute Sale dated March 6, 1987 was executed over the lot covered by TCT No. 64884 in favor of
Ellenora Vda. De Limcauco for the price of P500,000.00. A separate Deed of Absolute Sale dated October 5, 1987 was likewise
executed over the property covered by TCT No. 10896 in favor of Ma. Teresa Limcauco in consideration of P500,000.00. In both
instruments, the signature of the plaintiffs President, Felix H. Limcauco was forged. Likewise, a certification to the effect that
plaintiffs Board of Directors had duly approved the sale contained the forged signature of plaintffs President, Felix H. Limcauco.
(2) On July 7, 1987, a petition for issuance of owners duplicate copy was filed with the Regional Trial Court of Angeles
City, Branch 57 by Ellenora Limcauco who allegedly lost said owners duplicate copy of TCT No. 64884, which was docketed as
Cad. Case No. A-124-160. On January 10, 1989, a separate petition for the issuance of a new owners duplicate copy was filed with
the same court by counsel for Ma. Teresa Limcauco who allegedly lost the owners duplicate copy of TCT No. 10896, which was
docketed as Cad. Case No. A-124-280.After due hearing, the court in Cad. Case No. A-124-280 granted the petition in an Order
dated February 1, 1989 which directed the Register of Deeds to issue another owners duplicate copy of TCT No. 10896 in place of
the lost one.
(3) As a consequence of the courts order in Cad. Case No. A-124-280, TCT No. 10896 was cancelled and TCT No.
82760/T-414 was issued in the name of Ma. Teresa Limcauco who had the property covered thereby subdivided into different lots
for which TCT Nos. 85585, 85587, 85589 and 85591 were issued in the name of said Ma. Teresa Limcauco. As to TCT No. 64884,
this was also cancelled by the Register of Deeds of Angeles City, Honesto G. Guarin, by virtue of a purported court order issued by
Judge Eliodoro B. Guinto of RTC-Branch 57.Also appearing as Entry No. 1127 in TCT No. 64884 is the Secretarys Certificate in
favor of Felix H. Limcauco and Entry No. 1128 which is the sale in favor of Ellenora Limcauco. However, the copy of the court
order in Cad. Case No. A-124-160 presented to said Register of Deeds was not signed by Judge Guinto who had denied before the
NBI authorities having signed such order or having conducted hearing on said case. The copy submitted to the Register of Deeds
was merely stamped Original Signed. Another document certifying that the Order granting the petition in Cad. Case No. A-124-160
had become final and executory was also submitted to the Register of Deeds in connection with the cancellation of TCT No.
64884. However, then Branch Clerk of Court Benedicto A. Pineda testified that he did not sign said certification and neither had he
been aware of the proceedings in Cad. Case No. A-124-160. Atty. Pinedas signature on said certification appears to have been
falsified by one Lorenzo San Andres.
(4) Although the property covered by TCT No. 10896 has already been subdivided into different lots and covered by
separate titles in the name of Ma. Teresa Limcauco, said lots were not yet transferred or conveyed to third parties. But as to the
property covered by TCT No. 64884, said certificate of title was cancelled and a new certificate of title, TCT No. 75436/T-378 was
issued in the name of Ellenora Vda. De Limcauco. On September 23, 1987, a Deed of Absolute Sale was executed by Ellenora Vda.
De Limcauco in favor of defendant Raul P. Claveria whereby the property covered by TCT No. 64884 was supposedly sold to said
defendant for the sum of P5,139,126.00. On September 24, 1987, TCT No. 75436/T-378 was cancelled and a new certificate of title,
TCT No. 75533 was issued in the name of defendant Raul P. Claveria. On October 21, 1987, defendant spouses Raul and Elea
Claveria mortgaged the property with the defendant Philippine Trust Company to guarantee a loan in the amount of P8,000,000.00,
which mortgage was duly registered and annotated as Entry No. 2858 in TCT No. 75533.
On December 26, 1989, plaintiff instituted the present action against the defendants Ma. Teresa Limcauco, Ellenora D.
Limcauco, spouses Raul P. Claveria and Elea R. Claveria, Philippine Trust Company and the Register of Deeds of Angeles
City. The Complaint alleged conspiratorial acts committed by said defendants who succeeded in causing the fraudulent transfer of
registration of plaintiffs properties in the names of Ma. Teresa Limcauco and Ellenora D. Limcauco and the subdivision of the land
covered by TCT No. 10896 over which separate titles have been issued. Plaintiff prayed that the trial court render judgment (a)
declaring the deeds of sale of March 9, 1987, October 5, 1987 and September 23, 1987 as well as TCT Nos. 75436, 75533, 87269,
85585, 85587, 85589 and 85591, all of the Registry of Deeds of Angeles City as void ab initio, (b) directing the reconveyance of the
aforesaid real property in the name of plaintiff corporation, and (c) sentencing defendants to pay plaintiff sums of P1,000,000.00 as
moral damages, P100,000.00 plus daily appearance fee of P1,000.00 as attorneys fees, and costs of suit. Defendant Philippine Trust
Bank filed a motion for bill of particulars which was granted by the trial court, and accordingly plaintiff amended its Complaint to
specifically allege the fraudulent acts and irregularities in the transfer of registration of its properties, in addition to those already
specified in the Complaint. Thus plaintiff alleged in addition that (1) the supposed court Order directing the issuance of another
owners duplicate copy actually did not exist, copy of said Order not bearing either the signature of the judge or his branch clerk of
court as well as the court seal, and yet accepted at face value in conspiracy or at least negligently, by defendant Register of Deeds of
Angeles City, not to mention the haste, among other signs of conspiracy, with which said new owners duplicate copy of the title was
issued; (2) the mortgage executed by defendant-spouses Claveria in favor of defendant bank was characterized by irregularities, the
bank having extended a loan in the amount of P8 million, far in excess of the propertys market value of P2,855,070.00, as well as
the haste in which said loan was granted.
In its Answer, defendant Philippine Trust Company denied the allegations of the Complaint as to the irregularities in the
granting of the P8 million loan to defendant-spouses Raul and Elea Claveria. According to said defendant, the Claveria spouses
have been their clients since 1986 and on October 2, 1987, all their outstanding obligations in the amount of P7,300,000.00 were
consolidated into one (1) account on clean basis. Defendant bank had required the Claveria spouses to secure their clean loan
of P7,300,000.00 with a real estate mortgage, and hence on October 21, 1987, said spouses executed mortgage on real property
covered by TCT No. 75533 for an obligation of P8 million after securing an advance from the defendant bank in the amount
of P700,000.00. It had subjected the land offered as security to the usual bank appraisals and examined the genuineness and
authenticity of TCT No. 75533 with the Register of Deeds of Angeles City and found the same to be in existence and in
order. Thereupon, the deed of mortgage executed by the Claveria spouses was registered by the defendant bank with the Register of
Deeds and had it annotated in the original copy of the title. Defendant bank thus prayed that after due hearing, the complaint against
it be dismissed and a decision be rendered (a) holding as valid and legal the mortgage on the real property covered by TCT No.
75533 of the Registry of Deeds of Angeles City, and (b) on its counterclaim, ordering the plaintiff to pay to defendant bank the
amounts of P50,000.00 as actual damages, P1,000,000.00 as moral damages, P100,000.00 as attorneys fees, and the costs of suit.
On motion of plaintiff, the trial court ordered the service of summons by publication with respect to defendants Ma. Teresa
Limcauco, Ellenora Limcauco, Raul P. Claveria and Elea Claveria, whose addresses could not be located by the Sheriff and even by
the parties.

Defendant Register of Deeds of Angeles City filed his Answer denying that he conspired with the other defendants in
effecting the transfer of registration of the subject properties and averring that it had issued the questioned transfer certificates of
title to defendants Ma. Teresa Limcauco, Ellenora Vda. de Limcauco and the spouses Raul and Elea Claveria on the basis of
documents filed with it and existing in the Office of the Register of Deeds of Angeles City. In his defense, defendant Register of
Deeds maintained that he had no reason or basis to question the validity and legality of the documents presented before him for
registration nor to question the genuineness of the signatures appearing therein, as well as the Orders of RTC-Angeles City, Branch
57, which contained a signature over and above the typewritten name of Judge Eliodoro B. Guinto. He had the right to assume that
official functions were regularly performed. Plaintiff therefore has no cause of action against the defendant Register of Deeds as the
latter merely performed his duties and functions embodied under Sec. 10 of P.D. No. 1529. By way of counterclaim, defendant
Register of Deeds alleged bad faith and malice in plaintiffs filing of the complaint against him, stating that (1) despite plaintiffs
knowledge that defendant Register of Deeds has not committed any act of malfeasance or misfeasance in the registration of the
subject certificates of title, he was subjected to an investigation by NBI authorities at the instance of plaintiff and was compelled to
give a sworn statement before said government authorities in order to clear his name; and (2) plaintiffs former counsel had earlier
manifested that the Register of Deeds was being impleaded merely as a nominal party; however, in a sudden and unexplained
turnabout, plaintiff impleaded defendant Register of Deeds as a principal party in its Amended Complaint. Defendant Register of
Deeds thus prayed for the dismissal of the complaint against him for utter lack of merit and on his counterclaim, that a decision be
rendered ordering the plaintiff to pay the defendant Register of Deeds the following sums: P200,000.00 by way of moral
damages, P100,000.00 by way of exemplary damages, P20,000.00 by way of attorneys fees plus P500.00 per appearance, and costs
of suit.
In an Order dated October 30, 1991, the trial court declared the defendants Ma. Teresa Limcauco, Ellenora Limcauco, Raul
P. Claveria and Elea R. Claveria in default for their failure to file the necessary responsive pleadings despite the lapse of sixty (60)
days from the last day of publication of summons, and accordingly allowed the plaintiff to present its evidence ex parte against the
said defendants. During the pre-trial conference held on November 25, 1991, plaintiffs counsel manifested that it was joining the
defendant Register of Deeds only as a nominal party as the latter also waived his counterclaim against the plaintiff.
On February 4, 1992, the trial court granted plaintiffs motion to authenticate the signatures appearing in the Deeds of Sale
of October 5, 1987 and March 6, 1987, and that of Josefina K. Limcauco appearing in the Secretarys Certificate containing the
supposed Board resolution of plaintiff approving the sale of the parcels of land covered by TCT Nos. 10896 and 64884.The said
documents were ordered forwarded to the NBI for authentication. During the pre-trial conference conducted on August 25, 1992,
the parties agreed on two (2) issues for resolution during the trial: (1) whether or not the Deeds of Absolute Sale purportedly
executed by the plaintiff covering the subject real properties, as well as the titles issued thereat, TCT Nos. 75436, 75533, 87269,
85585, 85587, 85589 and 85591, all of the Registry of Deeds of Angeles City are genuine and valid; and (2) whether or not the
mortgage on the real property covered by TCT No. 75533 of the Registry of Deeds of Angeles City is valid and legal. At the trial
proper, plaintiff presented as its witnesses Jose Marie L. Ramos (Vice-President of plaintiff corporation), Alberto Ramos (NBI
officer), Eliodoro Constantino (NBI handwriting expert), Felix H. Limcauco, Jr. (former President of plaintiff corporation) and Atty.
Benedicto Pineda (former Branch Clerk of Court of RTC- Angeles City, Branch 57). Defendant Philippine Trust Company, on the
other hand, presented the testimony of defendant Atty. Honesto Guarin (Register of Deeds of Angeles City). After the formal offer
of the respective documentary evidence of the parties and submission of their memoranda, the case was submitted for decision. x x
x.[3]
On December 29, 1993, the RTC rendered its Decision in favor of private respondent Forfom Development Corporation
(Forfom):
WHEREFORE, all the [foregoing] considered, judgment is hereby rendered in favor of the plaintiff and against the
defendants Philippine Trust Co., spouses Raul P. Claveria and Elea R. Claveria, Ma. Teresa Limcauco @ Honorata Dizon and
Ellenora Vda. de Limcauco @ Honorata Dizon:
1. Declaring the Deeds of Sale of 9 March 1987, 23 September 1987 and 5 October 1987 as well as Transfer Certificates of
Title Nos. 75436, 75533, 82760, 85585, 85587, 85589 and 85591 all of the Register of Deeds of Angeles City as void ab initio;
2. Ordering the Register of Deeds of Angeles City to reinstate Transfer Certificates of Title Nos. 10896 and 64884 in the
name of the plaintiff or to issue new transfer certificate of title for the same parcels of land in the name of the plaintiff-corporation
free from liens and encumbrances made subsequent to the cancellation of the said two (2) titles;
3. Ordering the defendants Philippine Trust Co., spouses Raul P. Claveria and Elea R. Claveria, Ma. Teresa Limcauco @
Honorata Dizon and Ellenora Vda. de Limcauco @ Honorata Dizon to pay jointly and severally the plaintiff the sum of P50,000.00
as actual damages in the form of attorneys fees; and
4. To pay the costs of this suit.[4]

On January 21, 1994, petitioner Philippine Trust Company (Philtrust) filed a Notice of Appeal, alleging that the lower
court erred in declaring Transfer Certificate of Title No. 75533-Angeles City void and in concluding that it was a mortgagee in bad
faith. Philtrust further claims that Forfom was negligent with its property.
On June 15, 2001, the Court of Appeals rendered the assailed Decision affirming the Decision of the RTC:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED and the appealed Decision of the trial court
in Civil Case No. 6087 is hereby AFFIRMED and REITERATED. [5]
According to the Court of Appeals, Philtrust was negligent in its credit investigation procedures and its standards for
granting of loans, as shown by (a) its previously extending unsecured and uncollateralized loans to the spouses Raul and Elea
Claveria, and (b) its failure to discover the latters statement of a fictitious address in the mortgage contract and being the subject of
estafa cases. The Court of Appeals agreed with the trial courts finding that Philtrust acted in haste in the execution of the mortgage
and loan contracts, as the property, assessed only at more than P2 million and allegedly purchased at more than P5 million, was
made to secure the principal loan obligation of P8 million.
The appellate court further took note of Philtrusts refusal to present the records and details of its transactions with the
spouses Claveria despite being pressed to do so by Forfom. The Court of Appeals found this circumstance cast serious doubt on
Philtrusts allegation that it was a mortgagee in good faith.
On August 21, 2001, the Court of Appeals denied Philtrusts Motion for Reconsideration. Hence, this Petition
for Certiorari, where Philtrust raises the following arguments:
1. The Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in finding there
was lack of evidence that Philtrust was a mortgagee in good faith; hence, capriciously and wantonly ascribed bad faith to the
latter;[6]
2. The Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in finding that
Philtrust had actual knowledge of facts and circumstances pertaining to the fraudulent transfer of the registration of the subject
property from the name of Forfom to the name of Ellenora Limcauco, when there was no iota of evidence to support such factual
finding; hence, capriciously and wantonly ascribed bad faith to Philtrust as the mortgagee of the said property; [7]and
3. The Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in completely
disregarding the well-settled rule that a forged deed may be the root of a valid title; hence, capriciously and wantonly nullified the
real estate mortgage executed by the spouses Claveria in favor of Philtrust. [8]
Contrary to the allegation in the third argument presented by Philtrust, the Court of Appeals did not seem to have
disregarded the rule that a forged deed may be the root of a valid title. The appellate court clearly specified the circumstances
allowing the application of such rule:
A forged deed may be the root of a valid title when an innocent purchaser for value intervenes. A purchaser in good faith
and for value is one who buys the property of another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claims or interest of
some other person in the property. It has been held that where a mortgagee bank accepted the mortgage in good faith, the land
involved being registered land, it is not bound to go [beyond] the certificate of title to look for flaws in the mortgagors title, the
doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. A mortgagee in good faith and for
value is entitled to protection. A bank is not required, before accepting a mortgage, to make an investigation of the title of the
property being given as security. This is a consequence of the rule that a person dealing with registered land has a right to rely upon
the face of the Torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has
actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.[9]
Indeed, the presence of anything which excites or arouses suspicion should prompt the vendee or mortgagee to look
beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. [10] If the vendee or mortgagee
failed to do so before the execution of the contract, the vendee or mortgagee is deemed to be in bad faith and therefore cannot
acquire any title under the forged instrument.
The determination of the case at bar, therefore, hinges on the resolution of the first two issues, which deal with whether
Philtrust is a mortgagee in good or bad faith. However, since what Philtrust filed with us is a Petition for Certiorari rather than a
Petition for Review, a finding that Philtrust is in good faith is not enough for us to grant the Petition. A mere error in the judgment
of the Court of Appeals in affirming the RTC Decision would not be enough; nothing less than grave abuse of discretion on the part
of the Court of Appeals is required for the issuance of the Writ of Certiorari.

