EN BANC Ejercito Estrada, et al.

, for plunder, defined and

penalized in R.A. 7080, AN ACT DEFINING AND
JOSEPH VICTOR G. G.R. Nos. PENALIZING THE CRIME OF PLUNDER.
EJERCITO, 157294-95
P Present: In above-stated case of People v. Estrada, et
et al., the Special Prosecution Panel[1] filed on January
iti PANGANIBA 20, 2003 before the Sandiganbayan a Request for
o N, C.J., Issuance of Subpoena Duces Tecum for the issuance
ne PUNO, of a subpoena directing the President of Export and
r, QUISUMBING, Industry Bank (EIB, formerly Urban Bank) or his/her
YNARES- authorized representative to produce the following
SANTIAGO, documents during the hearings scheduled on January
SANDOVAL- 22 and 27, 2003:
GUTIERREZ,
- versus - CARPIO, I. For Trust Account No. 858;
AUSTRIA- 1. Account Opening Documents;
MARTINEZ, 2. Trading Order No. 020385
CORONA, dated January 29, 1999;
CARPIO 3. Confirmation Advice TA 858;
SANDIGANBAYAN MORALES, 4. Original/Microfilm copies,
(SPECIAL DIVISION) CALLEJO, including the dorsal side, of the
AND PEOPLE OF SR., following:
THE PHILIPPINES, AZCUNA,
R TINGA, a. Bank of Commerce MC
es CHICO- # 0256254 in the amount
p NAZARIO, of P2,000,000.00;
o GARCIA, and b. Urban bank Corp. MC #
n VELASCO, 34181 dated November 8,
de JR., JJ. 1999 in the amount of
nt Promulgated: P10,875,749.43;
s. c. Urban Bank MC # 34182
November 30, dated November 8, 1999 in
2006 the amount
x----------------------------------- of P42,716,554.22;
---------------x d. Urban Bank Corp. MC #
37661 dated November 23,
DECISION 1999 in the amount
of P54,161,496.52;
CARPIO MORALES, J.:
5. Trust Agreement dated January
The present petition for certiorari under Rule 1999:
65 assails the Sandiganbayan Resolutions dated Trustee: Joseph Victor C. Ejercito
February 7 and 12, 2003 denying petitioner Joseph Nominee: URBAN BANK-TRUST
Victor G. Ejercitos Motions to Quash Subpoenas DEPARTMENT
Duces Tecum/Ad Testificandum, and Resolution Special Private Account No. (SPAN)
dated March 11, 2003 denying his Motion for 858; and
Reconsideration of the first two resolutions. 6. Ledger of the SPAN # 858.

The three resolutions were issued in Criminal II. For Savings Account No. 0116-17345-9
Case No. 26558, People of the Philippines v. Joseph SPAN No. 858
1

1. Signature Cards; and
2. Statement of Account/Ledger
III. Urban Bank Managers Check and their
corresponding Urban Bank Managers
Check Application Forms, as follows:
1. MC # 039975 dated January 18,
2000 in the amount
of P70,000,000.00;
2. MC # 039976 dated January 18,
2000 in the amount
of P2,000,000.00;
3. MC # 039977 dated January 18,
2000 in the amount
of P2,000,000.00;
4. MC # 039978 dated January 18,
2000 in the amount
of P1,000,000.00;
The Special Prosecution Panel also filed
on January 20, 2003, a Request for Issuance of
Subpoena Duces Tecum/Ad Testificandum directed
to the authorized representative of Equitable-PCI
Bank to produce statements of account pertaining to
certain accounts in the name of Jose Velarde and to
testify thereon.
The Sandiganbayan granted both requests by
Resolution of January 21, 2003 and subpoenas were
accordingly issued.
The Special Prosecution Panel filed still
another Request for Issuance of Subpoena Duces
Tecum/Ad Testificandum dated January 23, 2003 for
the President of EIB or his/her authorized
representative to produce the same documents
subject of the Subpoena Duces Tecum dated January
21, 2003 and to testify thereon on the hearings
scheduled on January 27 and 29, 2003 and
subsequent dates until completion of the
testimony. The request was likewise granted by the
Sandiganbayan. A Subpoena Duces Tecum/Ad
Testificandum was accordingly issued on January
24, 2003.
Petitioner, claiming to have learned from the
media that the Special Prosecution Panel had
requested for the issuance of subpoenas for the
examination of bank accounts belonging to him,
attended the hearing of the case on January 27,
2003 and filed before the Sandiganbayan a letter of
even date expressing his concerns as follows,
quoted verbatim:
Your Honors:
It is with much respect that I write this
court relative to the concern of
subpoenaing the undersigneds bank
account which I have learned
through the media.
I am sure the prosecution is aware of
our banking secrecy laws everyone
supposed to observe. But, instead of
prosecuting those who may have
breached such laws, it seems it is even
going to use supposed evidence
which I have reason to believe could
only have been illegally obtained.
The prosecution was not content with
a general request. It even lists and
identifies specific documents
meaning someone else in the bank
illegally released confidential
information.
If this can be done to me, it can
happen to anyone. Not that anything
can still shock our family. Nor that I
have anything to hide. Your Honors.
But, I am not a lawyer and need time
to consult one on a situation that
affects every bank depositor in the
country and should interest the bank
itself, the Bangko Sentral ng
Pilipinas, and maybe the Ombudsman
himself, who may want to investigate,
not exploit, the serious breach that
can only harm the economy, a
consequence that may have been
overlooked. There appears to have
been deplorable connivance.
xxxx
2
 I hope and pray, Your Honors, that I
will be given time to retain the
services of a lawyer to help me
protect my rights and those of every
banking depositor. But the one I have
in mind is out of the country right
now.
May I, therefore, ask your Honors,
that in the meantime, the issuance of
the subpoena be held in abeyance for
at least ten (10) days to enable me to
take appropriate legal steps in
connection with the prosecutions
request for the issuance of subpoena
concerning my accounts. (Emphasis
supplied)
From the present petition, it is gathered that
the accounts referred to by petitioner in his above-
quoted letter are Trust Account No. 858 and Savings
Account No. 0116-17345-9.[2]
In open court, the Special Division of the
Sandiganbayan, through Associate Justice Edilberto
Sandoval, advised petitioner that his remedy was to
file a motion to quash, for which he was given up to
12:00 noon the following day, January 28, 2003.
Petitioner, unassisted by counsel, thus filed
on January 28, 2003 a Motion to Quash Subpoena
Duces Tecum/Ad Testificandum praying that the
subpoenas previously issued to the President of the
EIB dated January 21 and January 24, 2003 be
quashed.[3]
In his Motion to Quash, petitioner claimed
that his bank accounts are covered by R.A. No. 1405
(The Secrecy of Bank Deposits Law) and do not fall
under any of the exceptions stated therein. He further
claimed that the specific identification of documents
in the questioned subpoenas, including details on
dates and amounts, could only have been made
possible by an earlier illegal disclosure thereof by the
EIB and the Philippine Deposit Insurance
Corporation (PDIC) in its capacity as receiver of the
then Urban Bank.
The disclosure being illegal, petitioner
concluded, the prosecution in the case may not be
allowed to make use of the information.
Before the Motion to Quash was resolved by
the Sandiganbayan, the prosecution filed another
Request for the Issuance of Subpoena Duces
Tecum/Ad Testificandum dated January 31, 2003,
again to direct the President of the EIB to produce,
on the hearings scheduled on February 3 and 5, 2003,
the same documents subject of the January 21 and 24,
2003 subpoenas with the exception of the Bank of
Commerce MC #0256254 in the amount
of P2,000,000 as Bank of Commerce MC #0256256
in the amount of P200,000,000 was instead
requested. Moreover, the request covered the
following additional documents:
IV. For Savings Account No. 1701-
00646-1:
1. Account Opening Forms;
2. Specimen Signature Card/s; and
3. Statements of Account.
The prosecution also filed a Request for the
Issuance of Subpoena Duces Tecum/Ad
Testificandum bearing the same date, January 31,
2003, directed to Aurora C. Baldoz, Vice President-
CR-II of the PDIC for her to produce the following
documents on the scheduled hearings on February 3
and 5, 2003:
1. Letter of authority
dated November 23, 1999 re:
SPAN [Special Private Account
Number] 858;
2. Letter of authority dated January
29, 2000 re: SPAN 858;
3. Letter of authority dated April 24,
2000 re: SPAN 858;
4. Urban Bank check no. 052092
dated April 24, 2000 for the
amount of P36, 572, 315.43;
5. Urban Bank check no. 052093
dated April 24, 2000 for the
3
 amount of P107,191,780.85;
and
6. Signature Card Savings Account
No. 0116-17345-
9. (Underscoring supplied)
The subpoenas prayed for in both requests
were issued by the Sandiganbayan on January 31,
2003.
On February 7, 2003, petitioner, this time
assisted by counsel, filed an Urgent Motion to Quash
Subpoenae Duces Tecum/Ad Testificandum praying
that the subpoena dated January 31, 2003 directed to
Aurora Baldoz be quashed for the same reasons
which he cited in the Motion to Quash[4] he had
earlier filed.
On the same day, February 7, 2003, the
Sandiganbayan issued a Resolution denying
petitioners Motion to Quash Subpoenae Duces
Tecum/Ad Testificandum dated January 28, 2003.
Subsequently or on February 12, 2003, the
Sandiganbayan issued a Resolution denying
petitioners Urgent Motion to Quash Subpoena Duces
Tecum/Ad Testificandum dated February 7, 2003.
Petitioners Motion for Reconsideration
dated February 24, 2003 seeking a reconsideration of
the Resolutions of February 7 and 12, 2003 having
been denied by Resolution of March 11, 2003,
petitioner filed the present petition.
Raised as issues are:
1. Whether petitioners Trust Account
No. 858 is covered by the term deposit
as used in R.A. 1405;
2. Whether petitioners Trust Account
No. 858 and Savings Account No.
0116-17345-9 are excepted from the
protection of R.A. 1405; and
3. Whether the extremely-detailed
information contained in the Special
Prosecution Panels requests for
subpoena was obtained through a prior
illegal disclosure of petitioners bank
accounts, in violation of the fruit of the
poisonous tree doctrine.
Respondent People posits that Trust Account
No. 858[5] may be inquired into, not merely because
it falls under the exceptions to the coverage of R.A.
1405, but because it is not even contemplated
therein. For, to respondent People, the law applies
only to deposits which strictly means the money
delivered to the bank by which a creditor-debtor
relationship is created between the depositor and the
bank.
The contention that trust accounts are not
covered by the term deposits, as used in R.A. 1405,
by the mere fact that they do not entail a creditor-
debtor relationship between the trustor and the bank,
does not lie. An examination of the law shows that
the term deposits used therein is to be understood
broadly and not limited only to accounts which give
rise to a creditor-debtor relationship between the
depositor and the bank.
The policy behind the law is laid down in
Section 1:
SECTION 1. It is hereby declared to
be the policy of the Government to
give encouragement to the people to
deposit their money in banking
institutions and to discourage private
hoarding so that the same may be
properly utilized by banks in
authorized loans to assist in the
economic development of the
country. (Underscoring supplied)
If the money deposited under an account may
be used by banks for authorized loans to third
persons, then such account, regardless of whether it
creates a creditor-debtor relationship between the
depositor and the bank, falls under the category of
accounts which the law precisely seeks to protect for
the purpose of boosting the economic development
of the country.
4
 Trust Account No. 858 is, without doubt, one
such account. The Trust Agreement between
petitioner and Urban Bank provides that the trust
account covers deposit, placement or investment of
funds by Urban Bank for and in behalf of
petitioner.[6] The money deposited under Trust
Account No. 858, was, therefore, intended not
merely to remain with the bank but to be invested by
it elsewhere. To hold that this type of account is not
protected by R.A. 1405 would encourage private
hoarding of funds that could otherwise be invested
by banks in other ventures, contrary to the policy
behind the law.
Section 2 of the same law in fact even more
clearly shows that the term deposits was intended to
be understood broadly:
SECTION 2. All
deposits of whatever nature with
banks or banking institutions in the
Philippines including investments in
bonds issued by the Government of
the Philippines, its political
subdivisions and its instrumentalities,
are hereby considered as of an
absolutely confidential nature and
may not be examined, inquired or
looked into by any person,
government official, bureau or
office, except upon written
permission of the depositor, or in
cases of impeachment, or upon order
of a competent court in cases of
bribery or dereliction of duty of
public officials, or in cases where the
money deposited or invested is the
subject matter of the litigation.
(Emphasis and underscoring
supplied)
The phrase of whatever nature proscribes any
restrictive interpretation of deposits. Moreover, it is
clear from the immediately quoted provision that,
generally, the law applies not only to money which
is deposited but also to those which
are invested. This further shows that the law was not
intended to apply only to deposits in the strict sense
of the word. Otherwise, there would have been no
need to add the phrase or invested.
Clearly, therefore, R.A. 1405 is broad enough
to cover Trust Account No. 858.
The protection afforded by the law is,
however, not absolute, there being recognized
exceptions thereto, as above-quoted Section 2
provides. In the present case, two exceptions apply,
to wit: (1) the examination of bank accounts is upon
order of a competent court in cases of bribery or
dereliction of duty of public officials, and (2) the
money deposited or invested is the subject matter of
the litigation.
Petitioner contends that since plunder is
neither bribery nor dereliction of duty, his accounts
are not excepted from the protection of R.A.
1405. Philippine National Bank v. Gancayco[7] holds
otherwise:
Cases of unexplained wealth are
similar to cases of bribery or
dereliction of duty and no reason is
seen why these two classes of cases
cannot be excepted from the rule
making bank deposits
confidential. The policy as to one
cannot be different from the policy as
to the other. This policy expresses
the notion that a public office is a
public trust and any person who
enters upon its discharge does so with
the full knowledge that his life, so far
as relevant to his duty, is open to
public scrutiny.
Undoubtedly, cases for plunder involve
unexplained wealth. Section 2 of R.A. No. 7080
states so.