Philtrust claims that the loans secured by the mortgage on the subject property were granted to the spouses Claveria after
Philtrust was satisfied regarding the spouses credit worthiness and capacity to pay. [11] In fact, according to Philtrust, the spouses
Claveria were able to maintain a satisfactory record of payment during the early period of their transactions with the
bank.[12] Philtrust insists that prior to the constitution of the mortgage, it followed the standard operating procedures in accepting
property as security, including having investigators visit the subject property and appraise its value.[13]
When the Court of Appeals ruled that these claims by Philtrust were not supported by evidence, the latter countered before
us that its allegations were supported by the following documents: (a) the Promissory Note; [14] (b) the Deed of Mortgage;[15] and (c)
TCT No. 75533.[16] Philtrust adds that it stated in the Answer to Interrogatories that it followed the standard operating procedures in
accepting the property as security. Since said Answer to Interrogatories is a notarized document, Philtrust claims that it is a public
document which is conclusive as to the truthfulness of its contents.[17]
It is settled that banks, their business being impressed with public interest, are expected to exercise more care and prudence
than private individuals in their dealings, even those involving registered lands.[18] The rule that persons dealing with registered
lands can rely solely on the certificate of title does not apply to banks.[19] Consequently, Philtrust should prove that it exercised
extraordinary diligence required of it in approving the mortgage contract in favor of the spouses Claveria.
It baffles us how Philtrust can argue that the promissory note and Deed of Mortgage executed by the spouses Claveria, and
the TCT of the subject property, can prove its allegations that (a) the mortgage was granted after it was satisfied of the spouses
credit worthiness; (b) the latter was able to maintain a satisfactory record of payment early on; or (c) it followed the standard
operating procedures in accepting property as security, including having investigators visit the subject property and appraise its
value. The mere fact that Philtrust accepted the subject property as security most certainly does not prove that it followed the
standard operating procedure in doing so. As regards Philtrusts claim that the Answer to Interrogatories, being a notarized
document, is conclusive as to the truthfulness of its contents, we deem it necessary to clarify the doctrines cited by Philtrust on this
matter.
Section 19, Rule 132 of the Rules of Court enumerates three kinds of public documents, to wit:
Sec. 19. Classes of Documents. For the purpose of their presentation in evidence, documents are either public or private.
Public documents are:
(a) The written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and
public officers, whether of the Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills and testaments; and
(c) Public records, kept in the Philippines, of private documents required by law to be entered therein.
All other writings are private.
Notarized documents fall under the second classification of public documents. However, not all types of public documents
are deemed prima facie evidence of the facts therein stated:
Sec. 23. Public documents as evidence. Documents consisting of entries in public records made in the performance of a duty
by a public officer are prima facie evidence of the facts therein stated. All other public documents are evidence, even against a third
person, of the fact which gave rise to their execution and of the date of the latter. [20]
Public records made in the performance of a duty by a public officer include those specified as public documents under
Section 19(a), Rule 132 of the Rules of Court and the acknowledgement,[21] affirmation or oath,[22] or jurat[23] portion of public
documents under Section 19(c). Hence, under Section 23, notarized documents are merely proof of the fact which gave rise to their
execution (e.g., the notarized Answer to Interrogatories in the case at bar is proof that Philtrust had been served with Written
Interrogatories), and of the date of the latter (e.g., the notarized Answer to Interrogatories is proof that the same was executed on
October 12, 1992, the date stated thereon),[24] but is not prima facie evidence of the facts therein stated. Additionally, under Section
30 of the same Rule, the acknowledgement in notarized documents is prima facie evidence of the execution of the instrument or
document involved (e.g., the notarized Answer to Interrogatories is prima facieproof that petitioner executed the same).[25]
The reason for the distinction lies with the respective official duties attending the execution of the different kinds of public
instruments. Official duties are disputably presumed to have been regularly performed.[26] As regards affidavits, including Answers
to Interrogatories which are required to be sworn to by the person making them,[27] the only portion thereof executed by the person
authorized to take oaths is the jurat. The presumption that official duty has been regularly performed therefore applies only to the

latter portion, wherein the notary public merely attests that the affidavit was subscribed and sworn to before him or her, on the date
mentioned thereon. Thus, even though affidavits are notarized documents, we have ruled that affidavits, being self-serving, must be
received with caution.[28]
Philtrust, therefore, presented no evidence rebutting the following badges of bad faith shown in the records of the
case. Even though circumstantial, the following adequately prove by preponderance of evidence that Philtrust was aware of the
fraudulent scheme perpetrated upon Forfom:
1. Within a period of less than one year, Philtrust extended unsecured loans amounting to P7,300,000.00 to the spouses
Claveria as shown in its Answer wherein it declared:
Spouses Raul and Elea Claveria has been clients of the bank since 1986 and on October 2, 1987, all their outstanding obligations in
the amount of P7,300,000.00 were consolidated into one account on a clean basis. [29]
All Philtrust can give is a very general explanation for these unsecured loans:
5. Why were the Claveria spouses granted loans without collaterals at the onset? [30]
[ANSWER:]
5. The Claveria spouses passed the standards set by the bank.[31]
2. Although the spouses Claveria had declared their residence to be in the plush subdivision in Ayala Alabang, Philtrust
was content to receive as security a land outside Metro Manila, which was only recently acquired by the said spouses. When asked
about this in the Request for Interrogatories, Philtrust merely responded evasively:
7. Did the bank not request from the Claveria spouses collateral within the Metro Manila area and if so what was the reply
of the Claveria spouses?[32]
[ANSWER:]
7. The bank requested for collateral on the P8,300,000.00 loan preferably located in Metro Manila. [33]
3. It is presumed that evidence willfully suppressed would be adverse if produced.[34] When pressed in the Request for
Interrogatories for details of the investigation of the bank, and for the names of the persons who allegedly visited the subject
property and the alleged home of the spouses Claveria, and the names of the bank officers who dealt with said spouses, Philtrust
refused to do so:
10. Prior to the execution of the real estate mortgage by the Claveria spouses on the Angeles City property subject of the
above-captioned case, what investigation, if any did the bank undertake for the physical examination of said property, what were the
results, if any, of such physical examination of the property, and the name or names of the persons who visited the property? [35]
[ANSWER:]
10. The Angeles property was appraised in accordance with the usual procedure in the appraisal of property offered as
collateral. The property was visited by the investigators of the Credit Department of the bank. [36]
15. Did an officer or employee of the bank actually visit the given residences of the Claveria spouses in Angeles City and
Bacolod City, the result of such visit, and the name or names of the persons representing the bank who visited such places? [37]
[ANSWER:]
15. As stated above, the last known address of spouses was 406 Caliraya Street, New Alabang, Muntinlupa, M.M. [38]
17. Who was the particular bank officer who dealt directly with the Claveria spouses and handled their accounts? [39]
[ANSWER:]
17. The Loans and Discounts Department of the bank handled the accounts of the spouses. [40]

The RTC and the Court of Appeals considered these circumstances as circumstantial evidence of Philtrusts awareness of
the fraudulent scheme against Forfom.Nevertheless, Philtrust up to this date persists with suppressing these details:
Petitioner humbly believes and strongly maintains its position that the presentation of all documents pertaining to the loan
transactions of Spouses Claveria is unnecessary, irrelevant, and immaterial in its defense of good faith before the court a
quo. Nevertheless, as discussed above, Petitioner had sufficiently proved through its Answer to Interrogatories and loan documents
extant in the records of the case that it prudently complied with the standard practice of banks in accepting mortgage.[41]
4. Philtrust persistently refused to cooperate with the National Bureau of Investigation (NBI) in its investigation of the
fraudulent scheme perpetrated against Forfom, as testified by NBI agents Alberto V. Ramos and Pastor T. Pangan, [42] and as shown
in NBI Investigation Report NBI-NCR 10-11-90 90-2-5507.[43]
5. Had Philtrust properly conducted a credit investigation of the spouses Claveria, it would have easily discovered that they
did not reside and never resided in the address declared by them, as revealed in the investigation by the NBI [44] and declared by the
association of homeowners in the New Alabang subdivision. [45]
All the foregoing considered, we find that the Court of Appeals did not even err in finding that Philtrust was in bad faith in
the execution of the mortgage contract with the spouses Claveria. Consequently, Philtrust miserably failed to prove that the Court of
Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in rendering the assailed Decision and
Resolution.
WHEREFORE, the instant Petition for Certiorari is DISMISSED. The Decision of the Court of Appeals dated June 15,
2001 and the subsequent Resolution denying reconsideration dated August 21, 2001 are AFFIRMED.
Costs against petitioner Philippine Trust Company.
SO ORDERED.

FIRST DIVISION
[G.R. No. 114286. April 19, 2001]
THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), petitioner, vs. THE COURT OF
APPEALS, CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and SPOUSE, respondents.
DECISION
YNARES-SANTIAGO, J.:
The instant petition for review seeks to partially set aside the July 26, 1993 Decision [1] of respondent Court of Appeals in
CA-G.R. CV No. 29950, insofar as it orders petitioner to reimburse respondent Continental Cement Corporation the amount of
P490,228.90 with interest thereon at the legal rate from July 26, 1988 until fully paid. The petition also seeks to set aside the
March 8, 1994 Resolution[2] of respondent Court of Appeals denying its Motion for Reconsideration.
The facts are as follows:
On July 13, 1982, respondents Continental Cement Corporation (hereinafter, respondent Corporation) and Gregory T. Lim
(hereinafter, respondent Lim) obtained from petitioner Consolidated Bank and Trust Corporation Letter of Credit No. DOM-
23277 in the amount of P1,068,150.00 On the same date, respondent Corporation paid a marginal deposit of P320,445.00 to
petitioner. The letter of credit was used to purchase around five hundred thousand liters of bunker fuel oil from Petrophil
Corporation, which the latter delivered directly to respondent Corporation in its Bulacan plant. In relation to the same transaction,
a trust receipt for the amount of P1,001,520.93 was executed by respondent Corporation, with respondent Lim as signatory.
Claiming that respondents failed to turn over the goods covered by the trust receipt or the proceeds thereof, petitioner filed a
complaint for sum of money with application for preliminary attachment [3]before the Regional Trial Court of Manila. In answer to
the complaint, respondents averred that the transaction between them was a simple loan and not a trust receipt transaction, and that
the amount claimed by petitioner did not take into account payments already made by them. Respondent Lim also denied any
personal liability in the subject transactions. In a Supplemental Answer, respondents prayed for reimbursement of alleged
overpayment to petitioner of the amount of P490,228.90.
At the pre-trial conference, the parties agreed on the following issues:
1) Whether or not the transaction involved is a loan transaction or a trust receipt transaction;
2) Whether or not the interest rates charged against the defendants by the plaintiff are proper under the letter of credit, trust receipt
and under existing rules or regulations of the Central Bank;
3) Whether or not the plaintiff properly applied the previous payment of P300,456.27 by the defendant corporation on July 13,
1982 as payment for the latters account; and
4) Whether or not the defendants are personally liable under the transaction sued for in this case. [4]
On September 17, 1990, the trial court rendered its Decision,[5] dismissing the Complaint and ordering petitioner to pay
respondents the following amounts under their counterclaim: P490,228.90 representing overpayment of respondent Corporation,
with interest thereon at the legal rate from July 26, 1988 until fully paid; P10,000.00 as attorneys fees; and costs.
Both parties appealed to the Court of Appeals, which partially modified the Decision by deleting the award of attorneys fees
in favor of respondents and, instead, ordering respondent Corporation to pay petitioner P37,469.22 as and for attorneys fees and
litigation expenses.
Hence, the instant petition raising the following issues:
1. WHETHER OR NOT THE RESPONDENT APPELLATE COURT ACTED INCORRECTLY OR COMMITTED
REVERSIBLE ERROR IN HOLDING THAT THERE WAS OVERPAYMENT BY PRIVATE RESPONDENTS TO THE
PETITIONER IN THE AMOUNT OF P490,228.90 DESPITE THE ABSENCE OF ANY COMPUTATION MADE IN THE
DECISION AND THE ERRONEOUS APPLICATION OF PAYMENTS WHICH IS IN VIOLATION OF THE NEW CIVIL
CODE.
2. WHETHER OR NOT THE MANNER OF COMPUTATION OF THE MARGINAL DEPOSIT BY THE RESPONDENT
APPELLATE COURT IS IN ACCORDANCE WITH BANKING PRACTICE.
3. WHETHER OR NOT THE AGREEMENT AMONG THE PARTIES AS TO THE FLOATING OF INTEREST RATE IS
VALID UNDER APPLICABLE JURISPRUDENCE AND THE RULES AND REGULATIONS OF THE CENTRAL BANK.
4. WHETHER OR NOT THE RESPONDENT APPELLATE COURT GRIEVOUSLY ERRED IN NOT CONSIDERING THE
TRANSACTION AT BAR AS A TRUST RECEIPT TRANSACTION ON THE BASIS OF THE JUDICIAL ADMISSIONS OF
THE PRIVATE RESPONDENTS AND FOR WHICH RESPONDENTS ARE LIABLE THEREFOR.
5. WHETHER OR NOT THE RESPONDENT APPELLATE COURT GRIEVOUSLY ERRED IN NOT HOLDING PRIVATE
RESPONDENT SPOUSES LIABLE UNDER THE TRUST RECEIPT TRANSACTION. [6]
The petition must be denied.
On the first issue respecting the fact of overpayment found by both the lower court and respondent Court of Appeals, we
stress the time-honored rule that findings of fact by the Court of Appeals especially if they affirm factual findings of the trial court
will not be disturbed by this Court, unless these findings are not supported by evidence.[7]
Petitioner decries the lack of computation by the lower court as basis for its ruling that there was an overpayment
made. While such a computation may not have appeared in the Decision itself, we note that the trial courts finding of overpayment
is supported by evidence presented before it. At any rate, we painstakingly reviewed and computed the payments together with the
interest and penalty charges due thereon and found that the amount of overpayment made by respondent Bank to
petitioner, i.e., P563,070.13, was more than what was ordered reimbursed by the lower court. However, since respondents did not
file an appeal in this case, the amount ordered reimbursed by the lower court should stand.
Moreover, petitioners contention that the marginal deposit made by respondent Corporation should not be deducted outright
from the amount of the letter of credit is untenable. Petitioner argues that the marginal deposit should be considered only after
computing the principal plus accrued interests and other charges. However, to sustain petitioner on this score would be to