SECTION 2. Definition of the Crime
of Plunder; Penalties. Any public
officer who, by himself or in
connivance with members of his
family, relatives by affinity or
consanguinity, business associates,
subordinates or other
5
 persons, amasses, accumulates or malversation of public funds or
acquires ill-gotten wealth through a raids on the public treasury;
combination or series of overt or
criminal acts as described in Section 2) By receiving, directly or
1(d) hereof, in the aggregate amount indirectly, any commission,
or total value of at least Seventy-five gift, share, percentage,
million pesos (P75,000,000.00), shall kickbacks or any other form
be guilty of the crime of plunder and of pecuniary benefit from any
shall be punished by life person and/or entity in
imprisonment with perpetual absolute connection with any
disqualification from holding any government contract or
public office. Any person who project or by reason of the
participated with said public officer in office or position of the public
the commission of plunder shall officer concerned;
likewise be punished. In the
imposition of penalties, the degree of 3) By the illegal or fraudulent
participation and the attendance of conveyance or disposition of
mitigating and extenuating assets belonging to the National
circumstances shall be considered by Government or any of its
the court. The court shall declare any subdivisions, agencies or
and all ill-gotten wealth and their instrumentalities or
interests and other incomes and assets government-owned or -
including the properties and shares of controlled corporations and
stock derived from the deposit or their subsidiaries;
investment thereof forfeited in favor
of the State. (Emphasis and 4) By obtaining, receiving or
underscoring supplied) accepting directly or indirectly
any shares of stock, equity or
any other form of interest or
An examination of the overt or criminal acts participation including promise
as described in Section 1(d) of R.A. No. 7080 would of future employment in any
make the similarity between plunder and bribery business enterprise or
even more pronounced since bribery is essentially undertaking;
included among these criminal acts. Thus Section
1(d) states: 5) By establishing agricultural,
industrial or commercial
d) Ill-gotten wealth means monopolies or other
any asset, property, business combinations and/or
enterprise or material possession of implementation of decrees and
any person within the purview of orders intended to benefit
Section Two (2) hereof, acquired by particular persons or special
him directly or indirectly through interests; or
dummies, nominees, agents,
subordinates and or business 6) By taking undue advantage of
associates by any combination or official position, authority,
series of the following means or relationship, connection or
similar schemes. influence to unjustly enrich
himself or themselves at the
1) Through misappropriation, expense and to the damage and
conversion, misuse, or prejudice of the Filipino people
6
 and the Republic of demanded, the subject
the Philippines. (Emphasis of the action is the
supplied) matter or thing with
respect to which the
controversy has
Indeed, all the above-enumerated overt acts arisen, concerning
are similar to bribery such that, in each case, it may which the wrong has
be said that no reason is seen why these two classes been done, and this
of cases cannot be excepted from the rule making ordinarily is the
bank deposits confidential.[8] property or the
contract and its subject
The crime of bribery and the overt acts matter, or the thing in
constitutive of plunder are crimes committed by dispute.
public officers, and in either case the noble idea that
a public office is a public trust and any person who The argument is well-
enters upon its discharge does so with the full taken. We note with approval the
knowledge that his life, so far as relevant to his duty, difference between the subject of the
is open to public scrutiny applies with equal force. action from the cause of action. We
also find petitioners definition of the
Plunder being thus analogous to bribery, the phrase subject matter of the action is
exception to R.A. 1405 applicable in cases of bribery consistent with the term subject
must also apply to cases of plunder. matter of the litigation, as the latter is
used in the Bank Deposits Secrecy
Respecting petitioners claim that the money Act.
in his bank accounts is not the subject matter of the
litigation, the meaning of the phrase subject matter of In Mellon Bank, N.A. v.
the litigation as used in R.A. 1405 is explained Magsino, where the petitioner bank
in Union Bank of the Philippines v. Court of inadvertently caused the transfer of
Appeals,[9] thus: the amount of US$1,000,000.00
instead of only US$1,000.00, the
Petitioner contends that the Court sanctioned the examination
Court of Appeals confuses the cause of the bank accounts where part of
of action with the subject of the the money was subsequently caused
action. In Yusingco v. Ong Hing Lian, to be deposited:
petitioner points out, this Court
distinguished the two concepts. x x x Section 2
of [Republic Act No.
x x x The 1405] allows the
cause of action is the disclosure of bank
legal wrong deposits in cases
threatened or where the money
committed, while the deposited is the
object of the action is subject matter of the
to prevent or redress litigation. Inasmuch
the wrong by as Civil Case No.
obtaining some legal 26899 is aimed at
relief; but the subject recovering the
of the action is neither amount converted by
of these since it is not the Javiers for their
the wrong or the relief own benefit,
7
 necessarily, an
inquiry into the
whereabouts of the
illegally acquired
amount extends to
whatever is
concealed by being
held or recorded in
the name of persons
other than the one
responsible for the
illegal acquisition.
Clearly, Mellon
Bank involved a case where the
money deposited was the subject
matter of the litigation since the
money deposited was the very thing
in dispute. x x x (Emphasis and
underscoring supplied)
The plunder case now pending with the
Sandiganbayan necessarily involves an inquiry into
the whereabouts of the amount purportedly acquired
illegally by former President Joseph Estrada.
In light then of this Courts pronouncement
in Union Bank, the subject matter of the litigation
cannot be limited to bank accounts under the name of
President Estrada alone, but must include those
accounts to which the money purportedly acquired
illegally or a portion thereof was alleged to have been
transferred. Trust Account No. 858 and Savings
Account No. 0116-17345-9 in the name of petitioner
fall under this description and must thus be part of
the subject matter of the litigation.
In a further attempt to show that the
subpoenas issued by the Sandiganbayan are invalid
and may not be enforced, petitioner contends, as
earlier stated, that the information found therein,
given their extremely detailed character, could only
have been obtained by the Special Prosecution Panel
through an illegal disclosure by the bank officials
concerned. Petitioner thus claims that, following the
fruit of the poisonous tree doctrine, the subpoenas
must be quashed.
Petitioner further contends that even if, as
claimed by respondent People, the extremely-
detailed information was obtained by the
Ombudsman from the bank officials concerned
during a previous investigation of the charges against
President Estrada, such inquiry into his bank
accounts would itself be illegal.
Petitioner relies on Marquez v.
Desierto[10] where the Court held:
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. (Underscoring supplied)
As no plunder case against then President
Estrada had yet been filed before a court of
competent jurisdiction at the time the Ombudsman
conducted an investigation, petitioner concludes that
the information about his bank accounts were
acquired illegally, hence, it may not be lawfully used
to facilitate a subsequent inquiry into the same bank
accounts.
Petitioners attempt to make the exclusionary
rule applicable to the instant case fails. R.A. 1405, it
bears noting, nowhere provides that an unlawful
examination of bank accounts shall render the
evidence obtained therefrom inadmissible in
evidence. Section 5 of R.A. 1405 only states that
[a]ny violation of this law will subject the offender
upon conviction, to an imprisonment of not more
than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court.
The case of U.S. v. Frazin,[11] involving the
Right to Financial Privacy Act of 1978 (RFPA) of
the United States, is instructive.
Because the statute, when
properly construed, excludes a
8
 suppression remedy, it would not be
appropriate for us to provide one in
the exercise of our supervisory
powers over the administration of
justice. Where Congress has both
established a right and provided
exclusive remedies for its violation,
we would encroach upon the
prerogatives of Congress were we to
authorize a remedy not provided for
by statute. United States v.
Chanen, 549 F.2d 1306, 1313 (9th
Cir.), cert. denied, 434 U.S. 825, 98
S.Ct. 72, 54 L.Ed.2d 83 (1977).
The same principle was reiterated in U.S. v.
Thompson:[12]
x x x When Congress
specifically designates a remedy for
one of its acts, courts generally
presume that it engaged in the
necessary balancing of interests in
determining what the appropriate
penalty should
be. See Michaelian, 803 F.2d at
1049 (citing cases); Frazin, 780 F.2d
at 1466. Absent a specific reference
to an exclusionary rule, it is not
appropriate for the courts to read such
a provision into the act.
Even assuming arguendo, however, that the
exclusionary rule applies in principle to cases
involving R.A. 1405, the Court finds no reason to
apply the same in this particular case.
Clearly, the fruit of the poisonous tree
doctrine[13] presupposes a violation of law. If there
was no violation of R.A. 1405 in the instant case,
then there would be no poisonous tree to begin with,
and, thus, no reason to apply the doctrine.
How the Ombudsman conducted his inquiry
into the bank accounts of petitioner is recounted by
respondent People of the Philippines, viz:
x x x [A]s early as February 8, 2001, long
before the issuance of
the Marquez ruling, the Office of the
Ombudsman, acting under the powers
granted to it by the Constitution and
R.A. No. 6770, and acting on
information obtained from various
sources, including impeachment (of
then Pres. Joseph Estrada) related
reports, articles and investigative
journals, issued a Subpoena Duces
Tecumaddressed to Urban
Bank. (Attachment 1-b) It should be
noted that the description of the
documents sought to be produced at
that time included that of numbered
accounts 727, 737, 747, 757, 777 and
858 and included such names as Jose
Velarde, Joseph E. Estrada, Laarni
Enriquez, Guia Gomez, Joy
Melendrez, Peachy Osorio, Rowena
Lopez, Kevin or Kelvin
Garcia. The subpoena did not single
out account 858.
xxxx
Thus, on February 13, 2001, PDIC, as
receiver of Urban Bank, issued a
certification as to the availability of
bank documents relating to A/C 858
and T/A 858 and the non-availability
of bank records as to the other
accounts named in
the subpoena. (Attachments 2, 2-1
and 2-b)
Based on the certification issued by PDIC,
the Office of the Ombudsman
on February 16, 2001 again issued
a Subpoena Duces Tecum directed to
Ms. Corazon dela Paz, as Interim
Receiver, directing the production of
documents pertinent to account A/C
858 and T/C 858. (Attachment 3)
In compliance with the
said subpoena dated February 16,
2001, Ms. Dela Paz, as interim
receiver, furnished the Office of the
9
Ombudsman certified copies of
documents under cover latter
dated February 21, 2001:
1. Transaction registers
dated 7-02-99, 8-16-99, 9-
17-99, 10-18-99, 11-22-
99, 1-07-00, 04-03-00 and
04-24-00;
2. Report of Unregularized
TAFs & TDs for UR
COIN A & B Placements
of Various Branches as of
February 29, 2000 and as
of December 16, 1999;
and
3. Trading Orders Nos. A
No. 78102 and A No.
078125.
Trading Order A No. 07125 is
filed in two copies a white
copy which showed set up
information; and a yellow
copy which showed reversal
information. Both copies have
been reproduced and are
enclosed with this letter.
We are continuing our search
for other records and
documents pertinent to your
request and we will forward to
you on Friday, 23 February
2001, such additional records
and documents as we might
find until then. (Attachment
4)
The Office of the Ombudsman then
requested for the mangers checks,
detailed in the Subpoena Duces
Tecum dated March 7,
2001. (Attachment 5)
PDIC again complied with the
said Subpoena Duces
Tecum dated March 7, 2001 and
provided copies of the managers
checks thus requested under cover
letter dated March 16,
[14]
2001.(Attachment 6) (Emphasis in
the original)
The Sandiganbayan credited the foregoing
account of respondent People.[15] The Court finds no
reason to disturb this finding of fact by the
Sandiganbayan.
The Marquez ruling notwithstanding, the above-
described examination by the Ombudsman of
petitioners bank accounts, conducted before a case
was filed with a court of competent jurisdiction, was
lawful.
For the Ombudsman issued the subpoenas
bearing on the bank accounts of petitioner about four
months before Marquez was promulgated on June
27, 2001.
While judicial interpretations of statutes,
such as that made in Marquez with respect to R.A.
No. 6770 or the Ombudsman Act of 1989, are
deemed part of the statute as of the date it was
originally passed, the rule is not absolute.
Columbia Pictures, Inc. v. Court of
[16]
Appeals teaches:
It is consequently clear that a judicial
interpretation becomes a part of the
law as of the date that law was
originally passed, subject only to the
qualification that when a doctrine
of this Court is overruled and a
different view is adopted, and more
so when there is a reversal thereof,
the new doctrine should be
applied prospectively and should
not apply to parties who relied on the
old doctrine and acted in good faith.
(Emphasis and underscoring
supplied)
When this Court construed the Ombudsman Act of
1989, in light of the Secrecy of Bank Deposits Law
in Marquez, that before an in camera inspection may
be allowed there must be a pending case before a
10
court of competent jurisdiction, it was, in fact,
reversing an earlier doctrine found in Banco Filipino
Savings and Mortgage Bank v. Purisima[17].
Banco Filipino involved subpoenas duces
tecum issued by the Office of the Ombudsman, then
known as the Tanodbayan,[18] in the course of
its preliminary investigation of a charge of
violation of the Anti-Graft and Corrupt Practices Act.
While the main issue in Banco Filipino was
whether R.A. 1405 precluded the Tanodbayans
issuance of subpoena duces tecum of bank records in
the name of persons other than the one who was
charged, this Court, citing P.D. 1630,[19] Section 10,
the relevant part of which states:
(d) He may issue a subpoena
to compel any person to appear, give
sworn testimony, or produce
documentary or other evidence the
Tanodbayan deems relevant to a
matter under his inquiry,
held that The power of the Tanodbayan to issue
subpoenae ad testificandum and subpoenae duces
tecum at the time in question is not disputed, and
at any rate does not admit of doubt.[20]
As the subpoenas subject of Banco
Filipino were issued during a preliminary
investigation, in effect this Court upheld the power
of the Tandobayan under P.D. 1630 to issue
subpoenas duces tecum for bank documents prior to
the filing of a case before a court of competent
jurisdiction.
Marquez, on the other hand, practically
reversed this ruling in Banco Filipino despite the fact
that the subpoena power of the Ombudsman under
R.A. 6770 was essentially the same as that under P.D.
1630. Thus Section 15 of R.A. 6770 empowers the
Office of the Ombudsman to
(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;
A comparison of this provision with its counterpart
in Sec. 10(d) of P.D. 1630 clearly shows that it is
only more explicit in stating that the power of the
Ombudsman includes the power to examine and have
access to bank accounts and records which power
was recognized with respect to the Tanodbayan
through Banco Filipino.
The Marquez ruling that there must be a pending
case in order for the Ombudsman to validly inspect
bank records in camera thus reversed a prevailing
doctrine.[21] Hence, it may not be retroactively
applied.
The Ombudsmans inquiry into the subject bank
accounts prior to the filing of any case before a court
of competent jurisdiction was therefore valid at the
time it was conducted.
Likewise, the Marquez ruling that the account holder
must be notified to be present during the inspection
may not be applied retroactively to the inquiry of the
Ombudsman subject of this case. This ruling is not a
judicial interpretation either of R.A. 6770 or R.A.
1405, but a judge-made law which, as People v.
Luvendino[22] instructs, can only be given
prospective application:
x x x The doctrine that an
uncounselled waiver of the right to
counsel is not to be given legal effect
was initially a judge-made one and
was first announced on 26 April
1983 in Morales v. Enrile and
reiterated on 20 March 1985
in People v. Galit. x x x
While the Morales-Galit doctrine
eventually became part of Section
12(1) of the 1987 Constitution, that
doctrine affords no comfort to
appellant Luvendino for the
requirements and restrictions
outlined
in Morales and Galit have no
retroactive effect and do not reach
waivers made prior to 26 April
11
 1983 the date of promulgation
of Morales. (Emphasis supplied)
In fine, the subpoenas issued by the
Ombudsman in this case were legal, hence,
invocation of the fruit of the poisonous tree doctrine
is misplaced.
AT ALL EVENTS, even if the challenged
subpoenas are quashed, the Ombudsman is not
barred from requiring the production of the same
documents based solely on information obtained by
it from sources independent of its previous inquiry.
In particular, the Ombudsman, even before its
inquiry, had already possessed information giving
him grounds to believe that (1) there are bank
accounts bearing the number 858, (2) that such
accounts are in the custody of Urban Bank, and (3)
that the same are linked with the bank accounts of
former President Joseph Estrada who was then under
investigation for plunder.
Only with such prior independent information could
it have been possible for the Ombudsman to issue
the February 8, 2001 subpoena duces
tecum addressed to the President and/or Chief
Executive Officer of Urban Bank, which described
the documents subject thereof as follows:
(a) bank records and all
documents relative thereto
pertaining to all bank accounts
(Savings, Current, Time Deposit,
Trust, Foreign Currency Deposits,
etc) under the account names of
Jose Velarde, Joseph E. Estrada,
Laarni Enriquez, Guia Gomez, Joy
Melendrez, Peach Osorio, Rowena
Lopez, Kevin or Kelvin Garcia, 727,
737, 747, 757, 777
and 858. (Emphasis and underscoring
supplied)
The information on the existence of Bank Accounts
bearing number 858 was, according to respondent
People of the Philippines, obtained from various
sources including the proceedings during the
impeachment of President Estrada, related reports,
articles and investigative journals.[23] In the absence
of proof to the contrary, this explanation proffered by
respondent must be upheld. To presume that the
information was obtained in violation of R.A. 1405
would infringe the presumption of regularity in the
performance of official functions.
Thus, with the filing of the plunder case against
former President Estrada before the Sandiganbayan,
the Ombudsman, using the above independent
information, may now proceed to conduct the same
investigation it earlier conducted, through which it
can eventually obtain the same information
previously disclosed to it by the PDIC, for it is an
inescapable fact that the bank records of petitioner
are no longer protected by R.A. 1405 for the reasons
already explained above.
Since conducting such an inquiry would,
however, only result in the disclosure of the same
documents to the Ombudsman, this Court, in
avoidance of what would be a time-wasteful and
circuitous way of administering justice,[24] upholds
the challenged subpoenas.
Respecting petitioners claim that the
Sandiganbayan violated his right to due process as he
was neither notified of the requests for the issuance
of the subpoenas nor of the grant thereof, suffice it to
state that the defects were cured when petitioner
ventilated his arguments against the issuance thereof
through his earlier quoted letter addressed to the
Sandiganbayan and when he filed his motions to
quash before the Sandiganbayan.
IN SUM, the Court finds that the Sandiganbayan did
not commit grave abuse of discretion in issuing the
challenged subpoenas for documents pertaining to
petitioners Trust Account No. 858 and Savings
Account No. 0116-17345-9 for the following
reasons:
1. These accounts are no longer protected by
the Secrecy of Bank Deposits Law, there being two
exceptions to the said law applicable in this case,
namely: (1) the examination of bank accounts is upon
order of a competent court in cases of bribery or
dereliction of duty of public officials, and (2) the
money deposited or invested is the subject matter of
the litigation. Exception (1) applies since the plunder
12
case pending against former President Estrada is
analogous to bribery or dereliction of duty, while
exception (2) applies because the money deposited in
petitioners bank accounts is said to form part of the
subject matter of the same plunder case.
2. The fruit of the poisonous tree principle,
which states that once the primary source (the tree) is
shown to have been unlawfully obtained, any
secondary or derivative evidence (the fruit) derived
from it is also inadmissible, does not apply in this
case. In the first place, R.A. 1405 does not provide
for the application of this rule. Moreover, there is no
basis for applying the same in this case since the
primary source for the detailed information regarding
petitioners bank accounts the investigation
previously conducted by the Ombudsman was
lawful.
3. At all events, even if the subpoenas issued
by the Sandiganbayan were quashed, the
Ombudsman may conduct on its own the same
inquiry into the subject bank accounts that it earlier
conducted last February-March 2001, there being a
plunder case already pending against former
President Estrada. To quash the challenged
subpoenas would, therefore, be pointless since the
Ombudsman may obtain the same documents by
another route. Upholding the subpoenas avoids an
unnecessary delay in the administration of justice.
WHEREFORE, the petition is
DISMISSED. The Sandiganbayan Resolutions dated
February 7 and 12, 2003 and March 11, 2003 are
upheld.
The Sandiganbayan is hereby directed,
consistent with this Courts ruling in Marquez v.
Desierto, to notify petitioner as to the date the subject
bank documents shall be presented in court by the
persons subpoenaed.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 71479 October 18, 1990
MELLON BANK, N.A., petitioner,
vs.
HON. CELSO L. MAGSINO, in his capacity as
Presiding Judge of Branch CLIX of the Regional
Trial Court at Pasig; MELCHOR JAVIER, JR.,
VICTORIA JAVIER; HEIRS OF HONORIO
POBLADOR, JR., namely: Elsa Alunan
Poblador, Honorio Poblador III, Rafael
Poblador, Manuel Poblador, Ma. Regina
Poblador, Ma. Concepcion Poblador & Ma.
Dolores Poblador; F.C. HAGEDORN & CO.,
INC.; DOMINGO JHOCSON, JR.; JOSE
MARQUEZ; ROBERTO GARINO; ELNOR
INVESTMENT CO., INC.; PARAMOUNT
FINANCE CORPORATION; RAFAEL
CABALLERO; and TRI-ARC INVESTMENT
and MANAGEMENT CO., INC. respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los
Angeles for petitioner.
Jose Buendia for respondent Jose Marquez.
Raul L. Cornea & Associates for Jhocson and
Garino.
Jesus L. Santos and Conrado Valera for Tri-Arc
Investment, etc.
Bernardo D. Calderon for respondent ELNOR and
Rafael Caballero.
Nazareno, Azada, Sabado & Dizon for Movants.
Balgos & Perez for Paramount Finance
Corporation.
Meer, Meer & Meer for Hagedorn.
Alberto Villareza for F.C. Hagedorn & Co.
FERNAN, C.J.:
The issue in the instant special civil action
of certiorari is whether or not, by virtue of the
principle of election of remedies, an action filed in
California, U.S.A., to recover real property located
therein and to constitute a constructive trust on said
property precludes the filing in our jurisdiction of
an action to recover the purchase price of said real
property.
On May 27, 1977, Dolores Ventosa requested the
transfer of $1,000 from the First National Bank of
Moundsville, West Virginia, U.S.A. to Victoria
Javier in Manila through the Prudential Bank.
Accordingly, the First National Bank requested the
petitioner, Mellon Bank, to effect the transfer.
Unfortunately the wire sent by Mellon Bank to
Manufacturers Hanover Bank, a correspondent of
13
Prudential Bank, indicated the amount transferred as
"US$1,000,000.00" instead of US$1,000.00. Hence
Manufacturers Hanover Bank transferred one
million dollars less bank charges of $6.30 to the
Prudential Bank for the account of Victoria Javier.
On June 3, 1977, Javier opened a new dollar
account (No. 343) in the Prudential Bank and
deposited $999,943.70. Immediately their, Victoria
Javier and her husband, Melchor Javier, Jr., made
withdrawals from the account, deposited them in
several banks only to withdraw them later in an
apparent plan to conceal, "launder" and dissipate the
erroneously sent amount.
On June 14, 1977, Javier withdrew $475,000 from
account No. 343 and converted it into eight cashier's
checks made out to the following: (a) F.C.
Hagedorn & Co., Inc., two cheeks for the total
amount of P1,000,000; (b) Elnor Investment Co.,
Inc., two checks for P1,000,000; (c) Paramount
Finance Corporation, two checks for P1,000,000;
and (d) M. Javier, Jr., two checks for P496,000. The
first six checks were delivered to Jose Marquez and
Honorio Poblador, Jr.
It appears that Melchor Javier, Jr. had requested
Jose Marquez, a realtor, to look for properties for
sale in the United States. Marquez offered a 160-
acre lot in the Mojave desert in California City
which was owned by Honorio Poblador, Jr. Javier,
without having seen the property, agreed to buy it
for P3,236,800 (US$437,405) although it was
actually appraised at around $38,500. Consequently,
as Poblador's agent, Marquez executed in Makati a
deed of absolute sale in favor of the Javiers and had
the document notarized in Manila before an
associate of Poblador. Marquez executed another
deed of sale indicating receipt of the purchase price
and sent the deed to the Kern County Registrar in
California for registration.
Inasmuch as Poblador had requested that the
purchase price should not be paid directly to him,
the payment of P3,000,000 was coursed through
Elnor Investment Co., Inc., allegedly Poblador's
personal holding company; Paramount Finance,
allegedly headed by Poblador's brother, and F.C.
Hagedorn, allegedly a stock brokerage with
extensive dealings with Poblador. The payment was
made through the aforementioned six cashier's
checks while the balance of P236,000 was paid in
cash by Javier who did not even ask for a receipt.
The two checks totalling P1,000,000 was delivered
by Poblador to F.C. Hagedorn with specific
instructions to purchase Atlas, SMC and Philex
shares. The four checks for P2,000,000 with Elnor
Investment and Paramount Finance as payees were
delivered to the latter to purchase "bearer" notes.
Meanwhile, in July, 1977, Mellon Bank filed a
complaint docketed as No. 148056 in the Superior
Court of California, County of Kern, against
Melchor Javier, Jane Doe Javier, Honorio Poblador,
Jrn, and Does I through V. In its first amended
complaint to impose constructive trust dated July
14, 1977, 1 Mellon Bank alleged that it had
mistakenly and inadvertently cause the transfer of
the sum of $999,000.00 to Jane Doe Javier; that it
believes that the defendants had withdrawn said
funds; that "the defendants and each of them have
used a portion of said funds to purchase real
property located in Kern County, California"; and
that because of defendants' knowledge of Mellon
Bank's mistake and inadvertence and their use of the
funds to purchase the property, they and "each of
them are involuntary or constructive trustees of the
real property and of any profits therefrom, with a
duty to convey the same to plaintiff forthwith." It
prayed that the defendants and each of them be
declared as holders of the property in trust for the
plaintiff; that defendants be compelled to transfer
legal title and possession of the property to the
plaintiff; that defendants be made to pay the costs of
the suit, and that other reliefs be granted them.
On July 29, 1977, Mellon Bank also filed in the
Court of First Instance of Rizal, Branch X, a
complaint against the Javier spouses, Honorio
Poblador, Jr., Domingo L. Jhocson, Jr., Jose
Marquez, Roberto Gariño, Elnor Investment Co.,
Inc., F.C. Hagedorn & Co., Inc. and Paramount
Finance Corporation. After its amendment, Rafael
Caballero and Tri-Arc Investment & Management
Company, Inc. were also named defendants. 2
The amended and supplemental complaint alleged
the facts set forth above and added that Roberto
Gariño, chief accountant of Prudential Bank, and
who was the reference of Mrs. Ventosa's dollar
remittances to Victoria Javier, immediately
informed the Javiers of the receipt of
US$1,000,000.00; that knowing the financial
circumstances of Mrs. Ventosa and the fact that a
mistake had been committed, the Javiers, with
undue haste, took unlawful advantage of the
14
mistake, withdrew the whole amount and
transferred the same to a "343 dollar account"; that,
aided and abetted by Poblador and Domingo L.
Jhocson, the Javiers "compounded and completed
the conversion" of the funds by withdrawing from
the account dollars or pesos equivalent to US
$975,000; that by force of law, the Javiers had been
constituted trustees of an implied trust for the
benefit of Mellon Bank with a clear duty to return to
said bank the moneys mistakenly paid to them; that,
upon request of Mellon Bank and Manufacturers
Hanover Bank, Prudential Bank informed the
Javiers of the erroneous transmittal of one million
dollars first orally and later by letter-demand; that
conferences between the representatives of the
Javiers, led by Jhocson and Poblador, in the latter's
capacity as legal and financial counsel, and
representatives of Mellon Bank, proved futile as the
Javiers claimed that most of the moneys had been
irretrievably spent; that the Javiers could only return
the amount if the Mellon Bank should agree to
make an absolute quitclaim and waiver of future
rights against them, and that in a scheme to conceal
and dissipate the funds, through the active
participation of Jose Marquez, the Javiers bought
the California property of Poblador.
It further alleged that trust fund moneys totalling
P3,000,000.00 were made payable to Hagedorn
Paramount and Elnor; that Hagedorn on instructions
of Poblador, purchased shares of stock at a stock
exchange for P1,000,000.00 but later, it hastily sold
said shares at a loss of approximately P150,000.00
to the prejudice of the plaintiff; that proceeds of the
sale were deposited by Hagedorn in the name of
Poblador and/or the law office of Poblador,
Nazareno, Azada, Tomacruz and Paredes; that
dividends declared on the shares were delivered by
Hagedorn to Caballero after the complaint had been
filed and thereafter, Caballero deposited the
dividends in his personal account; that after
receiving the P1,000,000.00 trust money,
Paramount issued promissory notes upon maturity
of which Paramount released the amount to
unknown persons; that Elnor also invested
P1,000,000.00 in Paramount for which the latter
also issued promissory notes; that after the filing of
the complaint, counsel for plaintiff requested
Paramount not to release the amount after maturity;
that in evident bad faith, Elnor transferred the non-
negotiable Paramount promissory notes to Tri-Arc.
that when the notes matured, Paramount delivered
the proceeds of P1,000,000.00 to Tri-Arc; that
Poblador knew or should have known that the
attorney's fees he received from the Javiers came
from the trust funds; and that despite formal
demands even after the filing of the complaint, the
defendants refused to return the trust funds which
they continued concealing and dissipating.
It prayed that: (a) the Javiers, Poblador, Elnor,
Jhocson and Gariño be ordered to account for and
pay jointly and severally unto the plaintiff
US$999,000.00 plus increments, additions, fruits
and interests earned by the funds from receipt
thereof until fully paid; (b) the other defendants be
ordered to account for and pay unto the plaintiff
jointly and severally with the Javiers to the extent of
the amounts which each of them may have received
directly or indirectly from the US$999,000.00 plus
increments, additions, fruits and interests; (c)
Marquez be held jointly and severally liable with
Poblador for the amount received by the latter for
the sale of the 160-acre lot in California City; and
(d) defendants be likewise held liable jointly and
severally for attomey's fees and litigation expenses
plus exemplary damages.
In due course, the defendants filed their answers and
hearing of the case ensued. In his testimony, Jose
Marquez stated that Prudential Bank and Trust
Company checks Nos. 2530 and 2531 in the
respective amounts of P100,000 and P900,000
payable to F. C. Hagedorn were delivered to him by
Melchor Javier, Jr. as partial consideration for the
sale of Poblador's property in California. After
receiving the checks, Hagedorn purchased shares of
Atlas Mining, Philex, Marcopper and San Miguel
Corporation for Account No. 3000, which,
according to Fred Hagedorn belonged to the law
office of Poblador. 3
F.C. Hagedorn & Co., Inc. then sold the shares for
P874,490.75 as evidenced by HSBC check No.
339736 for P400,000 and HSBC check No. 339737
for P474,490.75 payable to "cash". Mellon Bank
traced these checks to Account 2825-1 of the
Philippine Veterans Bank in the name of Cipriano
Azada, Poblador's law partner and counsel to the
Javiers. 4
An employee of the Philippine Veterans Bank
thereafter introduced the specimen signature cards
for Account No. 2825-1 thereby confirming Azada's
ownership of the account. Defendants objected to
15
this testimony on the grounds of Azada's absence,
the confidentiality of the bank account, and the best
evidence rule. The court overruled the objection.
Another employee of the Philippine Veterans Bank
then presented the ledger card for Account No.
2825-1, a check deposit slip and a daily report of
returned items. The defendants objected but they
were again overruled by the court.
Mellon Bank then subpoenaed Erlinda Baylosis of
the Philippine Veterans Bank to show that Azada
deposited HSBC checks No. 339736 and 339737
amounting to P874,490.75 in his personal current
account with said bank. It also subpoenaed Pilologo
Red, Jr. of Hongkong & Shanghai Banking
Corporation to prove that said amount was returned
by Azada to Hagedorn.
The testimonies of these witnesses were objected to
by the defense on the grounds of res inter alios
acta, immateriality, irrelevancy and confidentiality.
To resolve the matter, the court ordered the parties
to submit memoranda. The defendants' objections
were also discussed at the hearing on July 13, 1982.
For the first time, Poblador's counsel raised the
matter of "election of remedies." 5
At the July 20, 1982 hearing, the lower court, then
presided by Judge Eficio Acosta, conditionally
allowed the testimonies of Baylosis and Red.
Baylosis afffirmed that Azada deposited checks
Nos. 339736 and 339737 in the total amount of
P874,490.75 in his personal account with the
Philippine Veterans Bank but almost
simultaneously, Azada issued his PVB check for the
same amount in favor of Hagedorn Consequently,
Azada's check initially bounced. For his part, Red
testified that Azada's check for P874,490.75 was
received by the Hongkong & Shanghai Banking
Corporation and credited to the account of
Hagedorn .