countenance a clear case of unjust enrichment, for while a marginal deposit earns no interest in favor of the debtor-depositor, the
bank is not only able to use the same for its own purposes, interest-free, but is also able to earn interest on the money loaned to
respondent Corporation. Indeed, it would be onerous to compute interest and other charges on the face value of the letter of credit
which the petitioner issued, without first crediting or setting off the marginal deposit which the respondent Corporation paid to
it. Compensation is proper and should take effect by operation of law because the requisites in Article 1279 of the Civil Code are
present and should extinguish both debts to the concurrent amount. [8]
Hence, the interests and other charges on the subject letter of credit should be computed only on the balance of P681,075.93,
which was the portion actually loaned by the bank to respondent Corporation.
Neither do we find error when the lower court and the Court of Appeals set aside as invalid the floating rate of interest
exhorted by petitioner to be applicable. The pertinent provision in the trust receipt agreement of the parties fixing the interest rate
states:
I, WE jointly and severally agree to any increase or decrease in the interest rate which may occur after July 1, 1981, when the
Central Bank floated the interest rate, and to pay additionally the penalty of 1% per month until the amount/s or installment/s due
and unpaid under the trust receipt on the reverse side hereof is/are fully paid.[9]
We agree with respondent Court of Appeals that the foregoing stipulation is invalid, there being no reference rate set either
by it or by the Central Bank, leaving the determination thereof at the sole will and control of petitioner.
While it may be acceptable, for practical reasons given the fluctuating economic conditions, for banks to stipulate that
interest rates on a loan not be fixed and instead be made dependent upon prevailing market conditions, there should always be a
reference rate upon which to peg such variable interest rates. An example of such a valid variable interest rate was found
in Polotan, Sr. v. Court of Appeals.[10]In that case, the contractual provision stating that if there occurs any change in the
prevailing market rates, the new interest rate shall be the guiding rate in computing the interest due on the outstanding
obligation without need of serving notice to the Cardholder other than the required posting on the monthly statement served to the
Cardholder[11] was considered valid. The aforequoted provision was upheld notwithstanding that it may partake of the nature of an
escalation clause, because at the same time it provides for the decrease in the interest rate in case the prevailing market rates
dictate its reduction. In other words, unlike the stipulation subject of the instant case, the interest rate involved in the Polotan case
is designed to be based on the prevailing market rate. On the other hand, a stipulation ostensibly signifying an agreement to any
increase or decrease in the interest rate, without more, cannot be accepted by this Court as valid for it leaves solely to the creditor
the determination of what interest rate to charge against an outstanding loan.
Petitioner has also failed to convince us that its transaction with respondent Corporation is really a trust receipt transaction
instead of merely a simple loan, as found by the lower court and the Court of Appeals.
The recent case of Colinares v. Court of Appeals[12] appears to be foursquare with the facts obtaining in the case at
bar. There, we found that inasmuch as the debtor received the goods subject of the trust receipt before the trust receipt itself was
entered into, the transaction in question was a simple loan and not a trust receipt agreement. Prior to the date of execution of the
trust receipt, ownership over the goods was already transferred to the debtor. This situation is inconsistent with what normally
obtains in a pure trust receipt transaction, wherein the goods belong in ownership to the bank and are only released to the importer
in trust after the loan is granted.
In the case at bar, as in Colinares, the delivery to respondent Corporation of the goods subject of the trust receipt occurred
long before the trust receipt itself was executed. More specifically, delivery of the bunker fuel oil to respondent Corporations
Bulacan plant commenced on July 7, 1982 and was completed by July 19, 1982. [13] Further, the oil was used up by respondent
Corporation in its normal operations by August, 1982. [14] On the other hand, the subject trust receipt was only executed nearly two
months after full delivery of the oil was made to respondent Corporation, or on September 2, 1982.
The danger in characterizing a simple loan as a trust receipt transaction was explained in Colinares, to wit:
The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse of confidence in
the handling of money or goods to the prejudice of another regardless of whether the latter is the owner. Here, it is crystal clear
that on the part of Petitioners there was neither dishonesty nor abuse of confidence in the handling of money to the prejudice of
PBC. Petitioners continually endeavored to meet their obligations, as shown by several receipts issued by PBC acknowledging
payment of the loan.
The Information charges Petitioners with intent to defraud and misappropriating the money for their personal use. The mala
prohibita nature of the alleged offense notwithstanding, intent as a state of mind was not proved to be present in Petitioners
situation. Petitioners employed no artifice in dealing with PBC and never did they evade payment of their obligation nor attempt
to abscond. Instead, Petitioners sought favorable terms precisely to meet their obligation.
Also noteworthy is the fact that Petitioners are not importers acquiring the goods for re-sale, contrary to the express provision
embodied in the trust receipt. They are contractors who obtained the fungible goods for their construction project. At no time did
title over the construction materials pass to the bank, but directly to the Petitioners from CM Builders Centre. This impresses upon
the trust receipt in question vagueness and ambiguity, which should not be the basis for criminal prosecution in the event of
violation of its provisions.
The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats of
criminal prosecution should they be unable to pay it may be unjust and inequitable, if not reprehensible. Such agreements are
contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved. The resort to this scheme leaves
poor and hapless borrowers at the mercy of banks, and is prone to misinterpretation, as had happened in this case. Eventually,
PBC showed its true colors and admitted that it was only after collection of the money, as manifested by its Affidavit of
Desistance.
Similarly, respondent Corporation cannot be said to have been dishonest in its dealings with petitioner. Neither has it been
shown that it has evaded payment of its obligations. Indeed, it continually endeavored to meet the same, as shown by the various

receipts issued by petitioner acknowledging payment on the loan. Certainly, the payment of the sum of P1,832,158.38 on a loan
with a principal amount of only P681,075.93 negates any badge of dishonesty, abuse of confidence or mishandling of funds on the
part of respondent Corporation, which are the gravamen of a trust receipt violation. Furthermore, respondent Corporation is not an
importer which acquired the bunker fuel oil for re-sale; it needed the oil for its own operations. More importantly, at no time did
title over the oil pass to petitioner, but directly to respondent Corporation to which the oil was directly delivered long before the
trust receipt was executed. The fact that ownership of the oil belonged to respondent Corporation, through its President, Gregory
Lim, was acknowledged by petitioners own account officer on the witness stand, to wit:
Q - After the bank opened a letter of credit in favor of Petrophil Corp. for the account of the defendants thereby paying the
value of the bunker fuel oil what transpired next after that?
A - Upon purchase of the bunker fuel oil and upon the requests of the defendant possession of the bunker fuel oil were
transferred to them.
Q - You mentioned them to whom are you referring to?
A - To the Continental Cement Corp. upon the execution of the trust receipt acknowledging the ownership of the bunker fuel
oil this should be acceptable for whatever disposition he may make.
Q - You mentioned about acknowledging ownership of the bunker fuel oil to whom by whom?
A - By the Continental Cement Corp.
Q - So by your statement who really owns the bunker fuel oil?
ATTY. RACHON:
Objection already answered.
COURT:
Give time to the other counsel to object.
ATTY. RACHON:
He has testified that ownership was acknowledged in favor of Continental Cement Corp. so that question has already been
answered.
ATTY. BAAGA:
That is why I made a follow up question asking ownership of the bunker fuel oil.
COURT:
Proceed.
ATTY. BAAGA:
Q - Who owns the bunker fuel oil after purchase from Petrophil Corp.?
A - Gregory Lim.[15]
By all indications, then, it is apparent that there was really no trust receipt transaction that took place. Evidently, respondent
Corporation was required to sign the trust receipt simply to facilitate collection by petitioner of the loan it had extended to the
former.
Finally, we are not convinced that respondent Gregory T. Lim and his spouse should be personally liable under the subject
trust receipt. Petitioners argument that respondent Corporation and respondent Lim and his spouse are one and the same cannot be
sustained. The transactions sued upon were clearly entered into by respondent Lim in his capacity as Executive Vice President of
respondent Corporation.We stress the hornbook law that corporate personality is a shield against personal liability of its
officers. Thus, we agree that respondents Gregory T. Lim and his spouse cannot be made personally liable since respondent Lim
entered into and signed the contract clearly in his official capacity as Executive Vice President. The personality of the corporation
is separate and distinct from the persons composing it.[16]
WHEREFORE, in view of all the foregoing, the instant Petition for Review is DENIED. The Decision of the Court of
Appeals dated July 26, 1993 in CA-G.R. CV No. 29950 is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Kapunan, JJ., concur.
Pardo J., no part.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 97218 May 17, 1993

PROVIDENT SAVINGS BANK, petitioner,
vs.
COURT OF APPEALS, Former SPECIAL EIGHTH DIVISION and WILSON CHUA, respondents.
Gonzales, Batiller, Bilog & Associates for petitioner.
Resty R. Villanueva for private respondent.
MELO, J.:
The error, if error it be, of respondent Court of Appeals which petitioner seeks to rectify via the petitioner for certiorari before us
refers to respondent court's major conclusion arrived at in CA-G.R. CV No. 21312 (Javellana (P), Kalalo, Dayrit, JJ) barring
petitioner from foreclosing the subject realty on account of prescription. Petitioner begs to differ, insisting that the period during
which it was placed under receivership by the Central Bank is akin to a caso fortuito and should not thus be reckoned against it.
Both petitioner and private respondent accepted the synthesized factual backdrop formulated by respondent court, to wit:
This an appeal by both plaintiff and defendant from the decision of the Regional Trial Court of the National Capital Judicial
29 September 1988, in Civil Case No. 977-NW, which directed plaintiff-appellant to pay defendant-appellant the personal
obligation of the spouses Guarin to defendant-appellant in the amount of P62,500.00, together with the interest, penalties,
and bank charges due thereon, and ordering defendant-appellant thereafter to: (1) release the real estate mortgage executed
by the spouses Lorenzo K. Guarin and Liwayway J. Guarin in favor of defendant bank on 16 February 1967; (2) return to
surrender to plaintiff-appellant, as successor-in-interest of the spouses Guarin, the latter's Owner's Duplicate of Title No.
177014; (3) pay plaintiff-appellant P20,000.00 as and for attorney's fees; and, (4) pay the costs of suit.
The established fact are:
On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway J. Guarin (Guarins) obtained a loan from defendant-
appellant in the amount of P62,500.00 payable on or before 20 June 1967. As security for the loan, they executed a real
estate mortgage in favor of defendant-appellant over a parcel of land covered by TCT No. 177014. (Exhs. C and D).
In September, 1972, defendant-appellant was placed under receivership by the Central Bank of the Philippines until 27 July
1981 when the receivership was set aside by the Honorable Supreme Court.
On 11 December 1984, Lorenzo K. Guarin, in reply to the letter of latter's counsel informing that the mortgaged property
would be sold at public auction on 27 December 1984, assured he and his wife had every intention of paying their
obligation and requesting for a recomputation of their account and a postponement of the foreclosure sale. (Exh. 1).
On 10 February 1986, the Guarins received a Statement of Account from defendant-appellant showing two outstanding
accounts as of 15 February 1986. One was account of Lorenzo K. Guarin in the amount of P591,088.80, and the other was
the account of L.K. Guarin Manufacturing Co., Inc. in the amount of P6,287,380.27 (Attachment to Exh. 2)
On 26 February 1986, Lorenzo K. Guarin wrote defendant-appellant stating that he was ready and willing to pay his
obligation in the total amount of P591,088.80 as recomputed by defendant-appellant whenever defendant-appellant was
already to receive the payment and inquiring as to when his mortgaged title would be available for him to pick up. (Exh. 2)
Defendant-appellant replied on 27 February 1986 that Lorenzo K. Guarin may make payment at its office in Makati, Metro
Manila, but that the mortgaged title could not be released to him even after the payment of the obligation of P591,088.80 as
it also served as security for the indebtedness of L.Y. Guarin Manufacturing Co., Inc., to defendant-appellant which was
undertaken by Lorenzo K. Guarin in his personal capacity and as president of the corporation. (Exh. 3)
On 20 May 1986, plaintiff-appellant wrote defendant-appellant saying that the mortgaged property of the Guarins had been
offered to him as payment of the judgment he obtained against the Guarins in Civil Case No. Q-47465 entitled, "Wilson
Chua vs. Lorenzo K. Guarin", and requesting for defendant-appellant's conformity to the assignment and expressing his
willingness to pay for the obligation of Mr. Guarin so that the title could be released by defendant-appellant. (Exh. 4)
On 10 July 1986, the Guarins and plaintiff-appellant executed a Deed of Absolute Sale With Assumption of Mortgaged
whereby the Guarins sold the mortgaged property to Guarins sold the appellant for the sum of P250,000.00 and plaintiff-
appellant undertook to assume the mortgaged obligation of the Guarins with defendant-appellant which as of 15 February
1985 amounted to P591,088.80.(Exh. B).
On 5 August 1986, plaintiff-appellant informed defendant-appellant that as a result of the judgment in Civil Case No. Q-
47645, the mortgaged property had been sold to him by the Guarins, as evidenced by the Deed of Sale enclosed for
guidance and information of defendant-appellant. He requested that he be allowed to pay the loan secured by the
mortgaged, otherwise, he would be constrained to bring the matter to court. (Exh. 5) In reply, defendant-appellant, on 11
August 1986, informed plaintiff-appellant that his request could be granted if he would settle the obligation of L.K. Guarin
Manufacturing Co., Inc., as well and defendant-appellant's letter to Mr. Guarin dated 27 February 1986. (Exh. 6)
On 3 August 1987, counsel for plaintiff-appellant addressed a letter to defendant-appellant informing that plaintiff-
appellant had purchased the mortgaged property from the Guarin's and requesting that the owner's copy of TCT No. 177014
in the possession of defendant-appellant be released to him so that he can register the sale and have the title to the property
transferred in his name. He likewise, informed defendant-appellant that it had lost whatever right or action had against the
Guarins because of prescription. (Exh. E) Defendant-appellant replied on 10 August 1987 stating the reasons why they
could not comply with plaintiff-appellant's demands. (Exh. F)