The defendants then moved to strike off the
testimonies of Baylosis and Red from the record.
Defendant Paramount Finance Corporation, which
is not a party to the California case, thereafter filed
its memorandum raising the matter of "election of
remedies". It averred that inasmuch as the Mellon
Bank had filed in California an action to impose
constructive trust on the California property and to
recover the same, Mellon Bank can no longer try to
regain the purchase price of the same property
through Civil Case No. 26899. The other defendants
adopted Paramount's stand.
After Mellon Bank filed its reply to the
memorandum of Paramount, on September 10,
1982, Judge Acosta issued a resolution ordering that
the testimonies of Baylosis and Red and the
documents they testified on, which were
conditionally allowed, be stricken from the
records. 6 Judge Acosta explained:
After a judicious evaluation of the
arguments of the parties the Court is
of the view that in cases where
money held in trust was diverted by
the trustee, under the "rule of trust
pursuit" the beneficiary "may elect
whether to accept the trust estate in
its new form or hold the trustee
responsible for it in its original
condition" (Lathrop vs. Hampton, 31
Cal. 17; Zodos vs. Marefalos 48
Idaho 291; Bahle vs. Hasselbrach 64
NW Eq. 334, 51 Sections 508-76 Am
Jur. 2d p. 475), and that "an election
to pursue one remedy waives and
bars pursuit of any inconsistent
remedy"(76 Am Jur. 2d S253). The
instant complaint among others is for
the recovery of the purchase price of
the Kern property as held in trust for
the plaintiff while in the California
case the plaintiff maintains that the
Kern property is held in trust for the
plaintiff, which positions are
inconsistent with each other. Neither
can the plaintiff now abandon his
complaint for the recovery of the
Kern property and pursue his
complaint for the recovery of the
purchase price of said property for
"if he has first sought to follow the
res, the plaintiff cannot thereafter
hold the trustee personally
responsible" and "when once there
has been an election to do one of two
things, you cannot retract it and do
the other thing. The election once
made is finally made." (Fowler vs.
Bowvery Savings Bank 113 N.Y.
450, 21 N.E. 172, 4 LRA 145, 10
Am. S.R. 479. 2 Silv. 280, 23, Abb.
N. Cos. 133065 C. J. p. 980 Note
32).
16
 The fact that the California case has
been stayed pending determination
of the instant case only means that
should this case be dismissed, the
California case can proceed to its
final determination.
Furthermore, when the plaintiff filed
the California case for the transfer of
legal title and possession of the Kern
property to the plaintiff it in effect
ratified the transaction for "by taking
the proceeds or product of a
wrongful transfer of trust property or
funds, the beneficiary ratifies the
transaction" (Board of Commissioner
vs. Strawn [CA6 Ohio] 157 F. 49, 76
Am Jur. 2d Section 253).
Consequently the purchase price of
the California property received by
defendant Poblador from Javier is no
longer the proper subject matter of
litigation and the movement and
disposition of the purchase price is
therefore within the scope of the
absolutely confidential nature of
bank deposits as provided by Sec. 2,
R.A. 1405 as amended by PD No.
1792.
Mellon Bank moved for reconsideration, alleging
that said order prevented the presentation of
evidence on the purchase price of the California
property; that the California case cannot be
considered a waiver of the pursuit of the purchase
price as even if said case was filed fifteen days prior
to the filing of the original complaint in this case,
except for the Javiers, no other defendants raised in
their answers the affirmative defense of the filing of
the California case; that after the amendment of the
complaint, none of the defendants raised the matter
of "election of remedies" in their answers; that
realizing this procedural error, Paramount sought
the amendment of its answer to reflect the "defence"
of "election of remedies"; that, disregarding its
previous orders allowing evidence and testimonies
on Account No. 2825-1, the court made a turnabout
and ruled that the testimonies on said account were
irrelevant and confidential under Republic Act No.
1405; that Philippine law and jurisprudence does
not require the election of remedies for they favor
availment of all remedies; that even United States
jurisprudence frowns upon election of remedies if it
will lead to an inequitable result; that, as held by
this Court in Radiowealth vs. Javier, 7 there can be
no binding election of remedies before the decision
on the merits is had; that until Mellon Bank gets full
recovery of the trust moneys, any contention of
election of remedy is premature, and that, the
purchase price being the subject of litigation,
inquiring into its movement, including its deposit in
banks, is allowed under Republic Act No. 1405.
Defendants filed their respective comments and
oppositions to the motion for reconsideration. In its
reply, the Mellon Bank presented proof to the effect
that in the California case, defendants filed motions
to stake out the cross-complaint of Mellon Bank, for
summary judgment and to stay or dismiss the action
on the ground of inconvenient forum but the first
two motions and the motion to dismiss were denied
"without prejudice to renew upon determination of
the Philippine action." The motion to stay
proceedings was "granted until determination of the
Philippine action." 8
On October 28, 1983, the lower court, through
Judge Acosta, denied the motion for reconsideration
and ordered the continuation of the hearing (Rollo,
p. 182). The plaintiff filed a motion for the
reconsideration of both the September 10, 1982 and
October 28, 1983 orders. After the parties had filed
comments, opposition and reply, the court, through
Judge Celso L. Magsino, denied Mellon Bank's
second motion for reconsideration on the ground
that it was "prescribed by the 1983 Interim Rules of
Court" in an order dated July 9, 1985. 9
The court ruled that the determination of the
relevancy of the testimonies of Baylosis and Red
was "premised directly and principally" on whether
or not Mellon Bank could still recover the purchase
price of the California property notwithstanding the
filing of the case in California to recover title and
possession of the said property. After quoting the
resolution of September 10, 1982, the Court ruled
that it was a "final order or a definitive judgment
with respect to the claim of plaintiff for the
recovery" of the purchase price of the California
property. It stated:
The adjudication in the Order of
September 10, 1982 and the Order of
October 28, 1983, which has the
effect of declaring that plaintiff has
no cause of action against the
17
 defendants for the recovery of the
proceeds of the sale of Kern property
in the amount of Three Million Three
Hundred Fifty Thousand Pesos
(P3,500,000.00 [sic]) for having filed
a complaint for the recovery of the
Kern property in the Superior Court
of California, County of Kern is
a final and definitive disposition of
the claim of the plaintiff to recover in
the instant action the proceeds of sale
of said property against the
defendants. The issue of "election of
remedy" by the plaintiff was
lengthily and thoroughly discussed
and argued by the parties before the
rendition of the resolution of
September 10, 1982, and in the
motion for reconsideration and
oppositions thereto before its
resolution in the Order of October
28, 1983. Such issue is a substantive
one as it refers to the existence of
plaintiffs cause of action to recover
the proceeds of the sale of the Kern
property in this action, and that issue
was presented to the Court as if a
motion to dismiss or a preliminary
hearing of an affirmative defense on
the ground that plaintiff has no cause
of action, and was resolved against
plaintiff in the Order of September
10, 1982, after a full hearing of all
the parties. Said Order of September
10, 1982 has the effect of putting an
end to the controversy between the
parties as to the right of plaintiff to
claim or recover the proceeds of the
sale of the Kern property from the
defendants. It is therefore an
adjudication upon the merits. 10
Hence, Mellon Bank filed the instant petition for
certiorari claiming that the resolution of September
10, 1982 and the orders of October 28, 1983 and
July 9, 1985 are void for being unlawful and
oppressive exercises of legal authority, subversive
of the fair administration of justice, and in excess of
jurisdiction. The petition is founded on its
allegations that: (a) the resolution of September 10,
1982 is interlocutory as it does not dispose of Civil
Case No. 26899 completely: (b) the evidence
stricken from the records is relevant on the basis of
the allegations of the amended and supplemental
complaint, and (c) the doctrine of election of
remedies, which has long been declared obsolete in
the United States, is not applicable in this case.
With the exception of the Javiers, all the
respondents filed their respective comments on the
petition. Having failed to file said comment, the
Javiers' counsel of record, Azada, Tomacruz &
Cacanindin, 11 was required to show cause why
disciplinary action should not be taken against it.
And, having also failed to show cause, it was fined
P300.
In his motion for reconsideration of the resolution
imposing said fine, Cipriano Azada alleged that in
Civil Case No. 26899, the Javiers were indeed
represented by the law firm of Poblador, Azada,
Tomacruz & Cacanindin but he was never the
lawyer of the Javiers' in his personal capacity; that
after the death of Honorio Poblador, Jr., he had
withdrawn from the partnership; that he is the
counsel of the Administratrix of the Estate of
Honorio Poblador, Jr. for which he had filed a
comment, and that should the Court still require him
to file comment for the Javiers despite the lack of
client-lawyer relationship, he would adopt the
comment he had filed for the said Administratrix. 12
In its effort to locate the Javiers so that their side
could be heard, we required the petitioner to furnish
us with the Javiers' address as well as the name and
address of their counsel. 13 In compliance therewith,
counsel for petitioner manifested that the Javiers
had two known addresses in San Juan, Metro
Manila and in Sampaloc, Manila; that since their
conviction in Crim. Case No. CCC-VII 2369-P.C.
of the Pasig Regional Trial Court, the Javiers had
gone into hiding and warrants for their arrest still
remain unserved; 14 that the Javiers' counsel of
record in Civil Case No. 26899 is Atty. Cipriano
Azada; that the same counsel appeared for the
Javiers in Criminal Case No. 39851 of the Pasig
Regional Trial Court which is a tax evasion case
filed by the Republic of the Philippines, and that
during the hearings of the civil and tax evasion
cases against the Javiers, Atty. Cipriano Azada, Jr.
represented them. 15
Inasmuch as copies of the resolution requiring
comment on the petition and the petition itself
addressed to Melchor Javier were returned with the
18
notations "moved" and "deceased", the Court
required that said copies be sent to Mrs. Javier
herself and that petitioner should inform the Court
of the veracity of Javier's death. 16 A copy of the
resolution addressed to Mrs. Javier was returned
also with the notation "deceased." 17
Counsel for petitioner accordingly informed the
Court that he learned that the Javiers had fled the
country and that he had no way of verifying whether
Melchor Javier had indeed died. 18
In view of these circumstances, the Javiers'
comment on the petition shall be dispensed with as
the Court deems the pleadings filed by the parties
sufficient bases for resolving this case. The Javiers
shall be served copies of this decision in accordance
with Section 6, Rule 13 of the Rules of Court by
delivering said copies to the clerk of court of the
lower court, with proof of failure of both personal
service and service by mail.
We hold that the lower court gravely abused its
discretion in ruling that the resolution of September
10, 1982 is a "final and definitive disposition" of
petitioner's claim for the purchase price of the Kern
property. The resolution is interlocutory and means
no more than what it states in its dispositive
portion-the testimonies of Baylosis and Red and the
documents they testified on, should be stricken from
the record.
That the resolution discusses the common-law
principle of election of remedies, a subject matter
which shall be dealt with later, is beside the point. It
is interlocutory because the issue resolved therein is
merely the admissibility of the plaintiff's
evidence. 19 As such, it does not dispose of the case
completely but leaves something more to be done
upon its merits. 20 There are things left undone in
Civil Case No. 26899 after the issuance of the
September 10, 1982 resolution not only because of
its explicit dispositive portion but also due to the
fact that even until now, the case is still pending and
being heard. 21
Furthermore, the lower court's holding in its July 9,
1985 order that petitioner's second motion for
reconsideration is proscribed by the 1983 Interim
Rules of Court which disallows such motion on
a final order or judgment, should be rectified. As
explained above, the resolution of September 10,
1982 is not a final one. It also contains conclusions
on procedural matters which, if left unchecked,
would prejudice petitioner's substantive rights.
In effect, therefore, the July 9, 1985 order is a
shortcut disposition of Civil Case No. 26899 in total
disregard of petitioner's right to a thorough
ventilation of its claims. By putting a premium on
procedural technicalities over the resolution of the
merits of the case, the lower court rode roughshod
over the basic judicial tenet that litigations should,
as much as possible, be decided on their merits and
not on technicalities. 22 The trial court's patent grave
abuse of discretion therefore forces us to exercise
supervisory authority to correct its errors
notwithstanding the fact that ordinarily, this Court
would not entertain a petition for certiorari
questioning the legality and validity of an
interlocutory order. 23
Respondents' principal objection to the testimonies
of Baylosis and Red is their alleged irrelevance to
the issues raised in Civil Case No. 26899. The
fallacy of this objection comes to fore upon a
scrutiny of the complaint. Petitioner's theory therein
is that after the Javiers had maliciously appropriated
unto themselves $999,000, the other private
respondents conspired and participated in the
concealment and dissipation of said amount. The
testimonies of Baylosis and Red are therefore
needed to establish the scheme to hide the
erroneously sent amount.
Private respondents' protestations that to allow the
questioned testimonies to remain on record would
be in violation of the provisions of Republic Act
No. 1405 on the secrecy of bank deposits, is
unfounded. Section 2 of said law allows the
disclosure of bank deposits in cases where the
money deposited is the subject matter of the
litigation. 24Inasmuch as Civil Case No. 26899 is
aimed at recovering the amount converted by the
Javiers for their own benefit, necessarily, an inquiry
into the whereabouts of the illegally acquired
amount extends to whatever is concealed by being
held or recorded in the name of persons other than
the one responsible for the illegal acquisition. 25
We view respondents' reliance on the procedural
principle of election of remedies as part of their
ploy to terminate Civil Case No. 26899
prematurely. With the exception of the Javiers,
respondents failed to raise it as a defense in their
answers and therefore, by virtue of Section 2, Rule
9 of the Rules of Court, such defense is deemed
waived. 26Notwithstanding its lengthy and thorough
discussion during the hearing and in pleadings
19
subsequent to the answers, the issue of election of
remedies has not, contrary to the lower court's
assertion, been elevated to a "substantive one."
Having been waived as a defense, it cannot be
treated as if it has been raised in a motion to dismiss
based on the nonexistence of a cause of action.
Moreover, granting that the defense was properly
raised, it is inapplicable in this case. In its broad
sense, election of remedies refers to the choice by a
party to an action of one of two or more coexisting
remedial rights, where several such rights arise out
of the same facts, but the term has been generally
limited to a choice by a party between inconsistent
remedial rights, the assertion of one being
necessarily repugnant to, or a repudiation of, the
other. In its technical and more restricted sense,
election of remedies is the adoption of one of two or
more coexisting remedies, with the effect of
precluding a resort to the others. 27
As a technical rule of procedure, the purpose of the
doctrine of election of remedies is not to prevent
recourse to any remedy, but to prevent double
redress for a single wrong. 28 It is regarded as an
application of the law of estoppel, upon the theory
that a party cannot, in the assertion of his right
occupy inconsistent positions which form the basis
of his respective remedies. However, when a certain
state of facts under the law entitles a party to
alternative remedies, both founded upon the
Identical state of facts, these remedies are not
considered inconsistent remedies. In such case, the
invocation of one remedy is not an election which
will bar the other, unless the suit upon the remedy
first invoked shall reach the stage of final
adjudication or unless by the invocation of the
remedy first sought to be enforced, the plaintiff
shall have gained an advantage thereby or caused
detriment or change of situation to the other. 29 It
must be pointed out that ordinarily, election of
remedies is not made until the judicial proceedings
has gone to judgment on the merits. 30
Consonant with these rulings, this Court, through
Justice J.B.L. Reyes, opined that while some
American authorities hold that the mere initiation of
proceedings constitutes a binding choice of
remedies that precludes pursuit of alternative
courses, the better rule is that no binding election
occurs before a decision on the merits is had or a
detriment to the other party supervenes. 31 This is
because the principle of election of remedies is
discordant with the modern procedural concepts
embodied in the Code of Civil Procedure which
Permits a party to seek inconsistent remedies in his
claim for relief without being required to elect
between them at the pleading stage of the
litigation. 32
It should be noted that the remedies pursued in the
California case and in Civil Case No. 26899 are not
exactly repugnant or inconsistent with each other. If
ever, they are merely alternative in view of the
inclusion of parties in the latter case who are not
named defendants in the former. The causes of
action, although they all stem from the erroneous
transmittal of dollars, are distinct as shown by the
complaints lengthily set out above. The bar of an
election of remedies does not apply to the assertion
of distinct causes of action against different persons
arising out of independent transactions. 33
As correctly pointed out by the petitioner, the
doctrine of election of remedies is not favored in the
United States for being harsh. 34 Its application with
regard to two cases filed in two different
jurisdictions is also circumscribed by jurisprudence
on abatement of suits. Thus, in Brooks Erection Co.
v. William R. Montgomery & Associates, Inc., 35 it is
held:
The pendency of an action in the
courts of one state or country is not a
bar to the institution of another
action between the same parties and
for the same cause of action in a
court of another state or country, nor
is it the duty of the court in which the
latter action is brought to stay the
same pending a determination of the
earlier action, even though the court
in which the earlier action is brought
has jurisdiction sufficient to dispose
of the entire controversy.
Nevertheless, sometimes stated as a
matter of comity not of right, it is
usual for the court in which the later
action is brought to stay proceedings
under such circumstances until the
earlier action is determined.
However, in view of the fact that the California
court wherein the case for recovery of the Kern
property was first filed against the Javiers had
stayed proceedings therein until after the
termination of Civil Case No. 26899, the court
20
below can do no less than expedite the disposition
of said case.
We cannot dispose of this case without condemning
in the strongest terms possible the acts of chicanery
so apparent from the records. The respective
liabilities of the respondents are still being
determined by the court below. We must warn,
however, against the use of technicalities and
obstructive tactics to delay a just settlement of this
case. The taking advantage of the petitioner's
mistake to gain sudden and undeserved wealth is
marked by circumstances so brazen and shocking
that any further delay will reflect poorly on the kind
of justice our courts dispense. The possible
involvement of lawyers in this sorry scheme stamps
a black mark on the legal profession. The Integrated
Bar of the Philippines (IBP) must be made aware of
the ostensible participation, if not instigation, in the
spiriting away of the missing funds. The IBP must
take the proper action at the appropriate time
against all lawyers involved in any misdeeds arising
from this case.
WHEREFORE, the resolution of September 10,
1982 and the orders of October 28, 1982 and July 9,
1985 are hereby annulled. The lower court is
ordered to proceed with dispatch in the disposition
of Civil case No. 26899, considering that thirteen
(13) years have gone by since the original erroneous
remittance.
Service of this decision on the Javier spouses shall
be in accordance with Section 6, Rule 13 of the
Rules of Court. A copy of this decision shall be
served on the Integrated Bar of the Philippines.
The decision is immediately executory. Costs
against private respondents.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18343 September 30, 1965
PHILIPPINE NATIONAL BANK and
EDUARDO Z. ROMUALDEZ, in his capacity as
President of the Philippine National
Bank, plaintiffs-appellants,
vs.
EMILIO A. GANCAYCO and FLORENTINO
FLOR, Special Prosecutors of the Dept. of
Justice, defendants-appellees.
Ramon B. de los Reyes and Zoilo P. Perlas for
plaintiffs-appellants.
Villamor & Gancayco for defendants-appellees.
REGALA, J.:
The principal question presented in this case is
whether a bank can be compelled to disclose the
records of accounts of a depositor who is under
investigation for unexplained wealth.
This question arose when defendants Emilio A.
Gancayco and Florentino Flor, as special
prosecutors of the Department of Justice, required
the plaintiff Philippine National Bank to produce at
a hearing to be held at 10 a.m. on February 20, 1961
the records of the bank deposits of Ernesto T.
Jimenez, former administrator of the Agricultural
Credit and Cooperative Administration, who was
then under investigation for unexplained wealth. In
declining to reveal its records, the plaintiff bank
invoked Republic Act No. 1405 which provides:
SEC. 2. All deposits of whatever nature with
banks or banking institutions in the
Philippines including investments in bonds
issued by the Government of the
Philippines, its political subdivisions and its
instrumentalities, are hereby considered as
of 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.
The plaintiff bank also called attention to the penal
provision of the law which reads:
SEC. 5. Any violation of this law will
subject the offender upon conviction, to an
imprisonment of not more than five years or
a fine of not more than twenty thousand
pesos or both, in the discretion of the court.
On the other hand, the defendants cited the Anti-
Graft and Corrupt Practices Act (Republic Act No.
3019) in support of their claim of authority and
demanded anew that plaintiff Eduardo Z.
21
Romualdez, as bank president, produce the records
or he would be prosecuted for contempt. The law
invoked by the defendant states:
SEC. 8. Dismissal due to unexplained
wealth. — If in accordance with the
provisions of Republic Act Numbered One
thousand three hundred seventy-nine, a
public official has been found to have
acquired during his incumbency, whether in
his name or in the name of other persons, an
amount of property and/or money manifestly
out of proportion to his salary and to his
other lawful income, that fact shall be a
ground for dismissal or removal. Properties
in the name of the spouse and unmarried
children of such public official may be taken
into consideration, when their acquisition
through legitimate means cannot be
satisfactorily shown. Bank deposits shall be
taken into consideration in the enforcement
of this section, notwithstanding any
provision of law to the contrary.
Because of the threat of prosecution, plaintiffs filed
an action for declaratory judgment in the Manila
Court of First Instance. After trial, during which
Senator Arturo M. Tolentino, author of the Anti-
Graft and Corrupt Practices Act testified, the court
rendered judgment, sustaining the power of the
defendants to compel the disclosure of bank
accounts of ACCFA Administrator Jimenez. The
court said that, by enacting section 8 of, the Anti-
Graft and Corrupt Practices Act, Congress clearly
intended to provide an additional ground for the
examination of bank deposits. Without such
provision, the court added prosecutors would be
hampered if not altogether frustrated in the
prosecution of those charged with having acquired
unexplained wealth while in public
office.1awphîl.nèt
From that judgment, plaintiffs appealed to this
Court. In brief, plaintiffs' position is that section 8
of the Anti-Graft Law "simply means that such bank
deposits may be included or added to the assets of
the Government official or employee for the
purpose of computing his unexplained wealth if and
when the same are discovered or revealed in the
manner authorized by Section 2 of Republic Act
1405, which are (1) Upon written permission of the
depositor; (2) In cases of impeachment; (3) Upon
order of a competent court in cases of bribery or
dereliction of duty of public officials; and (4) In
cases where the money deposited or invested is the
subject matter of the litigation."
In support of their position, plaintiffs contend, first,
that the Anti-Graft Law (which took effect on
August 17, 1960) is a general law which cannot be
deemed to have impliedly repealed section 2 of
Republic Act No. 1405 (which took effect on Sept.
9, 1955), because of the rule that repeals by
implication are not favored. Second, they argue that
to construe section 8 of the Anti-Graft Law as
allowing inquiry into bank deposits would be to
negate the policy expressed in section 1 of Republic
Act No. 1405 which is "to give encouragement to
the people to deposit their money in banking
institutions and to discourage private hoarding so
that the same may be utilized by banks in authorized
loans to assist in the economic development of the
country."
Contrary to their claim that their position effects a
reconciliation of the provisions of the two laws,
plaintiffs are actually making the provisions of
Republic Act No. 1405 prevail over those of the
Anti-Graft Law, because even without the latter law
the balance standing to the depositor's credit can be
considered provided its disclosure is made in any of
the cases provided in Republic Act No. 1405.
The truth is that these laws are so repugnant to each
other than no reconciliation is possible. Thus, while
Republic Act No. 1405 provides that bank deposits
are "absolutely confidential ... and [therefore] may
not be examined, inquired or looked into," except in
those cases enumerated therein, the Anti-Graft Law
directs in mandatory terms that bank deposits "shall
be taken into consideration in the enforcement of
this section, notwithstanding any provision of law to
the contrary." The only conclusion possible is that
section 8 of the Anti-Graft Law is intended to
amend section 2 of Republic Act No. 1405 by
providing additional exception to the rule against
the disclosure of bank deposits.
Indeed, it is said that if the new law is inconsistent
with or repugnant to the old law, the presumption
against the intent to repeal by implication is
overthrown because the inconsistency or
repugnancy reveals an intent to repeal the existing
law. And whether a statute, either in its entirety or
in part, has been repealed by implication is
ultimately a matter of legislative intent. (Crawford,
The Construction of Statutes, Secs. 309-310. Cf.
22
Iloilo Palay and Corn Planters Ass'n v. Feliciano,
G.R. No. L-24022, March 3, 1965).
The recent case of People v. De Venecia, G.R. No.
L-20808, July 31, 1965 invites comparison with this
case. There it was held:
The result is that although sec. 54 [Rev.
Election Code] prohibits a classified civil
service employee from aiding any candidate,
sec. 29 [Civil Service Act of 1959] allows
such classified employee to express his
views on current political problems or
issues, or to mention the name of his
candidate for public office, even if such
expression of views or mention of names
may result in aiding one particular
candidate. In other words, the last paragraph
of sec. 29 is an exception to sec. 54; at most,
an amendment to sec. 54.
With regard to the claim that disclosure would be
contrary to the policy making bank deposits
confidential, it is enough to point out that while
section 2 of Republic Act 1405 declares bank
deposits to be "absolutely confidential," it
nevertheless allows such disclosure in the following
instances: (1) Upon written permission of the
depositor; (2) In cases of impeachment; (3) Upon
order of a competent court in cases of bribery or
dereliction of duty of public officials; (4) In cases
where the money deposited is the subject matter of
the litigation. Cases of unexplained wealth are
similar to cases of bribery or dereliction of duty and
no reason is seen why these two classes of cases
cannot be excepted from the rule making bank
deposits confidential. The policy as to one cannot be
different from the policy as to the other. This policy
express the motion that a public office is a public
trust and any person who enters upon its discharge
does so with the full knowledge that his life, so far
as relevant to his duty, is open to public scrutiny.
WHEREFORE, the decision appealed from is
affirmed, without pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-56429 May 28, 1988
BANCO FILIPINO SAVINGS AND
MORTGAGE BANK, petitioner,
vs.
HON. FIDEL PURISIMA, etc., and HON.
VICENTE ERICTA and JOSE DEL FIERO,
etc., respondents.
NARVASA, J.:
The verdict in this special civil action of certiorari
turns upon the question of whether or not the "Law
on Secrecy of Bank Deposits" 1 precludes
production by subpoena duces tecum of bank
records of transactions by or in the names of the
wife, children and friends of a special agent of the
Bureau of Customs, accused before
the Tanodbayan of having allegedly acquired
property manifestly out of proportion to his salary
and other lawful income, in violation of the "Anti-
Graft and Corrupt Practices Act." 2
The Customs special agent involved is Manuel
Caturla, and the accusation against him was filed by
the Bureau of Internal Revenue. 3 In the course of
the preliminary investigation thereof,
the Tanodbayan issued a subpoena duces tecum to
the Banco Filipino Savings & Mortgage Bank,
commanding its representative to appear at a
specified time at the Office of the Tanodbayan and
furnish the latter with duly certified copies of the
records in all its branches and extension offices, of
the loans, savings and time deposits and other
banking transactions, dating back to 1969,
appearing in the names of Caturla, his wife, Purita
Caturla, their children — Manuel, Jr., Marilyn and
Michael — and/or Pedro Escuyos. 4
Caturla moved to quash the subpoena duces
tecum 5 arguing that compliance therewith would
result in a violation of Sections 2 and 3 of the Law
on Secrecy of Bank Deposits.
Then Tanodbayan Vicente Ericta not only denied
the motion for lack of merit, and directed
compliance with the subpoena, 6 but also expanded
its scope through a second subpoena duces
tecum,7 this time requiring production by Banco
Filipino of the bank records in all its branches and
extension offices, of Siargao Agro-Industrial
Corporation, Pedro Escuyos or his wife, Emeterio
Escuyos, Purita Caturla, Lucia Escuyos or her
husband, Romeo Escuyos, Emerson Escuyos,
Fraterno Caturla, Amparo Montilla, Cesar Caturla,
Manuel Caturla or his children, Manuel Jr., Marilyn
and Michael, LTD Pub/Restaurant, and Jose Buo or
his wife, Evelyn. Two other subpoena of
23
substantially the same tenor as the second were
released by the Tanodbayan's Office. 8 The last
required obedience under sanction of contempt.
The Banco Filipino Savings & Mortgage Bank,
hereafter referred to simply as BF Bank, took over
from Caturla in the effort to nullify the subpoenae.
It filed a complaint for declaratory relief with the
Court of First Instance of Manila, 9which was
assigned by raffle to the sala of respondent Judge
Fidel Purisima. BF Bank prayed for a judicial
declaration as to whether its compliance with the
subpoenae duces tecum would constitute an
infringement of the provisions of Sections 2 and 3
of R.A. No. 1405 in relation to Section 8 of R.A.
No. 3019. It also asked that pending final resolution
of the question, the Tanodbayan be provisionally
restrained from exacting compliance with
the subpoenae.
Respondent Judge Purisima issued an Order
denying for lack of merit the application by BF
Bank for a preliminary injunction and/or restraining
order. 10
This Order is now impugned in the instant certiorari
action instituted by BF Bank before this Court, as
having been issued with grave abuse of discretion,
amounting to lack of jurisdiction. It is the bank's
theory that the order declining to grant that remedy
operated as a premature adjudication of the very
issue raised in the declaratory suit, and as judicial
sufferance of a transgression of the bank deposits
statute, and so constituted grievous error correctible
by certiorari. It further argues that subpoenae in
question are in the nature of "fishing expeditions" or
"general warrants" since they authorize
indiscriminate inquiry into bank records; that,
assuming that such an inquiry is allowed as regards
public officials under investigation for a violation of
the Anti-Graft & Corrupt Practices Act, it is
constitutionally impermissible with respect to
private individuals or public officials not under
investigation on a charge of violating said Act; and
that while prosecution of offenses should not, as a
rule, be enjoined, there are recognized exceptions to
the principle one of which is here present, i.e. to
avoid multiplicity of suits, similar subpoenae having
been directed to other banks as well.
It is difficult to see how the refusal by the Court a
quo to issue the temporary restraining order applied
for by the petitioner — in other words, its
disagreement with the petitioner's advocated theory
— could be deemed so whimsical, capricious,
despotic or oppressive an act as to constitute grave
abuse of discretion. Obviously, the writ of certiorari
cannot issue simply on a showing of disagreement
between a party and the court upon some material
factual or legal issue. There must be a reasonable
demonstration that a party's contentions are so
clearly correct, or the court's ruling thereon so
clearly wrong, to justify the issuance of a writ
of certiorari. No such demonstration exists in this
case. Indeed, for aught that the record shows, the
Court's refusal to grant the application for a
restraining order was, in the premises, licit and
proper, or its validity, fairly debatable, at the very
least. Be this as it may, on the merits the petitioner
cannot succeed. Its declared theory is untenable.