On 21 August 1986, plaintiff-appellant filed a complaint against defendant-appellant to compel the latter to: (1) release the
real estate mortgaged executed by the Guarins in favor of defendant-appellant on 16 February 1967; (2) return or surrender
to plaintiff-appellant, as successor-in-interest of the Guarins, the latter's owner's duplicate of TCT No. 177014; and (3) pay
plaintiff-appellant P2,750,000.00 as actual and/or consequential damages, moral damages as may be proved during the trial,
exemplary damages as may be reasonably assessed by the court, and attorney's fees of P50,00.00. Defendant-appellant
answered the complaint thereof and setting up special and affirmative defenses. After trial, judgment was rendered as stated
in the opening paragraph hereof from which both parties appealed . . . . (pp. 35-37, Rollo.)
Concerning the challenge posed by Provident Saving Bank against the personality of Wilson Chua to initiate the action to compel
the release of the real estate mortgage and the delivery of the owner's duplicate copy of the certificate of title, respondent court
noted that Wilson Chua can be considered a real-property-in-interest because he is the successor-in-interest of the Guarins who is
naturally entitled to the realty as against the so-called right of Provident Savings Bank, as mortgagee, to foreclose the mortgage
which had become stale through sheer lapse of time. The matter of novation in the form of substitution of the debtor without
corresponding acquiesence of the mortgagee was viewed by respondent court to be legally inconsequential due to the demeanor of
the mortgagee-bank in requiring Wilson Chua to pay the indebtedness of Lorenzo Guarin, posterior to the change of obligors,
which act was construed as equivalent to consent.
To the question of whether petitioner can still foreclose the subject realty, respondent court gave a negative response on account
of the absence of proof to indicate that the bank was precluded from collecting indebtedness while it was under receivership from
September, 1972 until July 20,1981. Thus, there was no legal interruption of the pres-criptive period to speak of, said respondent
court, which intervened between June 20, 1967, the date the mortgage matured, and June 20, 1977 the last day within which
petitioner could have foreclosed the mortgage.
Respondent court did not also heed the suggestion of the petitioner bank to interpret Wilson Chua's assumption of the mortgage on
July 10, 1986 as tantamount to an explicit acknowledgement that the obligation was outstanding and had not yet prescribed.
As a result of these observations, respondent court reversed the decision of the trial court insofar as it ordered Wilson Chua to pay
the sum of P591,088.80 to the bank and affirmed the other dispositions made the court of origin (p. 42, Rollo).
Following the unfavorable judgment, the bank filed a motion for reconsideration and a motion for new trial premised on newly
discovered evidence relative to a statement of account unearthed by the bank's liaison officer from the loose folders on October
18, 1990 which it believed to be of legal significance to the case. But respondent court was unperturbed, observing that the vital
piece of document could have been located in the course of trial had the slightest degree of prudence been exercised, considering
that the statement of account sprouted the same day the liaison officer was advised to take an inventory of the records ( p.
45, Rollo).
Hence, the petitioner at bar.
Consistent with its theory premised on fuerza major, petitioner insists that it can not be blamed for not lifting a finger, so speak,
during the period when it was enjoined by the Central Bank on September 15, 1972 from transacting business until this Court
affirmed on July 27,1981 the decision of the Court of Appeals annulling the proscription against petitioner in Central Bank vs.
Court of Appeals (106 SCRA 143 [1981]. We are not unaware of the rule laid down in Teal Motor Co. vs. Court of First Instance
of Manila (51 Phil. 549 [1928]; Martin, Commentaries and Jurisprudence on the Philippine Commercial Laws, 1986 Revised ed.,
p.125) that the appointment of a receiver does not dissolve the corporation nor does it interfere with the exercise of its corporate
rights. But this principles is, of course, applicable to a situation where there is no restraint imposed on the corporation, unlike in
the case at bar where petitioner Provident Savings Bank was specifically forbidden and immobilized from doing business in the
Philippines on September 15, 1972 through Monetary Board Resolution No. 1766 until 1981 when the decision in Central Bank
vs. Court of Appeals (supra, at p. 150) was rendered. The question which immediately crops up is whether a foreclose proceeding
falls within the purview of the phrase "doing business". In Mentholatum Co., Inc., et al. vs. Mangaliman, et al. (72 Phil. 524
[1941]; Moreno, Philippine Law Dictionary, Second ed., 1972, p. 186), the term was construed by Justice Laurel to refer to:
. . . a continuity of commercial dealings and arrangements, and contemplates to that extent, the exercise of some
of the words or the normally incident to, and in progressive prosecution of, the purpose ands object of its
organizations. (p. 528; emphasis supplied.)
Withal, we believe that a foreclose is deemed embraced by the phrase "doing business" as a preparatory measure to acquiring or
holding property for petitioner as a saving bank under Section 34 of the General Banking Act. Like any other banking institution,
petitioner is vested with the usual attributes and powers of a corporation under Section 36 of the Corporation Code (Vitug, Pandect
of Commercial Law and Jurisprudence, 1990 ed., p. 475). The prerogative of a bank to foreclose is implicit from and is even
necessary to enforce collection of secured debts under Section 36(11) and 45 of the Corporation Code, in conjunction with Section
29 of the General Banking Act (6 Fletcher, 206; Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the
Philippines, 1990 ed., p. 325).
When a bank is prohibited to do business by the Central Bank and a receiver is appointed for such bank, that bank would not be
able to do new business, i.e., to grant new loans or to accept new deposits. However, the receiver of the bank is obliged to collect
debts owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the
obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the the receiver of the
bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages securing debts.
This is not to ignore The Philippine Trust Co. vs. HSBC (67 Phil. 204 [1939], for in that case, the Court simply rejected the
objections of certain creditors to the report of a receiver, that is, objections that the receiver did not report the collection made
before the beginning of his receivership. It would follow that the bank is bound by the acts, or failure to act, of the receiver. At the
same time, the receiver is liable to the bank for culpable or negligent failure to collect the assets of such bank and to safeguard
said assets.

Having arrived at the conclusion that the foreclosure is part of bank's business activity which could not have been pursued by the
receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period
was legally interrupted by fuerza mayor in 1972 on account on the prohibition imposed by the Monetary Board against petitioner
from transacting business, until the directive of the board was nullified in 1981. Indeed, the period during which the obligee was
prevented by a caso fortuito from enforcing his right is not reckoned against him (Article 1154, New Civil Code). When
prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be
entirely a new one. This concept should not be equated with suspension where the past period is included in the computation being
added to the period after prescription is resumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, 1991 ed., pp. 18-19). Consequently, when the closure of was set aside in 1981, the period of ten years within which to
foreclose under Article 1142 of the New Civil Code began to run again and, therefore, the action filed on August 21, 1986 to
compel petitioner to release the mortgage carried with it the mistaken notion that petitioner's own suit foreclosure had prescribed.
What exacerbates the situation is the letter of private respondent requesting petitioner on August 6, 1986 that private respondent
be allowed to pay the loan secured by the mortgage as the result of the Deed of Sale executed by the Guarins in his favor on July
10, 1986 (pp. 36-37, Rollo). In point of law, this written communication is synonymous to an express acknowledgment of the
obligation and had the effect of interrupting the prescription for the second time (Article 1155, New Civil Code; Osmeña vs.
Rama, 14 Phil. 99 [1909]; 4 Tolentino, supra at p. 50). And this piece of document necessarily estops private respondent from
setting up prescription vis-a-vis his unfounded supposition that acknowledgment of the debt is of no moment because the right of
the petitioner to foreclose had long prescribed in 1977 (p. 13, Petition; p. 7, Comment; pp. 19 and 58, Rollo).
Contrary to respondent court's prescription of the existence of novation, the evidence at hand does not buttress a finding along this
line from the mere fact that petitioner supposedly did not question the substitution when the bank reacted to private respondent's
offer to pay the loan (p. 39, Rollo). What seems to have escaped respondent court's attention was the condition imposed by the
petitioner that it will grant private respondent's request if the latter will also shoulder the obligation incurred by Lorenzo Guarin in
his capacity as president of the corporation (p.37, Rollo). The consent of the petitioner to the substitution, as creditor, was thus
erroneously appreciated.
With the conclusions reached, we need not discuss the other issues raised in the petition.
WHEREFORE, the petition is hereby GRANTED. The decision dated August 31, 1990, including the resolution dated February 6,
1991 of respondent court are hereby set aside and another one entered dismissing Wilson Chua's complaint. No special
pronouncement is made to costs.
Bidin, Davide, Jr., and Romero, JJ., concur.
Feliciano, J., concurs in the result.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 90027 March 3, 1993

CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
DAVIDE, JR., J.:

Is the contractual relation between a commercial bank and another party in a contract of rent of a safety deposit box with respect
to its contents placed by the latter one of bailor and bailee or one of lessor and lessee?
This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses Ramon and Paula Pugao entered into an
agreement whereby the former purchased from the latter two (2) parcels of land for a consideration of P350,625.00. Of this
amount, P75,725.00 was paid as downpayment while the balance was covered by three (3) postdated checks. Among the terms
and conditions of the agreement embodied in a Memorandum of True and Actual Agreement of Sale of Land were that the titles to
the lots shall be transferred to the petitioner upon full payment of the purchase price and that the owner's copies of the certificates
of titles thereto, Transfer Certificates of Title (TCT) Nos. 284655 and 292434, shall be deposited in a safety deposit box of any
bank. The same could be withdrawn only upon the joint signatures of a representative of the petitioner and the Pugaos upon full
payment of the purchase price. Petitioner, through Sergio Aguirre, and the Pugaos then rented Safety Deposit Box No. 1448 of
private respondent Security Bank and Trust Company, a domestic banking corporation hereinafter referred to as the respondent
Bank. For this purpose, both signed a contract of lease (Exhibit "2") which contains, inter alia, the following conditions:
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of the
same.
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes
absolutely no liability in connection therewith.1
After the execution of the contract, two (2) renter's keys were given to the renters — one to Aguirre (for the petitioner) and the
other to the Pugaos. A guard key remained in the possession of the respondent Bank. The safety deposit box has two (2) keyholes,
one for the guard key and the other for the renter's key, and can be opened only with the use of both keys. Petitioner claims that
the certificates of title were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots at a price of P225.00 per square
meter which, as petitioner alleged in its complaint, translates to a profit of P100.00 per square meter or a total of P280,500.00 for
the entire property. Mrs. Ramos demanded the execution of a deed of sale which necessarily entailed the production of the
certificates of title. In view thereof, Aguirre, accompanied by the Pugaos, then proceeded to the respondent Bank on 4 October
1979 to open the safety deposit box and get the certificates of title. However, when opened in the presence of the Bank's
representative, the box yielded no such certificates. Because of the delay in the reconstitution of the title, Mrs. Ramos withdrew
her earlier offer to purchase the lots; as a consequence thereof, the petitioner allegedly failed to realize the expected profit of
P280,500.00. Hence, the latter filed on 1 September 1980 a complaint 2 for damages against the respondent Bank with the Court of
First Instance (now Regional Trial Court) of Pasig, Metro Manila which docketed the same as Civil Case No. 38382.
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has no cause of action because of paragraphs 13 and
14 of the contract of lease (Exhibit "2"); corollarily, loss of any of the items or articles contained in the box could not give rise to
an action against it. It then interposed a counterclaim for exemplary damages as well as attorney's fees in the amount of
P20,000.00. Petitioner subsequently filed an answer to the counterclaim.4
In due course, the trial court, now designated as Branch 161 of the Regional Trial Court (RTC) of Pasig, Metro Manila, rendered a
decision5 adverse to the petitioner on 8 December 1986, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing plaintiff's complaint.
On defendant's counterclaim, judgment is hereby rendered ordering plaintiff to pay defendant the amount of
FIVE THOUSAND (P5,000.00) PESOS as attorney's fees.
With costs against plaintiff.6
The unfavorable verdict is based on the trial court's conclusion that under paragraphs 13 and 14 of the contract of lease, the Bank
has no liability for the loss of the certificates of title. The court declared that the said provisions are binding on the parties.
Its motion for reconsideration7 having been denied, petitioner appealed from the adverse decision to the respondent Court of
Appeals which docketed the appeal as CA-G.R. CV No. 15150. Petitioner urged the respondent Court to reverse the challenged
decision because the trial court erred in (a) absolving the respondent Bank from liability from the loss, (b) not declaring as null
and void, for being contrary to law, public order and public policy, the provisions in the contract for lease of the safety deposit box
absolving the Bank from any liability for loss, (c) not concluding that in this jurisdiction, as well as under American
jurisprudence, the liability of the Bank is settled and (d) awarding attorney's fees to the Bank and denying the petitioner's prayer
for nominal and exemplary damages and attorney's fees. 8
In its Decision promulgated on 4 July 1989, 9 respondent Court affirmed the appealed decision principally on the theory that the
contract (Exhibit "2") executed by the petitioner and respondent Bank is in the nature of a contract of lease by virtue of which the

petitioner and its co-renter were given control over the safety deposit box and its contents while the Bank retained no right to open
the said box because it had neither the possession nor control over it and its contents. As such, the contract is governed by Article
1643 of the Civil Code 10 which provides:
Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a
thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than
ninety-nine years shall be valid.
It invoked Tolentino vs. Gonzales 11 — which held that the owner of the property loses his control over the property
leased during the period of the contract — and Article 1975 of the Civil Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or instruments which earn interest shall be
bound to collect the latter when it becomes due, and to take such steps as may be necessary in order that the
securities may preserve their value and the rights corresponding to them according to law.
The above provision shall not apply to contracts for the rent of safety deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any duty to maintain the contents of the box. The
stipulation absolving the defendant-appellee from liability is in accordance with the nature of the contract of lease and
cannot be regarded as contrary to law, public order and public policy." 12 The appellate court was quick to add, however,
that under the contract of lease of the safety deposit box, respondent Bank is not completely free from liability as it may
still be made answerable in case unauthorized persons enter into the vault area or when the rented box is forced open.
Thus, as expressly provided for in stipulation number 8 of the contract in question:
8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe and beyond
this, the Bank will not be responsible for the contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent Court's Resolution of 28 August 1989, 15petitioner took this
recourse under Rule 45 of the Rules of Court and urges Us to review and set aside the respondent Court's ruling. Petitioner avers
that both the respondent Court and the trial court (a) did not properly and legally apply the correct law in this case, (b) acted with
grave abuse of discretion or in excess of jurisdiction amounting to lack thereof and (c) set a precedent that is contrary to, or is a
departure from precedents adhered to and affirmed by decisions of this Court and precepts in American jurisprudence adopted in
the Philippines. It reiterates the arguments it had raised in its motion to reconsider the trial court's decision, the brief submitted to
the respondent Court and the motion to reconsider the latter's decision. In a nutshell, petitioner maintains that regardless of
nomenclature, the contract for the rent of the safety deposit box (Exhibit "2") is actually a contract of deposit governed by Title
XII, Book IV of the Civil Code of the
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the loss of the certificates of title pursuant to
Article 1972 of the said Code which provides:
Art. 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the depositor, or
to his heirs and successors, or to the person who may have been designated in the contract. His responsibility,
with regard to the safekeeping and the loss of the thing, shall be governed by the provisions of Title I of this
Book.
If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that the
depositary must observe.
Petitioner then quotes a passage from American Jurisprudence 17 which is supposed to expound on the prevailing rule in
the United States, to wit:
The prevailing rule appears to be that where a safe-deposit company leases a safe-deposit box or safe and the
lessee takes possession of the box or safe and places therein his securities or other valuables, the relation of
bailee and bail or is created between the parties to the transaction as to such securities or other valuables; the
fact that the
safe-deposit company does not know, and that it is not expected that it shall know, the character or description
of the property which is deposited in such safe-deposit box or safe does not change that relation. That access to
the contents of the safe-deposit box can be had only by the use of a key retained by the lessee ( whether it is the
sole key or one to be used in connection with one retained by the lessor) does not operate to alter the foregoing
rule. The argument that there is not, in such a case, a delivery of exclusive possession and control to the deposit
company, and that therefore the situation is entirely different from that of ordinary bailment, has been generally
rejected by the courts, usually on the ground that as possession must be either in the depositor or in the
company, it should reasonably be considered as in the latter rather than in the former, since the company is, by
the nature of the contract, given absolute control of access to the property, and the depositor cannot gain access
thereto without the consent and active participation of the company. . . . (citations omitted).
and a segment from Words and Phrases 18 which states that a contract for the rental of a bank safety deposit box in
consideration of a fixed amount at stated periods is a bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned contract are contrary to law and public policy and should be
declared null and void. In support thereof, it cites Article 1306 of the Civil Code which provides that parties to a contract may
establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to the petition and required the parties to simultaneously
submit their respective Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of the safety deposit box is not an ordinary contract of lease
as defined in Article 1643 of the Civil Code. However, We do not fully subscribe to its view that the same is a contract of deposit

that is to be strictly governed by the provisions in the Civil Code on deposit; 19the contract in the case at bar is a special kind of
deposit. It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute possession and
control of the safety deposit box was not given to the joint renters — the petitioner and the Pugaos. The guard key of the box
remained with the respondent Bank; without this key, neither of the renters could open the box. On the other hand, the respondent
Bank could not likewise open the box without the renter's key. In this case, the said key had a duplicate which was made so that
both renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not apply. Neither could Article 1975, also relied upon by
the respondent Court, be invoked as an argument against the deposit theory. Obviously, the first paragraph of such provision
cannot apply to a depositary of certificates, bonds, securities or instruments which earn interest if such documents are kept in a
rented safety deposit box. It is clear that the depositary cannot open the box without the renter being present.
We observe, however, that the deposit theory itself does not altogether find unanimous support even in American jurisprudence.
We agree with the petitioner that under the latter, the prevailing rule is that the relation between a bank renting out safe-deposit
boxes and its customer with respect to the contents of the box is that of a bail or and bailee, the bailment being for hire and mutual
benefit. 21 This is just the prevailing view because:
There is, however, some support for the view that the relationship in question might be more properly
characterized as that of landlord and tenant, or lessor and lessee. It has also been suggested that it should be
characterized as that of licensor and licensee. The relation between a bank, safe-deposit company, or storage
company, and the renter of a safe-deposit box therein, is often described as contractual, express or implied, oral
or written, in whole or in part. But there is apparently no jurisdiction in which any rule other than that applicable
to bailments governs questions of the liability and rights of the parties in respect of loss of the contents of safe-
deposit boxes. 22 (citations omitted)
In the context of our laws which authorize banking institutions to rent out safety deposit boxes, it is clear that in this jurisdiction,
the prevailing rule in the United States has been adopted. Section 72 of the General Banking Act 23pertinently provides:
Sec. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other
than building and loan associations may perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes
for the safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections (a), (b) and (c) of this section
as depositories or as agents. . . . 24 (emphasis supplied)
Note that the primary function is still found within the parameters of a contract of deposit, i.e., the receiving in custody of funds,
documents and other valuable objects for safekeeping. The renting out of the safety deposit boxes is not independent from, but
related to or in conjunction with, this principal function. A contract of deposit may be entered into orally or in writing 25 and,
pursuant to Article 1306 of the Civil Code, the parties thereto may establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. The
depositary's responsibility for the safekeeping of the objects deposited in the case at bar is governed by Title I, Book IV of the
Civil Code. Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of fraud, negligence,
delay or contravention of the tenor of the agreement. 26 In the absence of any stipulation prescribing the degree of diligence
required, that of a good father of a family is to be observed. 27 Hence, any stipulation exempting the depositary from any liability
arising from the loss of the thing deposited on account of fraud, negligence or delay would be void for being contrary to law and
public policy. In the instant case, petitioner maintains that conditions 13 and 14 of the questioned contract of lease of the safety
deposit box, which read:
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of the
same.
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes
absolutely no liability in connection therewith. 28
are void as they are contrary to law and public policy. We find Ourselves in agreement with this proposition for indeed,
said provisions are inconsistent with the respondent Bank's responsibility as a depositary under Section 72(a) of the
General Banking Act. Both exempt the latter from any liability except as contemplated in condition 8 thereof which
limits its duty to exercise reasonable diligence only with respect to who shall be admitted to any rented safe, to wit:
8. The Bank shall use due diligence that no unauthorized person shall be admitted to any rented safe and beyond
this, the Bank will not be responsible for the contents of any safe rented from it. 29
Furthermore, condition 13 stands on a wrong premise and is contrary to the actual practice of the Bank. It is not correct to
assert that the Bank has neither the possession nor control of the contents of the box since in fact, the safety deposit box
itself is located in its premises and is under its absolute control; moreover, the respondent Bank keeps the guard key to
the said box. As stated earlier, renters cannot open their respective boxes unless the Bank cooperates by presenting and
using this guard key. Clearly then, to the extent above stated, the foregoing conditions in the contract in question are void
and ineffective. It has been said:
With respect to property deposited in a safe-deposit box by a customer of a safe-deposit company, the parties,
since the relation is a contractual one, may by special contract define their respective duties or provide for
increasing or limiting the liability of the deposit company, provided such contract is not in violation of law or
public policy. It must clearly appear that there actually was such a special contract, however, in order to vary the
ordinary obligations implied by law from the relationship of the parties; liability of the deposit company will not
be enlarged or restricted by words of doubtful meaning. The company, in renting

safe-deposit boxes, cannot exempt itself from liability for loss of the contents by its own fraud or negligence or
that of its agents or servants, and if a provision of the contract may be construed as an attempt to do so, it will be
held ineffective for the purpose. Although it has been held that the lessor of a safe-deposit box cannot limit its
liability for loss of the contents thereof through its own negligence, the view has been taken that such a lessor
may limits its liability to some extent by agreement or stipulation. 30 (citations omitted)
Thus, we reach the same conclusion which the Court of Appeals arrived at, that is, that the petition should be dismissed, but on
grounds quite different from those relied upon by the Court of Appeals. In the instant case, the respondent Bank's exoneration
cannot, contrary to the holding of the Court of Appeals, be based on or proceed from a characterization of the impugned contract
as a contract of lease, but rather on the fact that no competent proof was presented to show that respondent Bank was aware of the
agreement between the petitioner and the Pugaos to the effect that the certificates of title were withdrawable from the safety
deposit box only upon both parties' joint signatures, and that no evidence was submitted to reveal that the loss of the certificates of
title was due to the fraud or negligence of the respondent Bank. This in turn flows from this Court's determination that the contract
involved was one of deposit. Since both the petitioner and the Pugaos agreed that each should have one (1) renter's key, it was
obvious that either of them could ask the Bank for access to the safety deposit box and, with the use of such key and the Bank's
own guard key, could open the said box, without the other renter being present.
Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its part had been established,
the trial court erred in condemning the petitioner to pay the respondent Bank attorney's fees. To this extent, the Decision
(dispositive portion) of public respondent Court of Appeals must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the award for attorney's fees from the 4 July 1989
Decision of the respondent Court of Appeals in CA-G.R. CV No. 15150. As modified, and subject to the pronouncement We
made above on the nature of the relationship between the parties in a contract of lease of safety deposit boxes, the dispositive
portion of the said Decision is hereby AFFIRMED and the instant Petition for Review is otherwise DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
Gutierrez, Jr., J., is on leave.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168644 February 16, 2010
BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN, Petitioner,
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals in CA-G.R. SP
No. 876001 dated April 20, 2005, which reversed and set aside the September 13, 2004 2 and November 5, 20043 Orders issued by
the Regional Trial Court of Manila, Branch 364 in Criminal Case No. 02-202158 for qualified theft. The said orders, in turn,
respectively denied the motion filed by herein respondent Sally Go for the suppression of the testimonial and documentary
evidence relative to a Security Bank account, and denied reconsideration.
The basic antecedents are no longer disputed.
Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein representative, Ricardo Bangayan
(Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia Go and Sally Go-Bangayan, is Bangayan’s wife, who was
employed in the company as a cashier, and was engaged, among others, to receive and account for the payments made by the
various customers of the company.
In 2002, Bangayan filed with the Manila Prosecutor’s Office a complaint for estafa and/or qualified theft 5 against respondent,
alleging that several checks6 representing the aggregate amount of ₱1,534,135.50 issued by the company’s customers in payment
of their obligation were, instead of being turned over to the company’s coffers, indorsed by respondent who deposited the same to
her personal banking account maintained at Security Bank and Trust Company (Security Bank) in Divisoria, Manila
Branch.7 Upon a finding that the evidence adduced was uncontroverted, the assistant city prosecutor recommended the filing of
the Information for qualified theft against respondent.8
Accordingly, respondent was charged before the Regional Trial Court of Manila, Branch 36, in an Information, the inculpatory
portion of which reads:
That in or about or sometime during the period comprised (sic) between January 1988 [and] October 1989, inclusive, in the City
of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously with intent [to] gain and without
the knowledge and consent of the owner thereof, take, steal and carry away cash money in the total amount of ₱1,534,135.50
belonging to BSB GROUP OF COMPANIES represented by RICARDO BANGAYAN, to the damage and prejudice of said
owner in the aforesaid amount of ₱1,534,135.50, Philippine currency.
That in the commission of the said offense, said accused acted with grave abuse of confidence, being then employed as cashier by
said complainant at the time of the commission of the said offense and as such she was entrusted with the said amount of money.
Contrary to law.9
Respondent entered a negative plea when arraigned.10 The trial ensued. On the premise that respondent had allegedly encashed the
subject checks and deposited the corresponding amounts thereof to her personal banking account, the prosecution moved for the
issuance of subpoena duces tecum /ad testificandum against the respective managers or records custodians of Security Bank’s
Divisoria Branch, as well as of the Asian Savings Bank (now Metropolitan Bank & Trust Co. [Metrobank]), in Jose Abad Santos,
Tondo, Manila Branch.11 The trial court granted the motion and issued the corresponding subpoena. 12
Respondent filed a motion to quash the subpoena dated November 4, 2003, addressed to Metrobank, noting to the court that in the
complaint-affidavit filed with the prosecutor, there was no mention made of the said bank account, to which respondent, in
addition to the Security Bank account identified as Account No. 01-14-006, allegedly deposited the proceeds of the supposed
checks. Interestingly, while respondent characterized the Metrobank account as irrelevant to the case, she, in the same motion,
nevertheless waived her objection to the irrelevancy of the Security Bank account mentioned in the same complaint-affidavit,
inasmuch as she was admittedly willing to address the allegations with respect thereto. 13
Petitioner, opposing respondent’s move, argued for the relevancy of the Metrobank account on the ground that the complaint-
affidavit showed that there were two checks which respondent allegedly deposited in an account with the said bank. 14 To this,
respondent filed a supplemental motion to quash, invoking the absolutely confidential nature of the Metrobank account under the
provisions of Republic Act (R.A.) No. 1405. 15 The trial court did not sustain respondent; hence, it denied the motion to quash for
lack of merit.16
Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan (Marasigan), the representative of
Security Bank. In a nutshell, Marasigan’s testimony sought to prove that between 1988 and 1989, respondent, while engaged as
cashier at the BSB Group, Inc., was able to run away with the checks issued to the company by its customers, endorse the same,
and credit the corresponding amounts to her personal deposit account with Security Bank. In the course of the testimony, the
subject checks were presented to Marasigan for identification and marking as the same checks received by respondent, endorsed,
and then deposited in her personal account with Security Bank. 17 But before the testimony could be completed, respondent filed a
Motion to Suppress,18 seeking the exclusion of Marasigan’s testimony and accompanying documents thus far received, bearing on
the subject Security Bank account. This time respondent invokes, in addition to irrelevancy, the privilege of confidentiality under
R.A. No. 1405.
The trial court, nevertheless, denied the motion in its September 13, 2004 Order. 19 A motion for reconsideration was subsequently
filed, but it was also denied in the Order dated November 5, 2004. 20 These two orders are the subject of the instant case.