The provisions of R.A. No. 1405 subject of BF's
declaratory action, read as follows:
Sec. 2. All deposits of whatever
nature with banks or banking
institutions in the Philippines
including investments in bonds
issued by the Government of the
Philippines, its political subdivisions
and its instrumentalities, are hereby
considered as of 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 litigation.
Sec. 3. It shall be unlawful for any
official or employee of a banking
institution to disclose to any person
other than those mentioned in
Section two hereof any information
concerning said deposits
The other provision involved in the declaratory
action is Section 8 of R.A. No. 3019. It reads:
Sec. 8. Dismissal due to unexplained
wealth. — If in accordance with the
provisions of Republic Act
Numbered One thousand three
hundred seventy-nine, a public
24
 official has been found to have
acquired during his incumbency,
whether in his name or in the name
of other persons, an amount of
property and/or money manifestly
out of proportion to this salary and to
his other lawful income, that fact
shall be a ground for dismissal or
removal. Properties in the name of
the spouse and unmarried children of
such public official may be taken
into consideration, when their
acquisition through legitimate means
cannot be satisfactorily shown. Bank
deposits shall be taken into
consideration in the enforcement of
this section, notwithstanding any
prohibition of law to the contrary.
In our decision in Philippine National Bank v.
Gancayco, rendered on September 30, 1966, 11 we
upheld the judgment of the Trial Court "sustaining
the power of the defendants (special prosecutors of
the Department of Justice) to compel the disclosure
(by PNB) of bank accounts of ACCFA
Administrator Jimenez (then under investigation for
unexplained wealth), .. (it being ruled) that, by
enacting section 8 of the Anti-Graft and Corrupt
Practices Act, Congress clearly intended to provide
an additional ground for the examination of bank
deposits .. (for) without such provision, the ..
prosecutors would be hampered if not altogether
frustrated in the prosection of those charged with
having acquired unexplained wealth while in public
office. 12 We ourselves declared in said case
that 13—
.. while Republic Act No. 1405
provides that bank deposits are
"absolutely confidential .. and
[therefore] may not be examined,
inquired or looked into," except in
those cases enumerated therein, the
Anti-Graft Law directs in mandatory
terms that bank deposits "shall be
taken into consideration in the
enforcement of this
section, notwithstanding any
provision of law to the contrary."
The only conclusion possible is that
section 8 of the Anti-Graft Law is
intended to amend section 2 of
Republic Act No. 1405 by providing
an additional exception to the rule
against the disclosure of bank
desposits.
xxx xxx xxx
... Cases of unexplained wealth 14 are
similar to cases of bribery or
dereliction of duty 15 and no reason is
seen why these two classes of cases
cannot be excepted from the rule
making bank deposits confidential.
The policy as to one cannot be
different from the policy as to the
other. This policy expresses the
notion that a public office is a public
trust and any person who enters upon
its discharge does so with the full
knowledge that his life, so far as
relevant to his duty, is open to public
scrutiny.
The inquiry into illegally acquired property — or
property NOT "legitimately acquired" — extends to
cases where such property is concealed by being
held by or recorded in the name of other persons.
This proposition is made clear by R.A. No. 3019
which quite categorically states that the term,
"legitimately acquired property of a public officer
or employee shall not include .. property unlawfully
acquired by the respondent, but its ownership is
concealed by its being recorded in the name of, or
held by, respondent's spouse, ascendants,
descendants, relatives or any other persons." 16
To sustain the petitioner's theory, and restrict the
inquiry only to property held by or in the name of
the government official or employee, or his spouse
and unmarried children is unwarranted in the light
of the provisions of the statutes in question, and
would make available to persons in government
who illegally acquire property an easy and fool-
proof means of evading investigation and
prosecution; all they would have to do would be to
simply place the property in the possession or name
of persons other than their spouse and unmarried
children. This is an absurdity that we will not
ascribe to the lawmakers.
The power of the Tanodbayan to issue
subpoenae ad testificandcum and subpoenae duces
tecum at the time in question is not disputed, and at
any rate does not admit of doubt. 17 The subpoenae
25
issued by him, will be sustained against the
petitioner's impugnation.
WHEREFORE, the petition for certiorari is
DISMISSED, with costs against petitioner.
Cruz, Gancayco, Griño-Aquino and Medialdea, 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
camerarelative 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
26
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
27
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
camerainspection 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
28
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.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 174629 February 14, 2008
REPUBLIC OF THE PHILIPPINES,
Represented by THE ANTI-MONEY
LAUNDERING COUNCIL (AMLC),petitioner,
vs.
HON. ANTONIO M. EUGENIO, JR., AS
PRESIDING JUDGE OF RTC, MANILA,
BRANCH 34, PANTALEON ALVAREZ and
LILIA CHENG, respondents.
DECISION
TINGA, J.:
The present petition for certiorari and prohibition
under Rule 65 assails the orders and resolutions
issued by two different courts in two different cases.
The courts and cases in question are the Regional
Trial Court of Manila, Branch 24, which heard SP
29
Case No. 06-1142001 and the Court of Appeals,
Tenth Division, which heared CA-G.R. SP No.
95198.2 Both cases arose as part of the aftermath of
the ruling of this Court in Agan v.
PIATCO3 nullifying the concession agreement
awarded to the Philippine International Airport
Terminal Corporation (PIATCO) over the Ninoy
Aquino International Airport – International
Passenger Terminal 3 (NAIA 3) Project.
I.
Following the promulgation of Agan, a series of
investigations concerning the award of the NAIA 3
contracts to PIATCO were undertaken by the
Ombudsman and the Compliance and Investigation
Staff (CIS) of petitioner Anti-Money Laundering
Council (AMLC). On 24 May 2005, the Office of
the Solicitor General (OSG) wrote the AMLC
requesting the latter’s assistance "in obtaining more
evidence to completely reveal the financial trail of
corruption surrounding the [NAIA 3] Project," and
also noting that petitioner Republic of the
Philippines was presently defending itself in two
international arbitration cases filed in relation to the
NAIA 3 Project.4 The CIS conducted an intelligence
database search on the financial transactions of
certain individuals involved in the award, including
respondent Pantaleon Alvarez (Alvarez) who had
been the Chairman of the PBAC Technical
Committee, NAIA-IPT3 Project.5 By this time,
Alvarez had already been charged by the
Ombudsman with violation of Section 3(j) of R.A.
No. 3019.6 The search revealed that Alvarez
maintained eight (8) bank accounts with six (6)
different banks.7
On 27 June 2005, the AMLC issued Resolution No.
75, Series of 2005,8 whereby the Council resolved
to authorize the Executive Director of the AMLC
"to sign and verify an application to inquire into
and/or examine the [deposits] or investments of
Pantaleon Alvarez, Wilfredo Trinidad, Alfredo
Liongson, and Cheng Yong, and their related web
of accounts wherever these may be found, as
defined under Rule 10.4 of the Revised
Implementing Rules and Regulations;" and to
authorize the AMLC Secretariat "to conduct an
inquiry into subject accounts once the Regional
Trial Court grants the application to inquire into
and/or examine the bank accounts" of those four
individuals.9 The resolution enumerated the
particular bank accounts of Alvarez, Wilfredo
Trinidad (Trinidad), Alfredo Liongson (Liongson)
and Cheng Yong which were to be the subject of the
inquiry.10 The rationale for the said resolution was
founded on the cited findings of the CIS that
amounts were transferred from a Hong Kong bank
account owned by Jetstream Pacific Ltd. Account to
bank accounts in the Philippines maintained by
Liongson and Cheng Yong.11 The Resolution also
noted that "[b]y awarding the contract to PIATCO
despite its lack of financial capacity, Pantaleon
Alvarez caused undue injury to the government by
giving PIATCO unwarranted benefits, advantage, or
preference in the discharge of his official
administrative functions through manifest partiality,
evident bad faith, or gross inexcusable negligence,
in violation of Section 3(e) of Republic Act No.
3019."12
Under the authority granted by the Resolution, the
AMLC filed an application to inquire into or
examine the deposits or investments of Alvarez,
Trinidad, Liongson and Cheng Yong before the
RTC of Makati, Branch 138, presided by Judge
(now Court of Appeals Justice) Sixto Marella, Jr.
The application was docketed as AMLC No. 05-
005.13 The Makati RTC heard the testimony of the
Deputy Director of the AMLC, Richard David C.
Funk II, and received the documentary evidence of
the AMLC.14 Thereafter, on 4 July 2005, the Makati
RTC rendered an Order (Makati RTC bank inquiry
order) granting the AMLC the authority to inquire
and examine the subject bank accounts of Alvarez,
Trinidad, Liongson and Cheng Yong, the trial court
being satisfied that there existed "[p]robable cause
[to] believe that the deposits in various bank
accounts, details of which appear in paragraph 1 of
the Application, are related to the offense of
violation of Anti-Graft and Corrupt Practices Act
now the subject of criminal prosecution before the
Sandiganbayan as attested to by the Informations,
Exhibits C, D, E, F, and G."15 Pursuant to the
Makati RTC bank inquiry order, the CIS proceeded
to inquire and examine the deposits, investments
and related web accounts of the four.16
Meanwhile, the Special Prosecutor of the Office of
the Ombudsman, Dennis Villa-Ignacio, wrote a
letter dated 2 November 2005, requesting the
AMLC to investigate the accounts of Alvarez,
PIATCO, and several other entities involved in the
nullified contract. The letter adverted to probable
cause to believe that the bank accounts "were used
30
in the commission of unlawful activities that were
committed" in relation to the criminal cases then
pending before the Sandiganbayan.17 Attached to
the letter was a memorandum "on why the
investigation of the [accounts] is necessary in the
prosecution of the above criminal cases before the
Sandiganbayan."18
In response to the letter of the Special Prosecutor,
the AMLC promulgated on 9 December 2005
Resolution No. 121 Series of 2005,19 which
authorized the executive director of the AMLC to
inquire into and examine the accounts named in the
letter, including one maintained by Alvarez with
DBS Bank and two other accounts in the name of
Cheng Yong with Metrobank. The Resolution
characterized the memorandum attached to the
Special Prosecutor’s letter as "extensively
justif[ying] the existence of probable cause that the
bank accounts of the persons and entities mentioned
in the letter are related to the unlawful activity of
violation of Sections 3(g) and 3(e) of Rep. Act No.
3019, as amended."20
Following the December 2005 AMLC Resolution,
the Republic, through the AMLC, filed an
application21 before the Manila RTC to inquire into
and/or examine thirteen (13) accounts and two (2)
related web of accounts alleged as having been used
to facilitate corruption in the NAIA 3 Project.
Among said accounts were the DBS Bank account
of Alvarez and the Metrobank accounts of Cheng
Yong. The case was raffled to Manila RTC, Branch
24, presided by respondent Judge Antonio Eugenio,
Jr., and docketed as SP Case No. 06-114200.
On 12 January 2006, the Manila RTC issued an
Order (Manila RTC bank inquiry order) granting
the Ex ParteApplication expressing therein "[that]
the allegations in said application to be impressed
with merit, and in conformity with Section 11 of
R.A. No. 9160, as amended, otherwise known as the
Anti-Money Laundering Act (AMLA) of 2001 and
Rules 11.1 and 11.2 of the Revised Implementing
Rules and Regulations."22 Authority was thus
granted to the AMLC to inquire into the bank
accounts listed therein.
On 25 January 2006, Alvarez, through counsel,
entered his appearance23 before the Manila RTC in
SP Case No. 06-114200 and filed an Urgent Motion
to Stay Enforcement of Order of January 12,
2006.24 Alvarez alleged that he fortuitously learned
of the bank inquiry order, which was issued
following an ex parte application, and he argued
that nothing in R.A. No. 9160 authorized the
AMLC to seek the authority to inquire into bank
accounts ex parte.25 The day after Alvarez filed his
motion, 26 January 2006, the Manila RTC issued an
Order26 staying the enforcement of its bank inquiry
order and giving the Republic five (5) days to
respond to Alvarez’s motion.
The Republic filed an Omnibus Motion for
Reconsideration27 of the 26 January 2006 Manila
RTC Order and likewise sought to strike out
Alvarez’s motion that led to the issuance of said
order. For his part, Alvarez filed a Reply and
Motion to Dismiss28 the application for bank
inquiry order. On 2 May 2006, the Manila RTC
issued an Omnibus Order29 granting the Republic’s
Motion for Reconsideration, denying Alvarez’s
motion to dismiss and reinstating "in full force and
effect" the Order dated 12 January 2006. In the
omnibus order, the Manila RTC reiterated that the
material allegations in the application for bank
inquiry order filed by the Republic stood as "the
probable cause for the investigation and
examination of the bank accounts and investments
of the respondents."30
Alvarez filed on 10 May 2006 an Urgent
Motion31 expressing his apprehension that the
AMLC would immediately enforce the omnibus
order and would thereby render the motion for
reconsideration he intended to file as moot and
academic; thus he sought that the Republic be
refrained from enforcing the omnibus order in the
meantime. Acting on this motion, the Manila RTC,
on 11 May 2006, issued an Order32 requiring the
OSG to file a comment/opposition and reminding
the parties that judgments and orders become final
and executory upon the expiration of fifteen (15)
days from receipt thereof, as it is the period within
which a motion for reconsideration could be filed.
Alvarez filed his Motion for Reconsideration33 of
the omnibus order on 15 May 2006, but the motion
was denied by the Manila RTC in an Order34 dated
5 July 2006.
On 11 July 2006, Alvarez filed an Urgent Motion
and Manifestation35 wherein he manifested having
received reliable information that the AMLC was
about to implement the Manila RTC bank inquiry
order even though he was intending to appeal from
it. On the premise that only a final and executory
judgment or order could be executed or
31
implemented, Alvarez sought that the AMLC be
immediately ordered to refrain from enforcing the
Manila RTC bank inquiry order.
On 12 July 2006, the Manila RTC, acting on
Alvarez’s latest motion, issued an Order36 directing
the AMLC "to refrain from enforcing the order
dated January 12, 2006 until the expiration of the
period to appeal, without any appeal having been
filed." On the same day, Alvarez filed a Notice of
Appeal37 with the Manila RTC.
On 24 July 2006, Alvarez filed an Urgent Ex
Parte Motion for Clarification.38 Therein, he alleged
having learned that the AMLC had began to inquire
into the bank accounts of the other persons
mentioned in the application for bank inquiry order
filed by the Republic.39 Considering that the Manila
RTC bank inquiry order was issued ex parte,
without notice to those other persons, Alvarez
prayed that the AMLC be ordered to refrain from
inquiring into any of the other bank deposits and
alleged web of accounts enumerated in AMLC’s
application with the RTC; and that the AMLC be
directed to refrain from using, disclosing or
publishing in any proceeding or venue any
information or document obtained in violation of
the 11 May 2006 RTC Order.40
On 25 July 2006, or one day after Alvarez filed his
motion, the Manila RTC issued an Order41 wherein
it clarified that "the Ex Parte Order of this Court
dated January 12, 2006 can not be implemented
against the deposits or accounts of any of the
persons enumerated in the AMLC Application until
the appeal of movant Alvarez is finally resolved,
otherwise, the appeal would be rendered moot and
academic or even nugatory."42 In addition, the
AMLC was ordered "not to disclose or publish any
information or document found or obtained in
[v]iolation of the May 11, 2006 Order of this
Court."43 The Manila RTC reasoned that the other
persons mentioned in AMLC’s application were not
served with the court’s 12 January 2006 Order. This
25 July 2006 Manila RTC Order is the first of the
four rulings being assailed through this petition.
In response, the Republic filed an Urgent Omnibus
Motion for Reconsideration44 dated 27 July 2006,
urging that it be allowed to immediately enforce the
bank inquiry order against Alvarez and that
Alvarez’s notice of appeal be expunged from the
records since appeal from an order of inquiry is
disallowed under the Anti money Laundering Act
(AMLA).
Meanwhile, respondent Lilia Cheng filed with the
Court of Appeals a Petition for Certiorari,
Prohibition and Mandamus with Application for
TRO and/or Writ of Preliminary Injunction45 dated
10 July 2006, directed against the Republic of the
Philippines through the AMLC, Manila RTC Judge
Eugenio, Jr. and Makati RTC Judge Marella, Jr..
She identified herself as the wife of Cheng
Yong46 with whom she jointly owns a conjugal
bank account with Citibank that is covered by the
Makati RTC bank inquiry order, and two conjugal
bank accounts with Metrobank that are covered by
the Manila RTC bank inquiry order. Lilia Cheng
imputed grave abuse of discretion on the part of the
Makati and Manila RTCs in granting AMLC’s ex
parte applications for a bank inquiry order, arguing
among others that the ex parte applications violated
her constitutional right to due process, that the bank
inquiry order under the AMLA can only be granted
in connection with violations of the AMLA and that
the AMLA can not apply to bank accounts opened
and transactions entered into prior to the effectivity
of the AMLA or to bank accounts located outside
the Philippines.47
On 1 August 2006, the Court of Appeals, acting on
Lilia Cheng’s petition, issued a Temporary
Restraining Order48enjoining the Manila and Makati
trial courts from implementing, enforcing or
executing the respective bank inquiry orders
previously issued, and the AMLC from enforcing
and implementing such orders. On even date, the
Manila RTC issued an Order49 resolving to hold in
abeyance the resolution of the urgent omnibus
motion for reconsideration then pending before it
until the resolution of Lilia Cheng’s petition for
certiorari with the Court of Appeals. The Court of
Appeals Resolution directing the issuance of the
temporary restraining order is the second of the four
rulings assailed in the present petition.
The third assailed ruling50 was issued on 15 August
2006 by the Manila RTC, acting on the Urgent
Motion for Clarification51 dated 14 August 2006
filed by Alvarez. It appears that the 1 August 2006
Manila RTC Order had amended its previous 25
July 2006 Order by deleting the last paragraph
which stated that the AMLC "should not disclose or
publish any information or document found or
obtained in violation of the May 11, 2006 Order of
32
this Court."52 In this new motion, Alvarez argued
that the deletion of that paragraph would allow the
AMLC to implement the bank inquiry orders and
publish whatever information it might obtain
thereupon even before the final orders of the Manila
RTC could become final and executory.53 In the 15
August 2006 Order, the Manila RTC reiterated that
the bank inquiry order it had issued could not be
implemented or enforced by the AMLC or any of its
representatives until the appeal therefrom was
finally resolved and that any enforcement thereof
would be unauthorized.54
The present Consolidated Petition55 for certiorari
and prohibition under Rule 65 was filed on 2
October 2006, assailing the two Orders of the
Manila RTC dated 25 July and 15 August 2006 and
the Temporary Restraining Order dated 1 August
2006 of the Court of Appeals. Through an Urgent
Manifestation and Motion56 dated 9 October 2006,
petitioner informed the Court that on 22 September
2006, the Court of Appeals hearing Lilia Cheng’s
petition had granted a writ of preliminary injunction
in her favor.57 Thereafter, petitioner sought as well
the nullification of the 22 September 2006
Resolution of the Court of Appeals, thereby
constituting the fourth ruling assailed in the instant
petition.58
The Court had initially granted a Temporary
Restraining Order59 dated 6 October 2006 and later
on a Supplemental Temporary Restraining
Order60 dated 13 October 2006 in petitioner’s favor,
enjoining the implementation of the assailed rulings
of the Manila RTC and the Court of Appeals.
However, on respondents’ motion, the Court,
through a Resolution61 dated 11 December 2006,
suspended the implementation of the restraining
orders it had earlier issued.
Oral arguments were held on 17 January 2007. The
Court consolidated the issues for argument as
follows:
1. Did the RTC-Manila, in issuing the
Orders dated 25 July 2006 and 15 August
2006 which deferred the implementation of
its Order dated 12 January 2006, and the
Court of Appeals, in issuing its Resolution
dated 1 August 2006, which ordered
the status quo in relation to the 1 July 2005
Order of the RTC-Makati and the 12 January
2006 Order of the RTC-Manila, both of
which authorized the examination of bank
accounts under Section 11 of Rep. Act No.
9160 (AMLA), commit grave abuse of
discretion?
(a) Is an application for an order
authorizing inquiry into or
examination of bank accounts or
investments under Section 11 of the
AMLA ex-parte in nature or one
which requires notice and hearing?
(b) What legal procedures and
standards should be observed in the
conduct of the proceedings for the
issuance of said order?
(c) Is such order susceptible to legal
challenges and judicial review?
2. Is it proper for this Court at this time and
in this case to inquire into and pass upon the
validity of the 1 July 2005 Order of the
RTC-Makati and the 12 January 2006 Order
of the RTC-Manila, considering the
pendency of CA G.R. SP No. 95-198 (Lilia
Cheng v. Republic) wherein the validity of
both orders was challenged?62
After the oral arguments, the parties were directed
to file their respective memoranda, which they
did,63 and the petition was thereafter deemed
submitted for resolution.
II.
Petitioner’s general advocacy is that the bank
inquiry orders issued by the Manila and Makati
RTCs are valid and immediately enforceable
whereas the assailed rulings, which effectively
stayed the enforcement of the Manila and Makati
RTCs bank inquiry orders, are sullied with grave
abuse of discretion. These conclusions flow from
the posture that a bank inquiry order, issued upon a
finding of probable cause, may be issued ex
parte and, once issued, is immediately executory.
Petitioner further argues that the information
obtained following the bank inquiry is necessarily
beneficial, if not indispensable, to the AMLC in
discharging its awesome responsibility regarding
the effective implementation of the AMLA and that
any restraint in the disclosure of such information to
appropriate agencies or other judicial fora would
render meaningless the relief supplied by the bank
inquiry order.
Petitioner raises particular arguments questioning
Lilia Cheng’s right to seek injunctive relief before
the Court of Appeals, noting that not one of the
33
bank inquiry orders is directed against her. Her
"cryptic assertion" that she is the wife of Cheng
Yong cannot, according to petitioner,
"metamorphose into the requisite legal standing to
seek redress for an imagined injury or to maintain
an action in behalf of another." In the same breath,
petitioner argues that Alvarez cannot assert any
violation of the right to financial privacy in behalf
of other persons whose bank accounts are being
inquired into, particularly those other persons
named in the Makati RTC bank inquiry order who
did not take any step to oppose such orders before
the courts.
Ostensibly, the proximate question before the Court
is whether a bank inquiry order issued in
accordance with Section 10 of the AMLA may be
stayed by injunction. Yet in arguing that it does,
petitioner relies on what it posits as the final and
immediately executory character of the bank inquiry
orders issued by the Manila and Makati RTCs.
Implicit in that position is the notion that the inquiry
orders are valid, and such notion is susceptible to
review and validation based on what appears on the
face of the orders and the applications which
triggered their issuance, as well as the provisions of
the AMLA governing the issuance of such orders.
Indeed, to test the viability of petitioner’s argument,
the Court will have to be satisfied that the subject
inquiry orders are valid in the first place. However,
even from a cursory examination of the applications
for inquiry order and the orders themselves, it is
evident that the orders are not in accordance with
law.
III.
A brief overview of the AMLA is called for.
Money laundering has been generally defined by the
International Criminal Police Organization
(Interpol) `as "any act or attempted act to conceal or
disguise the identity of illegally obtained proceeds
so that they appear to have originated from
legitimate sources."64 Even before the passage of
the AMLA, the problem was addressed by the
Philippine government through the issuance of
various circulars by the Bangko Sentral ng
Pilipinas. Yet ultimately, legislative proscription
was necessary, especially with the inclusion of the
Philippines in the Financial Action Task Force’s list
of non-cooperative countries and territories in the
fight against money laundering.65 The original
AMLA, Republic Act (R.A.) No. 9160, was passed
in 2001. It was amended by R.A. No. 9194 in 2003.
Section 4 of the AMLA states that "[m]oney
laundering is a crime whereby the proceeds of an
unlawful activity as [defined in the law] are
transacted, thereby making them appear to have
originated from legitimate sources."66 The section
further provides the three modes through which the
crime of money laundering is committed. Section 7
creates the AMLC and defines its powers, which
generally relate to the enforcement of the AMLA
provisions and the initiation of legal actions
authorized in the AMLA such as civil forefeiture
proceedings and complaints for the prosecution of
money laundering offenses.67
In addition to providing for the definition and
penalties for the crime of money laundering, the
AMLA also authorizes certain provisional remedies
that would aid the AMLC in the enforcement of the
AMLA. These are the "freeze order" authorized
under Section 10, and the "bank inquiry order"
authorized under Section 11.
Respondents posit that a bank inquiry order under
Section 11 may be obtained only upon the pre-
existence of a money laundering offense case
already filed before the courts.68 The conclusion is
based on the phrase "upon order of any competent
court in cases of violation of this Act," the word
"cases" generally understood as referring to actual
cases pending with the courts.
We are unconvinced by this proposition, and agree
instead with the then Solicitor General who
conceded that the use of the phrase "in cases of"
was unfortunate, yet submitted that it should be
interpreted to mean "in the event there are
violations" of the AMLA, and not that there are
already cases pending in court concerning such
violations.69 If the contrary position is adopted, then
the bank inquiry order would be limited in purpose
as a tool in aid of litigation of live cases, and wholly
inutile as a means for the government to ascertain
whether there is sufficient evidence to sustain an
intended prosecution of the account holder for
violation of the AMLA. Should that be the situation,
in all likelihood the AMLC would be virtually
deprived of its character as a discovery tool, and
thus would become less circumspect in filing
complaints against suspect account holders. After
all, under such set-up the preferred strategy would
be to allow or even encourage the indiscriminate
34
filing of complaints under the AMLA with the hope
or expectation that the evidence of money
laundering would somehow surface during the trial.
Since the AMLC could not make use of the bank
inquiry order to determine whether there is
evidentiary basis to prosecute the suspected
malefactors, not filing any case at all would not be
an alternative. Such unwholesome set-up should not
come to pass. Thus Section 11 cannot be interpreted
in a way that would emasculate the remedy it has
established and encourage the unfounded initiation
of complaints for money laundering.
Still, even if the bank inquiry order may be availed
of without need of a pre-existing case under the
AMLA, it does not follow that such order may be
availed of ex parte. There are several reasons why
the AMLA does not generally sanction ex
parte applications and issuances of the bank inquiry
order.
IV.
It is evident that Section 11 does not specifically
authorize, as a general rule, the issuance ex parte of
the bank inquiry order. We quote the provision in
full:
SEC. 11. Authority to Inquire into Bank
Deposits. ― Notwithstanding the provisions
of Republic Act No. 1405, as amended,
Republic Act No. 6426, as amended,
Republic Act No. 8791, and other laws, the
AMLC may inquire into or examine any
particular deposit or investment with any
banking institution or non bank financial
institution upon order of any competent
court in cases of violation of this Act, when
it has been established that there is
probable cause that the deposits or
investments are related to an unlawful
activity as defined in Section 3(i) hereof or
a money laundering offense under Section
4 hereof, except that no court order shall
be required in cases involving unlawful
activities defined in Sections 3(i)1, (2) and
(12).
To ensure compliance with this Act, the
Bangko Sentral ng Pilipinas (BSP) may
inquire into or examine any deposit of
investment with any banking institution or
non bank financial institution when the
examination is made in the course of a
periodic or special examination, in
accordance with the rules of examination of
the BSP.70 (Emphasis supplied)
Of course, Section 11 also allows the AMLC to
inquire into bank accounts without having to obtain
a judicial order in cases where there is probable
cause that the deposits or investments are related to
kidnapping for ransom,71certain violations of the
Comprehensive Dangerous Drugs Act of
2002,72 hijacking and other violations under R.A.
No. 6235, destructive arson and murder. Since such
special circumstances do not apply in this case,
there is no need for us to pass comment on this
proviso. Suffice it to say, the proviso contemplates a
situation distinct from that which presently
confronts us, and for purposes of the succeeding
discussion, our reference to Section 11 of the
AMLA excludes said proviso.
In the instances where a court order is required for
the issuance of the bank inquiry order, nothing in
Section 11 specifically authorizes that such court
order may be issued ex parte. It might be argued
that this silence does not preclude the ex
parte issuance of the bank inquiry order since the
same is not prohibited under Section 11. Yet this
argument falls when the immediately preceding
provision, Section 10, is examined.
SEC. 10. Freezing of Monetary Instrument
or Property. ― The Court of Appeals,
upon application ex parte by the AMLC
and after determination that probable
cause exists that any monetary instrument or
property is in any way related to an unlawful
activity as defined in Section 3(i) hereof,
may issue a freeze order which shall be
effective immediately. The freeze order
shall be for a period of twenty (20) days
unless extended by the court.73
Although oriented towards different purposes, the
freeze order under Section 10 and the bank inquiry
order under Section 11 are similar in that they are
extraordinary provisional reliefs which the AMLC
may avail of to effectively combat and prosecute
money laundering offenses. Crucially, Section 10
uses specific language to authorize an ex
parte application for the provisional relief therein, a
circumstance absent in Section 11. If indeed the
legislature had intended to authorize ex
parte proceedings for the issuance of the bank
inquiry order, then it could have easily expressed
35
such intent in the law, as it did with the freeze order
under Section 10.
Even more tellingly, the current language of
Sections 10 and 11 of the AMLA was crafted at the
same time, through the passage of R.A. No. 9194.
Prior to the amendatory law, it was the AMLC, not
the Court of Appeals, which had authority to issue a
freeze order, whereas a bank inquiry order always
then required, without exception, an order from a
competent court.74 It was through the same
enactment that ex parte proceedings were
introduced for the first time into the AMLA, in the
case of the freeze order which now can only be
issued by the Court of Appeals. It certainly would
have been convenient, through the same amendatory
law, to allow a similar ex parte procedure in the
case of a bank inquiry order had Congress been so
minded. Yet nothing in the provision itself, or even
the available legislative record, explicitly points to
an ex parte judicial procedure in the application for
a bank inquiry order, unlike in the case of the freeze
order.
That the AMLA does not contemplate ex
parte proceedings in applications for bank inquiry
orders is confirmed by the present implementing
rules and regulations of the AMLA, promulgated
upon the passage of R.A. No. 9194. With respect to
freeze orders under Section 10, the implementing
rules do expressly provide that the applications for
freeze orders be filed ex parte,75 but no similar
clearance is granted in the case of inquiry orders
under Section 11.76 These implementing rules were
promulgated by the Bangko Sentral ng Pilipinas, the
Insurance Commission and the Securities and
Exchange Commission,77 and if it was the true
belief of these institutions that inquiry orders could
be issued ex parte similar to freeze orders, language
to that effect would have been incorporated in the
said Rules. This is stressed not because the
implementing rules could authorize ex
parte applications for inquiry orders despite the
absence of statutory basis, but rather because the
framers of the law had no intention to allow such ex
parte applications.
Even the Rules of Procedure adopted by this Court
in A.M. No. 05-11-04-SC78 to enforce the
provisions of the AMLA specifically authorize ex
parte applications with respect to freeze orders
under Section 1079 but make no similar
authorization with respect to bank inquiry orders
under Section 11.