Aggrieved, and believing that the trial court gravely abused its discretion in acting the way it did, respondent elevated the matter
to the Court of Appeals via a petition for certiorari under Rule 65. Finding merit in the petition, the Court of Appeals reversed and
set aside the assailed orders of the trial court in its April 20, 2005 Decision. 21The decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed orders dated September 13, 2004 and November 5, 2004 are
REVERSED and SET ASIDE. The testimony of the SBTC representative is ordered stricken from the records.
SO ORDERED.22
With the denial of its motion for reconsideration, 23 petitioner is now before the Court pleading the same issues as those raised
before the lower courts.
In this Petition24 under Rule 45, petitioner averred in the main that the Court of Appeals had seriously erred in reversing the
assailed orders of the trial court, and in effect striking out Marasigan’s testimony dealing with respondent’s deposit account with
Security Bank.25 It asserted that apart from the fact that the said evidence had a direct relation to the subject matter of the case for
qualified theft and, hence, brings the case under one of the exceptions to the coverage of confidentiality under R.A.
1405.26 Petitioner believed that what constituted the subject matter in litigation was to be determined by the allegations in the
information and, in this respect, it alluded to the assailed November 5, 2004 Order of the trial court, which declared to be
erroneous the limitation of the present inquiry merely to what was contained in the information. 27
For her part, respondent claimed that the money represented by the Security Bank account was neither relevant nor material to the
case, because nothing in the criminal information suggested that the money therein deposited was the subject matter of the case.
She invited particular attention to that portion of the criminal Information which averred that she has stolen and carried away cash
money in the total amount of ₱1,534,135.50. She advanced the notion that the term "cash money" stated in the Information was
not synonymous with the checks she was purported to have stolen from petitioner and deposited in her personal banking account.
Thus, the checks which the prosecution had Marasigan identify, as well as the testimony itself of Marasigan, should be suppressed
by the trial court at least for violating respondent’s right to due process. 28 More in point, respondent opined that admitting the
testimony of Marasigan, as well as the evidence pertaining to the Security Bank account, would violate the secrecy rule under
R.A. No. 1405.29
In its reply, petitioner asserted the sufficiency of the allegations in the criminal Information for qualified theft, as the same has
sufficiently alleged the elements of the offense charged. It posits that through Marasigan’s testimony, the Court would be able to
establish that the checks involved, copies of which were attached to the complaint-affidavit filed with the prosecutor, had indeed
been received by respondent as cashier, but were, thereafter, deposited by the latter to her personal account with Security Bank.
Petitioner held that the checks represented the cash money stolen by respondent and, hence, the subject matter in this case is not
only the cash amount represented by the checks supposedly stolen by respondent, but also the checks themselves. 30
We derive from the conflicting advocacies of the parties that the issue for resolution is whether the testimony of Marasigan and
the accompanying documents are irrelevant to the case, and whether they are also violative of the absolutely confidential nature of
bank deposits and, hence, excluded by operation of R.A. No. 1405. The question of admissibility of the evidence thus comes to
the fore. And the Court, after deliberative estimation, finds the subject evidence to be indeed inadmissible.
Prefatorily, fundamental is the precept in all criminal prosecutions, that the constitutive acts of the offense must be established
with unwavering exactitude and moral certainty because this is the critical and only requisite to a finding of guilt. 31 Theft is
present when a person, with intent to gain but without violence against or intimidation of persons or force upon things, takes the
personal property of another without the latter’s consent. It is qualified when, among others, and as alleged in the instant case, it is
committed with abuse of confidence.32 The prosecution of this offense necessarily focuses on the existence of the following
elements: (a) there was taking of personal property belonging to another; (b) the taking was done with intent to gain; (c) the taking
was done without the consent of the owner; (d) the taking was done without violence against or intimidation of persons or force
upon things; and (e) it was done with abuse of confidence. 33 In turn, whether these elements concur in a way that overcomes the
presumption of guiltlessness, is a question that must pass the test of relevancy and competency in accordance with Section
334 Rule 128 of the Rules of Court.
Thus, whether these pieces of evidence sought to be suppressed in this case the testimony of Marasigan, as well as the checks
purported to have been stolen and deposited in respondent’s Security Bank account are relevant, is to be addressed by
considering whether they have such direct relation to the fact in issue as to induce belief in its existence or non-existence; or
whether they relate collaterally to a fact from which, by process of logic, an inference may be made as to the existence or non-
existence of the fact in issue.35
The fact in issue appears to be that respondent has taken away cash in the amount of ₱1,534,135.50 from the coffers of petitioner.
In support of this allegation, petitioner seeks to establish the existence of the elemental act of taking by adducing evidence that
respondent, at several times between 1988 and 1989, deposited some of its checks to her personal account with Security Bank.
Petitioner addresses the incongruence between the allegation of theft of cash in the Information, on the one hand, and the evidence
that respondent had first stolen the checks and deposited the same in her banking account, on the other hand, by impressing upon
the Court that there obtains no difference between cash and check for purposes of prosecuting respondent for theft of cash.
Petitioner is mistaken.
In theft, the act of unlawful taking connotes deprivation of personal property of one by another with intent to gain, and it is
immaterial that the offender is able or unable to freely dispose of the property stolen because the deprivation relative to the
offended party has already ensued from such act of execution. 36 The allegation of theft of money, hence, necessitates that evidence
presented must have a tendency to prove that the offender has unlawfully taken money belonging to another. Interestingly,
petitioner has taken pains in attempting to draw a connection between the evidence subject of the instant review, and the
allegation of theft in the Information by claiming that respondent had fraudulently deposited the checks in her own name. But this
line of argument works more prejudice than favor, because it in effect, seeks to establish the commission, not of theft, but rather of
some other crime probably estafa.

Moreover, that there is no difference between cash and check is true in other instances. In estafa by conversion, for instance,
whether the thing converted is cash or check, is immaterial in relation to the formal allegation in an information for that offense; a
check, after all, while not regarded as legal tender, is normally accepted under commercial usage as a substitute for cash, and the
credit it represents in stated monetary value is properly capable of appropriation. And it is in this respect that what the offender
does with the check subsequent to the act of unlawfully taking it becomes material inasmuch as this offense is a continuing
one.37 In other words, in pursuing a case for this offense, the prosecution may establish its cause by the presentation of the checks
involved. These checks would then constitute the best evidence to establish their contents and to prove the elemental act of
conversion in support of the proposition that the offender has indeed indorsed the same in his own name. 38
Theft, however, is not of such character. Thus, for our purposes, as the Information in this case accuses respondent of having
stolen cash, proof tending to establish that respondent has actualized her criminal intent by indorsing the checks and depositing the
proceeds thereof in her personal account, becomes not only irrelevant but also immaterial and, on that score, inadmissible in
evidence.
We now address the issue of whether the admission of Marasigan’s testimony on the particulars of respondent’s account with
Security Bank, as well as of the corresponding evidence of the checks allegedly deposited in said account, constitutes an
unallowable inquiry under R.A. 1405.
It is conceded that while the fundamental law has not bothered with the triviality of specifically addressing privacy rights relative
to banking accounts, there, nevertheless, exists in our jurisdiction a legitimate expectation of privacy governing such accounts.
The source of this right of expectation is statutory, and it is found in R.A. No. 1405, 39otherwise known as the Bank Secrecy Act of
1955. 40
R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time encourage the people to
deposit their money in banking institutions, so that it may be utilized by way of authorized loans and thereby assist in economic
development.41 Owing to this piece of legislation, the confidentiality of bank deposits remains to be a basic state policy in the
Philippines.42 Section 2 of the law institutionalized this policy by characterizing as absolutely confidential in general all deposits
of whatever nature with banks and other financial institutions in the country. It declares:
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.1avvphi1
Subsequent statutory enactments43 have expanded the list of exceptions to this policy yet the secrecy of bank deposits still lies as
the general rule, falling as it does within the legally recognized zones of privacy. 44 There is, in fact, much disfavor to construing
these primary and supplemental exceptions in a manner that would authorize unbridled discretion, whether governmental or
otherwise, in utilizing these exceptions as authority for unwarranted inquiry into bank accounts. It is then perceivable that the
present legal order is obliged to conserve the absolutely confidential nature of bank deposits. 45
The measure of protection afforded by the law has been explained in China Banking Corporation v. Ortega. 46That case principally
addressed the issue of whether the prohibition against an examination of bank deposits precludes garnishment in satisfaction of a
judgment. Ruling on that issue in the negative, the Court found guidance in the relevant portions of the legislative deliberations on
Senate Bill No. 351 and House Bill No. 3977, which later became the Bank Secrecy Act, and it held that the absolute
confidentiality rule in R.A. No. 1405 actually aims at protection from unwarranted inquiry or investigation if the purpose of such
inquiry or investigation is merely to determine the existence and nature, as well as the amount of the deposit in any given bank
account. Thus,
x x x The lower court did not order an examination of or inquiry into the deposit of B&B Forest Development Corporation, as
contemplated in the law. It merely required Tan Kim Liong to inform the court whether or not the defendant B&B Forest
Development Corporation had a deposit in the China Banking Corporation only for purposes of the garnishment issued by it, so
that the bank would hold the same intact and not allow any withdrawal until further order. It will be noted from the discussion of
the conference committee report on Senate Bill No. 351 and House Bill No. 3977which later became Republic Act No. 1405, that
it was not the intention of the lawmakers to place banks deposits beyond the reach of execution to satisfy a final judgmentThus:
x x x Mr. Marcos: Now, for purposes of the record, I should like the Chairman of the Committee on Ways and Means to clarify
this further. Suppose an individual has a tax case. He is being held liable by the Bureau of Internal Revenue [(BIR)] or, say,
₱1,000.00 worth of tax liability, and because of this the deposit of this individual [has been] attached by the [BIR].
Mr. Ramos: The attachment will only apply after the court has pronounced sentence declaring the liability of such person. But
where the primary aim is to determine whether he has a bank deposit in order to bring about a proper assessment by the [BIR],
such inquiry is not allowed by this proposed law.
Mr. Marcos: But under our rules of procedure and under the Civil Code, the attachment or garnishment of money deposited is
allowed. Let us assume for instance that there is a preliminary attachment which is for garnishment or for holding liable all
moneys deposited belonging to a certain individual, but such attachment or garnishment will bring out into the open the value of
such deposit. Is that prohibited by... the law?
Mr. Ramos: It is only prohibited to the extent that the inquiry... is made only for the purpose of satisfying a tax liability already
declared for the protection of the right in favor of the government; but when the object is merely to inquire whether he has a
deposit or not for purposes of taxation, then this is fully covered by the law. x x x
Mr. Marcos: The law prohibits a mere investigation into the existence and the amount of the deposit.
Mr. Ramos: Into the very nature of such deposit. x x x47

In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant case posits that the account maintained
by respondent with Security Bank contains the proceeds of the checks that she has fraudulently appropriated to herself and, thus,
falls under one of the exceptions in Section 2 of R.A. No. 1405 that the money kept in said account is the subject matter in
litigation. To highlight this thesis, petitioner avers, citing Mathay v. Consolidated Bank and Trust Co.,48 that the subject matter of
the action refers to the physical facts; the things real or personal; the money, lands, chattels and the like, in relation to which the
suit is prosecuted, which in the instant case should refer to the money deposited in the Security Bank account. 49 On the surface,
however, it seems that petitioner’s theory is valid to a point, yet a deeper treatment tends to show that it has argued quite off-
tangentially. This, because, while Mathay did explain what the subject matter of an action is, it nevertheless did so only to
determine whether the class suit in that case was properly brought to the court.
What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has been pointedly and amply
addressed in Union Bank of the Philippines v. Court of Appeals,50 in which the Court noted that the inquiry into bank deposits
allowable under R.A. No. 1405 must be premised on the fact that the money deposited in the account is itself the subject of the
action.51 Given this perspective, we deduce that the subject matter of the action in the case at bar is to be determined from the
indictment that charges respondent with the offense, and not from the evidence sought by the prosecution to be admitted into the
records. In the criminal Information filed with the trial court, respondent, unqualifiedly and in plain language, is charged with
qualified theft by abusing petitioner’s trust and confidence and stealing cash in the amount of ₱1,534,135.50. The said Information
makes no factual allegation that in some material way involves the checks subject of the testimonial and documentary evidence
sought to be suppressed. Neither do the allegations in said Information make mention of the supposed bank account in which the
funds represented by the checks have allegedly been kept.
In other words, it can hardly be inferred from the indictment itself that the Security Bank account is the ostensible subject of the
prosecution’s inquiry. Without needlessly expanding the scope of what is plainly alleged in the Information, the subject matter of
the action in this case is the money amounting to ₱1,534,135.50 alleged to have been stolen by respondent, and not the money
equivalent of the checks which are sought to be admitted in evidence. Thus, it is that, which the prosecution is bound to prove
with its evidence, and no other.
It comes clear that the admission of testimonial and documentary evidence relative to respondent’s Security Bank account serves
no other purpose than to establish the existence of such account, its nature and the amount kept in it. It constitutes an attempt by
the prosecution at an impermissible inquiry into a bank deposit account the privacy and confidentiality of which is protected by
law. On this score alone, the objection posed by respondent in her motion to suppress should have indeed put an end to the
controversy at the very first instance it was raised before the trial court.
In sum, we hold that the testimony of Marasigan on the particulars of respondent’s supposed bank account with Security Bank and
the documentary evidence represented by the checks adduced in support thereof, are not only incompetent for being excluded by
operation of R.A. No. 1405. They are likewise irrelevant to the case, inasmuch as they do not appear to have any logical and
reasonable connection to the prosecution of respondent for qualified theft. We find full merit in and affirm respondent’s objection
to the evidence of the prosecution. The Court of Appeals was, therefore, correct in reversing the assailed orders of the trial court.
A final note. In any given jurisdiction where the right of privacy extends its scope to include an individual’s financial privacy
rights and personal financial matters, there is an intermediate or heightened scrutiny given by courts and legislators to laws
infringing such rights.52 Should there be 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. This attitude persists unless
congress lifts its finger to reverse the general state policy respecting the absolutely confidential nature of bank deposits. 53
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 87600 dated April 20, 2005,
reversing the September 13, 2004 and November 5, 2004 Orders of the Regional Trial Court of Manila, Branch 36 in Criminal
Case No. 02-202158, is AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

SECOND DIVISION
[G.R. No. 128996. February 15, 2002]
CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P. BRAWNER, petitioners, vs. COURT OF APPEALS,
DEPARTMENT OF JUSTICE, AZIZ RAJKOTWALA, WILLIAM FERGUSON, JOVEN REYES, and VIC
LIM, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari, seeking the reversal of the Decision[1] dated July 8, 1996 of the former
Fifteenth Division[2] of the Court of Appeals in CA-G.R. SP No. 37577 as well as its Resolution[3] dated April 16, 1997 denying
petitioners motion for reconsideration. The appellate court, in its Decision, sustained a resolution of the Department of Justice
ordering the withdrawal of informations for violation of Republic Act No. 1405 against private respondents.
The facts are:
On September 21, 1993, Citibank filed a complaint for violation of section 31, [4] in relation to section 144[5] of the
Corporation Code against two (2) of its officers, Dante L. Santos and Marilou Genuino. Attached to the complaint was an
affidavit[6] executed by private respondent Vic Lim, a vice-president of Citibank. Pertinent portions of his affidavit are quoted
hereunder:
2.1 Sometime this year, the higher management of Citibank, N.A. assigned me to assist in the investigation of certain
anomalous/highly irregular activities of the Treasurer of the Global Consumer Group of the bank, namely, Dante L. Santos and the
Asst. Vice President in the office of Mr. Dante L. Santos, namely Ms. Marilou (also called Malou) Genuino. Ms. Marilou Genuino
apart from being an Assistant Vice President in the office of Mr. Dante L. Santos also performed the duties of an Account Officer.
An Account Officer in the office of Mr. Dante L. Santos personally attends to clients of the bank in the effort to persuade clients
to place and keep their monies in the products of Citibank, NA., such as peso and dollar deposits, mortgage backed securities and
money placements, among others.
xxx xxx xxx
4.1 The investigation in which I was asked to participate was undertaken because the bank had found records/evidence showing
that Mr. Dante L. Santos and Ms. Malou Genuino, contrary to their disclosures and the aforementioned bank policy, appeared to
have been actively engaged in business endeavors that were in conflict with the business of the bank. It was found that with the
use of two (2) companies in which they have personal financial interest, namely Torrance Development Corporation and Global
Pacific Corporation, they managed or caused existing bank clients/depositors to divert their money from Citibank, N.A., such as
those placed in peso and dollar deposits and money placements, to products offered by other companies that were commanding
higher rate of yields. This was done by first transferring bank clients monies to Torrance and Global which in turn placed the
monies of the bank clients in securities, shares of stock and other certificates of third parties. It also appeared that out of these
transactions, Mr. Dante L. Santos and Ms. Marilou Genuino derived substantial financial gains.
5.1 In the course of the investigation, I was able to determine that the bank clients which Mr. Santos and Ms. Genuino
helped/caused to divert their deposits/money placements with Citibank, NA. to Torranceand Global (their family corporations) for
subsequent investment in securities, shares of stocks and debt papers in other companies were as follows:
xxx
b) Carmen Intengan
xxx
d) Rosario Neri
xxx
i) Rita Brawner
All the above persons/parties have long standing accounts with Citibank, N.A. in savings/dollar deposits and/or in trust accounts
and/or money placements.
As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and Genuino. Some of the
documents pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and Rita P. Brawner, as follows:
a) Annex A-6[7] - an Application for Money Transfer in the amount of US $140,000.00, executed by Intengan in favor
of Citibank $ S/A No. 24367796, to be debited from her Account No. 22543341;
b) Annex A-7[8] - a Money Transfer Slip in the amount of US $45,996.30, executed by Brawner in favor of Citibank $
S/A No. 24367796, to be debited from her Account No. 22543236; and
c) Annex A-9[9] - an Application for Money Transfer in the amount of US $100,000.00, executed by Neri in favor of
Citibank $ S/A No. 24367796, to be debited from her Account No. 24501018.
In turn, private respondent Joven Reyes, vice-president/business manager of the Global Consumer Banking Group of
Citibank, admits to having authorized Lim to state the names of the clients involved and to attach the pertinent bank records,
including those of petitioners.[10] He states that private respondents Aziz Rajkotwala and William Ferguson, Citibank, N.A. Global
Consumer Banking Country Business Manager and Country Corporate Officer, respectively, had no hand in the disclosure, and
that he did so upon the advice of counsel.
In his memorandum, the Solicitor General described the scheme as having been conducted in this manner:
First step: Santos and/or Genuino would tell the bank client that they knew of financial products of other companies that were
yielding higher rates of interests in which the bank client can place his money. Acting on this information, the bank client would
then authorize the transfer of his funds from his Citibank account to the Citibank account of either Torrance or Global.
The transfer of the Citibank clients deposits was done through the accomplishment of either an Application For Managers Checks
or a Term Investment Application in favor of Global or Torrance that was prepared/filed by Genuino herself.

Upon approval of the Application for Managers Checks or Term Investment Application, the funds of the bank client covered
thereof were then deposited in the Citibank accounts of Torrance and/or Global.
Second step: Once the said fund transfers had been effected, Global and/or Torrance would then issue its/ their checks drawn
against its/their Citibank accounts in favor of the other companies whose financial products, such as securities, shares of stocks
and other certificates, were offering higher yields.
Third step: On maturity date(s) of the placements made by Torrance and/or Global in the other companies, using the monies of the
Citibank client, the other companies would then. return the placements to Global and/or Torrance with the corresponding interests
earned.
Fourth step: Upon receipt by Global and/or Torrance of the remittances from the other companies, Global and/or Torrance would
then issue its/their own checks drawn against their Citibank accounts in favor of Santos and Genuino.
The amounts covered by the checks represent the shares of Santos and Genuino in the margins Global and/or Torrance had
realized out of the placements [using the diverted monies of the Citibank clients] made with the other companies.
Fifth step: At the same time, Global and/or Torrance would also issue its/their check(s) drawn against its/their Citibank accounts
in favor of the bank client.
The check(s) cover the principal amount (or parts thereof) which the Citibank client had previously transferred, with the help of
Santos and/or Genuino, from his Citibank account to the Citibank account(s) of Global and/or Torrance for placement in the other
companies, plus the interests or earnings his placements in other companies had made less the spreads made by Global, Torrance,
Santos and Genuino.
The complaints which were docketed as I.S. Nos. 93-9969, 93-10058 and 94-1215 were subsequently amended to include a
charge of estafa under Article 315, paragraph 1(b)[11] of the Revised Penal Code.
As an incident to the foregoing, petitioners filed respective motions for the exclusion and physical withdrawal of their bank
records that were attached to Lims affidavit.
In due time, Lim and Reyes filed their respective counter-affidavits.[12] In separate Memoranda dated March 8,
1994 and March 15, 1994 2nd Assistant Provincial Prosecutor Hermino T. Ubana, Sr. recommended the dismissal of petitioners
complaints. The recommendation was overruled by Provincial Prosecutor Mauro M. Castro who, in a Resolution dated August 18,
1994,[13] directed the filing of informations against private respondents for alleged violation of Republic Act No. 1405, otherwise
known as the Bank Secrecy Law.
Private respondents counsel then filed an appeal before the Department of Justice (DOJ). On November 17, 1994, then DOJ
Secretary Franklin M. Drilon issued a Resolution[14]ordering, inter alia, the withdrawal of the aforesaid informations against
private respondents. Petitioners motion for reconsideration[15] was denied by DOJ Acting Secretary Demetrio G. Demetria in a
Resolution dated March 6, 1995.[16]
Initially, petitioners sought the reversal of the DOJ resolutions via a petition for certiorari and mandamus filed with this
Court, docketed as G.R. No. 119999-120001. However, the former First Division of this Court, in a Resolution dated June 5,
1995,[17] referred the matter to the Court of the Appeals, on the basis of the latter tribunals concurrent jurisdiction to issue the
extraordinary writs therein prayed for. The petition was docketed as CA-G.R. SP No. 37577 in the Court of Appeals.
On July 8, 1996, the Court of Appeals rendered judgment dismissing the petition in CA-G.R. SP No. 37577 and declared
therein, as follows:
Clearly, the disclosure of petitioners deposits was necessary to establish the allegation that Santos and Genuino had violated
Section 31 of the Corporation Code in acquiring any interest adverse to the corporation in respect of any matter which has been
reposed in him in confidence. To substantiate the alleged scheme of Santos and Genuino, private respondents had to present the
records of the monies which were manipulated by the two officers which included the bank records of herein petitioners.
Although petitioners were not the parties involved in IS. No. 93-8469, their accounts were relevant to the complete prosecution of
the case against Santos and Genuino and the respondent DOJ properly ruled that the disclosure of the same falls under the last
exception of R.A. No. 1405. That ruling is consistent with the principle laid down in the case of Mellon Bank, N.A. vs. Magsino
(190 SCRA 633) where the Supreme Court allowed the testimonies on the bank deposits of someone not a party to the case as it
found that said bank deposits were material or relevant to the allegations in the complaint. Significantly, therefore, as long as the
bank deposits are material to the case, although not necessarily the direct subject matter thereof, a disclosure of the same is proper
and falls within the scope of the exceptions provided for by R.A. No. 1405.
xxx xxx xxx
Moreover, the language of the law itself is clear and cannot be subject to different interpretations. A reading of the provision itself
would readily reveal that the exception or in cases where the money deposited or invested is the subject matter of the litigation is
not qualified by the phrase upon order of competent Court which refers only to cases of bribery or dereliction of duty of public
officials.
Petitioners motion for reconsideration was similarly denied in a Resolution dated April 16, 1997. Appeal was made in due
time to this Court.
The instant petition was actually denied by the former Third Division of this Court in a Resolution [18] dated July 16, 1997, on
the ground that petitioners had failed to show that a reversible error had been committed. On motion, however, the petition was
reinstated[19] and eventually given due course.[20]
In assailing the appellate courts findings, petitioners assert that the disclosure of their bank records was unwarranted and
illegal for the following reasons:
I.
IN BLATANT VIOLATION OF R.A. NO. 1405, PRIVATE RESPONDENTS ILLEGALLY MADE DISCLOSURES OF
PETITIONERS CONFIDENTIAL BANK DEPOSITS FOR THEIR SELFISH ENDS IN PROSECUTING THEIR
COMPLAINT IN IS. NO. 93-8469 THAT DID NOT INVOLVE PETITIONERS.

II.
PRIVATE RESPONDENTS DISCLOSURES DO NOT FALL UNDER THE FOURTH EXCEPTION OF R.A. NO. 1405
(i.e., in cases where the money deposited or invested is the subject matter of the litigation), NOR UNDER ANY OTHER
EXCEPTION:
(1)
PETITIONERS DEPOSITS ARE NOT INVOLVED IN ANY LITIGATION BETWEEN PETITIONERS AND
RESPONDENTS. THERE IS NO LITIGATION BETWEEN THE PARTIES, MUCH LESS ONE INVOLVING
PETITIONERS DEPOSITS AS THE SUBJECT MATTER THEREOF.
(2)
EVEN ASSUMING ARGUENDO THAT THERE IS A LITIGATION INVOLVING PETITIONERS DEPOSITS AS
THE SUBJECT MATTER THEREOF, PRIVATE RESPONDENTS DISCLOSURES OF PETITIONERS DEPOSITS
ARE NEVERTHELESS ILLEGAL FOR WANT OF THE REQUISITE COURT ORDER, IN VIOLATION OF R.A.
NO. 1405.
III.
THEREFORE, PETITIONERS ARE ENTITLED TO PROSECUTE PRIVATE RESPONDENTS FOR VIOLATIONS OF
R.A. NO. 1405 FOR HAVING ILLEGALLY DISCLOSED PETITIONERS CONFIDENTIAL BANK DEPOSITS AND
RECORDS IN IS. NO. 93-8469.
Apart from the reversal of the decision and resolution of the appellate court as well as the resolutions of the Department of
Justice, petitioners pray that the latter agency be directed to issue a resolution ordering the Provincial Prosecutor of Rizal to file
the corresponding informations for violation of Republic Act No. 1405 against private respondents.
The petition is not meritorious.
Actually, this case should have been studied more carefully by all concerned. The finest legal minds in the country - from the
parties respective counsel, the Provincial Prosecutor, the Department of Justice, the Solicitor General, and the Court of Appeals -
all appear to have overlooked a single fact which dictates the outcome of the entire controversy. A circumspect review of the
record shows us the reason. The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act
No. 1405 but Republic Act (RA) No. 6426, known as the Foreign Currency Deposit Act of the Philippines, section 8 of which
provides:
Sec. 8. Secrecy of Foreign Currency Deposits.- All foreign currency deposits authorized under this Act, as amended by
Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby
declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no
instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official bureau or
office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said
foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever. [21] (italics supplied)
Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is
allowed only upon the written permission of the depositor. Incidentally, the acts of private respondents complained of happened
before the enactment on September 29, 2001 of R.A. No. 9160 otherwise known as the Anti-Money Laundering Act of 2001.
A case for violation of Republic Act No. 6426 should have been the proper case brought against private respondents. Private
respondents Lim and Reyes admitted that they had disclosed details of petitioners dollar deposits without the latters written
permission. It does not matter if that such disclosure was necessary to establish Citibanks case against Dante L. Santos and
Marilou Genuino. Lims act of disclosing details of petitioners bank records regarding their foreign currency deposits, with the
authority of Reyes, would appear to belong to that species of criminal acts punishable by special laws, called malum
prohibitum. In this regard, it has been held that:
While it is true that, as a rule and on principles of abstract justice, men are not and should not be held criminally responsible for
acts committed by them without guilty knowledge and criminal or at least evil intent xxx, the courts have always recognized the
power of the legislature, on grounds of public policy and compelled by necessity, the great master of things, to forbid in a limited
class of cases the doing of certain acts, and to make their commission criminal without regard to the intent of the doer. xxx In such
cases no judicial authority has the power to require, in the enforcement of the law, such knowledge or motive to be shown. As was
said in the case of State vs. McBrayer xxx:
It is a mistaken notion that positive, willful intent, as distinguished from a mere intent, to violate the criminal law, is an essential
ingredient in every criminal offense, and that where there is the absence of such intent there is no offense; this is especially so as
to statutory offenses. When the statute plainly forbids an act to be done, and it is done by some person, the law implies
conclusively the guilty intent, although the offender was honestly mistaken as to the meaning of the law he violates. When the
language is plain and positive, and the offense is not made to depend upon the positive, willful intent and purpose, nothing is left
to interpretation.[22]
Ordinarily, the dismissal of the instant petition would have been without prejudice to the filing of the proper charges against
private respondents. The matter would have ended here were it not for the intervention of time, specifically the lapse thereof. So
as not to unduly prolong the settlement of the case, we are constrained to rule on a material issue even though it was not raised by
the parties. We refer to the issue of prescription.
Republic Act No. 6426 being a special law, the provisions of Act No. 3326, [23] as amended by Act No. 3763, are applicable:
SECTION 1. Violations penalized by special acts shall, unless otherwise provided in such acts, prescribe in accordance with the
following rules: (a) after a year for offences punished only by a fine or by imprisonment for not more than one month, or both: (b)
after four years for those punished by imprisonment for more than one month, but less than two years; (c) after eight years for
those punished by imprisonment for two years or more, but less than six years; and (d) after twelve years for any other offence

punished by imprisonment for six years or more, except the crime of treason, which shall prescribe after twenty years: Provided,
however, That all offences against any law or part of law administered by the Bureau of Internal Revenue shall prescribe after five
years. Violations penalized by municipal ordinances shall prescribe after two months.
Violations of the regulations or conditions of certificates of public convenience issued by the Public Service Commission shall
prescribe after two months.
SEC. 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at
the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted against the guilty person, and shall begin to run again if the
proceedings are dismissed for reasons not constituting jeopardy.
A violation of Republic Act No. 6426 shall subject the offender to imprisonment of not less than one year nor more than five
years, or by a fine of not less than five thousand pesos nor more than twenty-five thousand pesos, or both.[24] Applying Act No.
3326, the offense prescribes in eight years.[25] Per available records, private respondents may no longer be haled before the courts
for violation of Republic Act No. 6426. Private respondent Vic Lim made the disclosure in September of 1993 in his affidavit
submitted before the Provincial Fiscal.[26] In her complaint-affidavit,[27] Intengan stated that she learned of the revelation of the
details of her foreign currency bank account on October 14, 1993. On the other hand, Neri asserts that she discovered the
disclosure on October 24, 1993.[28] As to Brawner, the material date is January 5, 1994.[29] Based on any of these dates,
prescription has set in.[30]
The filing of the complaint or information in the case at bar for alleged violation of Republic Act No. 1405 did not have the
effect of tolling the prescriptive period. For it is the filing of the complaint or information corresponding to the correct offense
which produces that effect.[31]
It may well be argued that the foregoing disquisition would leave petitioners with no remedy in law. We point out, however,
that the confidentiality of foreign currency deposits mandated by Republic Act No. 6426, as amended by Presidential Decree No.
1246, came into effect as far back as 1977. Hence, ignorance thereof cannot be pretended. On one hand, the existence of laws is a
matter of mandatory judicial notice;[32] on the other, ignorantia legis non excusat.[33] Even during the pendency of this appeal,
nothing prevented the petitioners from filing a complaint charging the correct offense against private respondents. This was not
done, as everyone involved was content to submit the case on the basis of an alleged violation of Republic Act No. 1405 (Bank
Secrecy Law), however, incorrectly invoked.[34]
WHEREFORE, the petition is hereby DENIED. No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

EN BANC
[G.R. No. 135882. June 27, 2001]
LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union Bank of the Philippines, petitioners, vs. HON.
ANIANO A. DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and Preliminary Investigation Bureau,
Office of the Ombudsman, ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC and JOSE T.
DE JESUS, JR., in their capacities as Chairman and Members of the Panel, respectively, respondents.
DECISION
PARDO, J.:
In the petition at bar, petitioner seeks to--
a. Annul and set aside, for having been issued without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack of jurisdiction, respondents order dated September 7, 1998 in OMB-0-97-0411, In Re: Motion to Cite
Lourdes T. Marquez for indirect contempt, received by counsel of September 9, 1998, and their order dated October 14,
1998, denying Marquezs motion for reconsideration dated September 10, 1998, received by counsel on October 20, 1998.
b. Prohibit respondents from implementing their order dated October 14, 1998, in proceeding with the hearing of the motion
to cite Marquez for indirect contempt, through the issuance by this Court of a temporary restraining order and/or preliminary
injunction.[1]
The antecedent facts are as follows:
Sometime in May 1998, petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto dated April 29,
1998, to produce several bank documents for purposes of inspection in camera relative to various accounts maintained at Union
Bank of the Philippines, Julia Vargas Branch, where petitioner is the branch manager. The accounts to be inspected are Account
Nos. 011-37270, 240-020718, 245-30317-3 and 245-30318-1, involved in a case pending with the Ombudsman entitled, Fact-
Finding and Intelligence Bureau (FFIB) v. Amado Lagdameo, et. al. The order further states:
It is worth mentioning that the power of the Ombudsman to investigate and to require the production and inspection of records and
documents is sanctioned by the 1987 Philippine Constitution, Republic Act No. 6770, otherwise known as the Ombudsman Act of
1989 and under existing jurisprudence on the matter. It must be noted that R. A. 6770 especially Section 15 thereof provides,
among others, the following powers, functions and duties of the Ombudsman, to wit:
xxx
(8) Administer oaths, issue subpoena and subpoena duces tecum and take testimony in any investigation or inquiry, including the
power to examine and have access to bank accounts and records;
(9) Punish for contempt in accordance with the Rules of Court and under the same procedure and with the same penalties provided
therein.
Clearly, the specific provision of R.A. 6770, a later legislation, modifies the law on the Secrecy of Bank Deposits (R.A. 1405) and
places the office of the Ombudsman in the same footing as the courts of law in this regard.[2]
The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail of managers checks purchased by
one George Trivinio, a respondent in OMB-0-97-0411, pending with the office of the Ombudsman.
It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks (MCs) for a total amount of P272.1
Million at Traders Royal Bank, United Nations Avenue branch, on May 2 and 3, 1995. Out of the 51 MCs, eleven (11) MCs
in the amount of P70.6 million, were deposited and credited to an account maintained at the Union Bank, Julia Vargas
Branch.[3]
On May 26, 1998, the FFIB panel met in conference with petitioner Lourdes T. Marquez and Atty. Fe B. Macalino at the
banks main office, Ayala Avenue, Makati City. The meeting was for the purpose of allowing petitioner and Atty. Macalino to
view the checks furnished by Traders Royal Bank. After convincing themselves of the veracity of the checks, Atty. Macalino
advised Ms. Marquez to comply with the order of the Ombudsman. Petitioner agreed to an in camera inspection set on June 3,
1998.[4]
However, on June 4, 1998, petitioner wrote the Ombudsman explaining to him that the accounts in question cannot readily
be identified and asked for time to respond to the order. The reason forwarded by petitioner was that despite diligent efforts and
from the account numbers presented, we can not identify these accounts since the checks are issued in cash or bearer. We
surmised that these accounts have long been dormant, hence are not covered by the new account number generated by the Union
Bank system. We therefore have to verify from the Interbank records archives for the whereabouts of these accounts. [5]
The Ombudsman, responding to the request of the petitioner for time to comply with the order, stated: firstly, it must be
emphasized that Union Bank, Julia Vargas Branch was the depositary bank of the subject Traders Royal Bank Managers Checks
(MCs), as shown at its dorsal portion and as cleared by the Philippine Clearing House, not the International Corporate Bank.
Notwithstanding the fact that the checks were payable to cash or bearer, nonetheless, the name of the depositor(s) could
easily be identified since the account numbers x x x where said checks were deposited are identified in the order.
Even assuming that the accounts xxx were already classified as dormant accounts, the bank is still required to preserve the
records pertaining to the accounts within a certain period of time as required by existing banking rules and regulations.
And finally, the in camera inspection was already extended twice from May 13, 1998 to June 3, 1998, thereby giving the
bank enough time within which to sufficiently comply with the order. [6]
Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner to produce the bank documents relative to the
accounts in issue. The order states:
Viewed from the foregoing, your persistent refusal to comply with Ombudsmans order is unjustified, and is merely intended to
delay the investigation of the case. Your act constitutes disobedience of or resistance to a lawful order issued by this office and is
punishable as Indirect Contempt under Section 3(b) of R.A. 6770. The same may also constitute obstruction in the lawful exercise
of the functions of the Ombudsman which is punishable under Section 36 of R.A. 6770.[7]

On July 10, 1998, petitioner together with Union Bank of the Philippines, filed a petition for declaratory relief, prohibition
and injunction[8] with the Regional Trial Court, Makati City, against the Ombudsman.
The petition was intended to clear the rights and duties of petitioner. Thus, petitioner sought a declaration of her rights from
the court due to the clear conflict between R. A. No. 6770, Section 15 and R. A. No. 1405, Sections 2 and 3.
Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman and other persons acting under his
authority were continuously harassing her to produce the bank documents relative to the accounts in question. Moreover, on June
16, 1998, the Ombudsman issued another order stating that unless petitioner appeared before the FFIB with the documents
requested, petitioner manager would be charged with indirect contempt and obstruction of justice.
In the meantime,[9] on July 14, 1998, the lower court denied petitioners prayer for a temporary restraining order and stated
thus:
After hearing the arguments of the parties, the court finds the application for a Temporary Restraining Order to be without merit.
Since the application prays for the restraint of the respondent, in the exercise of his contempt powers under Section 15 (9) in
relation to paragraph (8) of R.A. 6770, known as The Ombudsman Act of 1989, there is no great or irreparable injury from which
petitioners may suffer, if respondent is not so restrained. Respondent should he decide to exercise his contempt powers would still
have to apply with the court. x x x Anyone who, without lawful excuse x x x refuses to produce documents for inspection, when
thereunto lawfully required shall be subject to discipline as in case of contempt of Court and upon application of the individual or
body exercising the power in question shall be dealt with by the Judge of the First Instance (now RTC) having jurisdiction of the
case in a manner provided by law (section 580 of the Revised Administrative Code). Under the present Constitution only judges
may issue warrants, hence, respondent should apply with the Court for the issuance of the warrant needed for the enforcement of
his contempt orders. It is in these proceedings where petitioners may question the propriety of respondents exercise of his
contempt powers. Petitioners are not therefore left without any adequate remedy.
The questioned orders were issued with the investigation of the case of Fact-Finding and Intelligence Bureau vs. Amado
Lagdameo, et. el., OMB-0-97-0411, for violation of R.A. 3019. Since petitioner failed to show prima facie evidence that the
subject matter of the investigation is outside the jurisdiction of the Office of the Ombudsman, no writ of injunction may be issued
by this Court to delay this investigation pursuant to Section 14 of the Ombudsman Act of 1989. [10]
On July 20, 1998, petitioner filed a motion for reconsideration based on the following grounds:
a. Petitioners application for Temporary Restraining Order is not only to restrain the Ombudsman from exercising his
contempt powers, but to stop him from implementing his Orders dated April 29,1998 and June 16,1998; and
b. The subject matter of the investigation being conducted by the Ombudsman at petitioners premises is outside his
jurisdiction.[11]
On July 23, 1998, the Ombudsman filed a motion to dismiss the petition for declaratory relief [12] on the ground that the
Regional Trial Court has no jurisdiction to hear a petition for relief from the findings and orders of the Ombudsman, citing R. A.
No. 6770, Sections 14 and 27. On August 7, 1998, the Ombudsman filed an opposition to petitioners motion for reconsideration
dated July 20, 1998.[13]
On August 19, 1998, the lower court denied petitioners motion for reconsideration, [14] and also the Ombudsmans motion to
dismiss.[15]
On August 21, 1998, petitioner received a copy of the motion to cite her for contempt, filed with the Office of the
Ombudsman by Agapito B. Rosales, Director, Fact Finding and Intelligence Bureau (FFIB). [16]
On August 31, 1998, petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the ground
that the filing thereof was premature due to the petition pending in the lower court. [17] Petitioner likewise reiterated that she had no
intention to disobey the orders of the Ombudsman. However, she wanted to be clarified as to how she would comply with the
orders without her breaking any law, particularly R. A. No. 1405. [18]
Respondent Ombudsman panel set the incident for hearing on September 7, 1998. [19] After hearing, the panel issued an order
dated September 7, 1998, ordering petitioner and counsel to appear for a continuation of the hearing of the contempt charges
against her.[20]
On September 10, 1998, petitioner filed with the Ombudsman a motion for reconsideration of the above order. [21] Her motion
was premised on the fact that there was a pending case with the Regional Trial Court, Makati City,[22] which would determine
whether obeying the orders of the Ombudsman to produce bank documents would not violate any law.
The FFIB opposed the motion,[23] and on October 14, 1998, the Ombudsman denied the motion by order the dispositive
portion of which reads:
Wherefore, respondent Lourdes T. Marquezs motion for reconsideration is hereby DENIED, for lack of merit. Let the hearing of
the motion of the Fact Finding Intelligence Bureau (FFIB) to cite her for indirect contempt be intransferrably set to 29 October
1998 at 2:00 oclock p.m. at which date and time she should appear personally to submit her additional evidence. Failure to do so
shall be deemed a waiver thereof.[24]
Hence, the present petition.[25]
The issue is whether petitioner may be cited for indirect contempt for her failure to produce the documents requested by the
Ombudsman. And whether the order of the Ombudsman to have an in camera inspection of the questioned account is allowed as
an exception to the law on secrecy of bank deposits (R. A. No. 1405).
An examination of the secrecy of bank deposits law (R. A. No. 1405) would reveal the following exceptions:
1. Where the depositor consents in writing;
2. Impeachment case;
3. By court order in bribery or dereliction of duty cases against public officials;
4. Deposit is subject of litigation;
5. Sec. 8, R. A. No. 3019, in cases of unexplained wealth as held in the case of PNB vs. Gancayco [26]

The order of the Ombudsman to produce for in camera inspection the subject accounts with the Union Bank of the
Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the Ombudsman against Amado Lagdameo,
et. al. for violation of R. A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates
Authority and AMARI.
We rule that before an in camera inspection may be allowed, there must be a pending case before a court of competent
jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before
the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the
inspection, and such inspection may cover only the account identified in the pending case.
In Union Bank of the Philippines v. Court of Appeals, we held that Section 2 of the Law on Secrecy of Bank
Deposits, as amended, declares bank deposits to be absolutely confidential except:
(1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by
the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious
irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or
irregularity,
(2) In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the
examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank,
(3) Upon written permission of the depositor,
(4) In cases of impeachment,
(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or
(6) In cases where the money deposited or invested is the subject matter of the litigation[27]
In the case at bar, there is yet no pending litigation before any court of competent authority. What is existing is an
investigation by the office of the Ombudsman. In short, what the Office of the Ombudsman would wish to do is to fish for
additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in
court which would warrant the opening of the bank account for inspection.
Zones of privacy are recognized and protected in our laws. The Civil Code provides that "[e]very person shall respect the
dignity, personality, privacy and peace of mind of his neighbors and other persons" and punishes as actionable torts several acts
for meddling and prying into the privacy of another. It also holds a public officer or employee or any private individual liable for
damages for any violation of the rights and liberties of another person, and recognizes the privacy of letters and other private
communications. The Revised Penal Code makes a crime of the violation of secrets by an officer, the revelation of trade and
industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the
Secrecy of Bank Deposits Act, and the Intellectual Property Code.[28]
IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to cease and desist from requiring Union Bank
Manager Lourdes T. Marquez, or anyone in her place to comply with the order dated October 14, 1998, and similar orders. No
costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Buena, Gonzaga-Reyes,
Ynares-Santiago, De Leon, Jr., and Sandoval-Gutierrez, JJ., concur.

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SECOND DIVISION

JOSE C. GO, G.R. No. 178429

QUISUMBING, J., Chairperson,

BANGKO SENTRAL NG PILIPINAS,

October 23, 2009

CONTRARY TO LAW. [Emphasis supplied.]

On May 28, 2001, Go pleaded not guilty to the offense charged.

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

THE COURTS RULING

The Accuseds Right to be Informed

Intellectual Property Law 10/8/18

Credit accommodation limit is not an exception nor is it an element of the

Rules of Court allow amendment of insufficient Information

Intellectual Property Law 10/8/18

PHILIPPINE TRUST COMPANY (also known as G.R. No. 150318

LEONARDO-DE CASTRO, J.:

Intellectual Property Law 10/8/18

4. To pay the costs of this suit.[4]

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Intellectual Property Law 10/8/18

Public documents are:

All other writings are private.

Intellectual Property Law 10/8/18

5. The Claveria spouses passed the standards set by the bank.[31]

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Costs against petitioner Philippine Trust Company.

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Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

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G.R. No. 97218 May 17, 1993

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G.R. No. 90027 March 3, 1993

DAVIDE, JR., J.:

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Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

Intellectual Property Law 10/8/18

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