The Court could divine the sense in allowing ex
parte proceedings under Section 10 and in
proscribing the same under Section 11. A freeze
order under Section 10 on the one hand is aimed at
preserving monetary instruments or property in any
way deemed related to unlawful activities as defined
in Section 3(i) of the AMLA. The owner of such
monetary instruments or property would thus be
inhibited from utilizing the same for the duration of
the freeze order. To make such freeze order
anteceded by a judicial proceeding with notice to
the account holder would allow for or lead to the
dissipation of such funds even before the order
could be issued.
On the other hand, a bank inquiry order under
Section 11 does not necessitate any form of physical
seizure of property of the account holder. What the
bank inquiry order authorizes is the examination of
the particular deposits or investments in banking
institutions or non-bank financial institutions. The
monetary instruments or property deposited with
such banks or financial institutions are not seized in
a physical sense, but are examined on particular
details such as the account holder’s record of
deposits and transactions. Unlike the assets subject
of the freeze order, the records to be inspected
under a bank inquiry order cannot be physically
seized or hidden by the account holder. Said records
are in the possession of the bank and therefore
cannot be destroyed at the instance of the account
holder alone as that would require the extraordinary
cooperation and devotion of the bank.
Interestingly, petitioner’s memorandum does not
attempt to demonstrate before the Court that the
bank inquiry order under Section 11 may be
issued ex parte, although the petition itself did
devote some space for that argument. The petition
argues that the bank inquiry order is "a special and
peculiar remedy, drastic in its name, and made
necessary because of a public necessity… [t]hus, by
its very nature, the application for an order or
inquiry must necessarily, be ex parte." This
argument is insufficient justification in light of the
clear disinclination of Congress to allow the
issuance ex parte of bank inquiry orders under
Section 11, in contrast to the legislature’s clear
inclination to allow the ex parte grant of freeze
orders under Section 10.
36
Without doubt, a requirement that the application
for a bank inquiry order be done with notice to the
account holder will alert the latter that there is a
plan to inspect his bank account on the belief that
the funds therein are involved in an unlawful
activity or money laundering offense.80 Still, the
account holder so alerted will in fact be unable to do
anything to conceal or cleanse his bank account
records of suspicious or anomalous transactions, at
least not without the whole-hearted cooperation of
the bank, which inherently has no vested interest to
aid the account holder in such manner.
V.
The necessary implication of this finding that
Section 11 of the AMLA does not generally
authorize the issuance ex parte of the bank inquiry
order would be that such orders cannot be issued
unless notice is given to the owners of the account,
allowing them the opportunity to contest the
issuance of the order. Without such a consequence,
the legislated distinction between ex
parte proceedings under Section 10 and those which
are not ex parte under Section 11 would be lost and
rendered useless.
There certainly is fertile ground to contest the
issuance of an ex parte order. Section 11 itself
requires that it be established that "there is probable
cause that the deposits or investments are related to
unlawful activities," and it obviously is the court
which stands as arbiter whether there is indeed such
probable cause. The process of inquiring into the
existence of probable cause would involve the
function of determination reposed on the trial court.
Determination clearly implies a function of
adjudication on the part of the trial court, and not a
mechanical application of a standard pre-
determination by some other body. The word
"determination" implies deliberation and is, in
normal legal contemplation, equivalent to "the
decision of a court of justice."81
The court receiving the application for inquiry order
cannot simply take the AMLC’s word that probable
cause exists that the deposits or investments are
related to an unlawful activity. It will have to
exercise its
own determinative function in order to be convinced
of such fact. The account holder would be certainly
capable of contesting such probable cause if given
the opportunity to be apprised of the pending
application to inquire into his account; hence a
notice requirement would not be an empty
spectacle. It may be so that the process of obtaining
the inquiry order may become more cumbersome or
prolonged because of the notice requirement, yet we
fail to see any unreasonable burden cast by such
circumstance. After all, as earlier stated, requiring
notice to the account holder should not, in any way,
compromise the integrity of the bank records
subject of the inquiry which remain in the
possession and control of the bank.
Petitioner argues that a bank inquiry order
necessitates a finding of probable cause, a
characteristic similar to a search warrant which is
applied to and heard ex parte. We have examined
the supposed analogy between a search warrant and
a bank inquiry order yet we remain to be
unconvinced by petitioner.
The Constitution and the Rules of Court prescribe
particular requirements attaching to search warrants
that are not imposed by the AMLA with respect to
bank inquiry orders. A constitutional warrant
requires that the judge personally examine under
oath or affirmation the complainant and the
witnesses he may produce,82 such examination
being in the form of searching questions and
answers.83 Those are impositions which the
legislative did not specifically prescribe as to the
bank inquiry order under the AMLA, and we cannot
find sufficient legal basis to apply them to Section
11 of the AMLA. Simply put, a bank inquiry order
is not a search warrant or warrant of arrest as it
contemplates a direct object but not the seizure of
persons or property.
Even as the Constitution and the Rules of Court
impose a high procedural standard for the
determination of probable cause for the issuance of
search warrants which Congress chose not to
prescribe for the bank inquiry order under the
AMLA, Congress nonetheless disallowed ex
parte applications for the inquiry order. We can
discern that in exchange for these procedural
standards normally applied to search warrants,
Congress chose instead to legislate a right to notice
and a right to be heard— characteristics of judicial
proceedings which are not ex parte.Absent any
demonstrable constitutional infirmity, there is no
reason for us to dispute such legislative policy
choices.
VI.
37
The Court’s construction of Section 11 of the
AMLA is undoubtedly influenced by right to
privacy considerations. If sustained, petitioner’s
argument that a bank account may be inspected by
the government following an ex parteproceeding
about which the depositor would know nothing
would have significant implications on the right to
privacy, a right innately cherished by all
notwithstanding the legally recognized exceptions
thereto. The notion that the government could be so
empowered is cause for concern of any individual
who values the right to privacy which, after all,
embodies even the right to be "let
alone," the most comprehensive of rights and the
right most valued by civilized people.84
One might assume that the constitutional dimension
of the right to privacy, as applied to bank deposits,
warrants our present inquiry. We decline to do so.
Admittedly, that question has proved controversial
in American jurisprudence. Notably, the United
States Supreme Court in U.S. v. Miller85 held that
there was no legitimate expectation of privacy as to
the bank records of a depositor.86 Moreover, the text
of our Constitution has not bothered with the
triviality of allocating specific rights peculiar to
bank deposits.
However, sufficient for our purposes, we can assert
there is a right to privacy governing bank accounts
in the Philippines, and that such right finds
application to the case at bar. The source of such
right is statutory, expressed as it is in R.A. No. 1405
otherwise known as the Bank Secrecy Act of 1955.
The right to privacy is enshrined in Section 2 of that
law, to wit:
SECTION 2. All deposits of whatever
nature with banks or banking institutions
in the Philippines including investments
in bonds issued by the Government of the
Philippines, its political subdivisions and
its instrumentalities, are hereby
considered as of an absolutely
confidential natureand may not be
examined, inquired or looked into by any
person, government official, bureau or
office, except upon written permission of the
depositor, or in cases of impeachment, or
upon order of a competent court in cases of
bribery or dereliction of duty of public
officials, or in cases where the money
deposited or invested is the subject matter of
the litigation. (Emphasis supplied)
Because of the Bank Secrecy Act, the
confidentiality of bank deposits remains a basic
state policy in the Philippines.87 Subsequent laws,
including the AMLA, may have added exceptions to
the Bank Secrecy Act, yet the secrecy of bank
deposits still lies as the general rule. It falls within
the zones of privacy recognized by our laws.88The
framers of the 1987 Constitution likewise
recognized that bank accounts are not covered by
either the right to information89 under Section 7,
Article III or under the requirement of full public
disclosure90 under Section 28, Article II.91 Unless
the Bank Secrecy Act is repealed or
amended, the legal order is obliged to conserve the
absolutely confidential nature of Philippine bank
deposits.
Any exception to the rule of absolute confidentiality
must be specifically legislated. Section 2 of the
Bank Secrecy Act itself prescribes exceptions
whereby these bank accounts may be examined by
"any person, government official, bureau or office";
namely when: (1) upon written permission of the
depositor; (2) in cases of impeachment; (3) the
examination of bank accounts is upon order of a
competent court in cases of bribery or dereliction of
duty of public officials; and (4) the money
deposited or invested is the subject matter of the
litigation. Section 8 of R.A. Act No. 3019, the Anti-
Graft and Corrupt Practices Act, has been
recognized by this Court as constituting an
additional exception to the rule of absolute
confidentiality,92 and there have been other similar
recognitions as well.93
The AMLA also provides exceptions to the Bank
Secrecy Act. Under Section 11, the AMLC may
inquire into a bank account upon order of any
competent court in cases of violation of the AMLA,
it having been established that there is probable
cause that the deposits or investments are related to
unlawful activities as defined in Section 3(i) of the
law, or a money laundering offense under Section 4
thereof. Further, in instances where there is
probable cause that the deposits or investments are
related to kidnapping for ransom,94 certain
violations of the Comprehensive Dangerous Drugs
Act of 2002,95 hijacking and other violations under
R.A. No. 6235, destructive arson and murder, then
38
there is no need for the AMLC to obtain a court
order before it could inquire into such accounts.
It cannot be successfully argued the proceedings
relating to the bank inquiry order under Section 11
of the AMLA is a "litigation" encompassed in one
of the exceptions to the Bank Secrecy Act which is
when "the money deposited or invested is the
subject matter of the litigation." The orientation of
the bank inquiry order is simply to serve as a
provisional relief or remedy. As earlier stated, the
application for such does not entail a full-blown
trial.
Nevertheless, just because the AMLA establishes
additional exceptions to the Bank Secrecy Act it
does not mean that the later law has dispensed with
the general principle established in the older law
that "[a]ll deposits of whatever nature with banks or
banking institutions in the Philippines x x x are
hereby considered as of an absolutely confidential
nature."96 Indeed, by force of statute, all bank
deposits are absolutely confidential, and that nature
is unaltered even by the legislated exceptions
referred to above. There is disfavor towards
construing these exceptions in such a manner that
would authorize unlimited discretion on the part of
the government or of any party seeking to enforce
those exceptions and inquire into bank deposits. If
there are doubts in upholding the absolutely
confidential nature of bank deposits against
affirming the authority to inquire into such
accounts, then such doubts must be resolved in
favor of the former. Such a stance would persist
unless Congress passes a law reversing the general
state policy of preserving the absolutely confidential
nature of Philippine bank accounts.
The presence of this statutory right to privacy
addresses at least one of the arguments raised by
petitioner, that Lilia Cheng had no personality to
assail the inquiry orders before the Court of Appeals
because she was not the subject of said orders.
AMLC Resolution No. 75, which served as the
basis in the successful application for the Makati
inquiry order, expressly adverts to Citibank Account
No. 88576248 "owned by Cheng Yong and/or Lilia
G. Cheng with Citibank N.A.,"97 whereas Lilia
Cheng’s petition before the Court of Appeals is
accompanied by a certification from Metrobank that
Account Nos. 300852436-0 and 700149801-7, both
of which are among the subjects of the Manila
inquiry order, are accounts in the name of "Yong
Cheng or Lilia Cheng."98 Petitioner does not
specifically deny that Lilia Cheng holds rights of
ownership over the three said accounts, laying focus
instead on the fact that she was not named as a
subject of either the Makati or Manila RTC inquiry
orders. We are reasonably convinced that Lilia
Cheng has sufficiently demonstrated her joint
ownership of the three accounts, and such
conclusion leads us to acknowledge that she has the
standing to assail via certiorari the inquiry orders
authorizing the examination of her bank accounts as
the orders interfere with her statutory right to
maintain the secrecy of said accounts.
While petitioner would premise that the inquiry into
Lilia Cheng’s accounts finds root in Section 11 of
the AMLA, it cannot be denied that the authority to
inquire under Section 11 is only exceptional in
character, contrary as it is to the general rule
preserving the secrecy of bank deposits. Even
though she may not have been the subject of the
inquiry orders, her bank accounts nevertheless were,
and she thus has the standing to vindicate the right
to secrecy that attaches to said accounts and their
owners. This statutory right to privacy will not
prevent the courts from authorizing the inquiry
anyway upon the fulfillment of the requirements set
forth under Section 11 of the AMLA or Section 2 of
the Bank Secrecy Act; at the same time, the owner
of the accounts have the right to challenge whether
the requirements were indeed complied with.
VII.
There is a final point of concern which needs to be
addressed. Lilia Cheng argues that the AMLA,
being a substantive penal statute, has no retroactive
effect and the bank inquiry order could not apply to
deposits or investments opened prior to the
effectivity of Rep. Act No. 9164, or on 17 October
2001. Thus, she concludes, her subject bank
accounts, opened between 1989 to 1990, could not
be the subject of the bank inquiry order lest there be
a violation of the constitutional prohibition
against ex post facto laws.
No ex post facto law may be enacted,99 and no law
may be construed in such fashion as to permit a
criminal prosecution offensive to the ex post
facto clause. As applied to the AMLA, it is plain
that no person may be prosecuted under the penal
provisions of the AMLA for acts committed prior to
the enactment of the law on 17 October 2001. As
much was understood by the lawmakers since they
39
deliberated upon the AMLA, and indeed there is no
serious dispute on that point.
Does the proscription against ex post facto laws
apply to the interpretation of Section 11, a provision
which does not provide for a penal sanction but
which merely authorizes the inspection of suspect
accounts and deposits? The answer is in the
affirmative. In this jurisdiction, we have defined
an ex post facto law as one which either:
(1) makes criminal an act done before the
passage of the law and which was innocent
when done, and punishes such an act;
(2) aggravates a crime, or makes it greater
than it was, when committed;
(3) changes the punishment and inflicts a
greater punishment than the law annexed to
the crime when committed;
(4) alters the legal rules of evidence, and
authorizes conviction upon less or different
testimony than the law required at the time
of the commission of the offense;
(5) assuming to regulate civil rights and
remedies only, in effect imposes penalty or
deprivation of a right for something which
when done was lawful; and
(6) deprives a person accused of a crime
of some lawful protection to which he has
become entitled, such as the protection of
a former conviction or acquittal, or a
proclamation of amnesty. (Emphasis
supplied)100
Prior to the enactment of the AMLA, the fact that
bank accounts or deposits were involved in
activities later on enumerated in Section 3 of the
law did not, by itself, remove such accounts from
the shelter of absolute confidentiality. Prior to the
AMLA, in order that bank accounts could be
examined, there was need to secure either the
written permission of the depositor or a court order
authorizing such examination, assuming that they
were involved in cases of bribery or dereliction of
duty of public officials, or in a case where the
money deposited or invested was itself the subject
matter of the litigation. The passage of the AMLA
stripped another layer off the rule on absolute
confidentiality that provided a measure of lawful
protection to the account holder. For that reason, the
application of the bank inquiry order as a means of
inquiring into records of transactions entered into
prior to the passage of the AMLA would be
constitutionally infirm, offensive as it is to the ex
post facto clause.
Still, we must note that the position submitted by
Lilia Cheng is much broader than what we are
willing to affirm. She argues that the proscription
against ex post facto laws goes as far as to prohibit
any inquiry into deposits or investments included in
bank accounts opened prior to the effectivity of the
AMLA even if the suspect transactions were entered
into when the law had already taken effect. The
Court recognizes that if this argument were to be
affirmed, it would create a horrible loophole in the
AMLA that would in turn supply the means to
fearlessly engage in money laundering in the
Philippines; all that the criminal has to do is to
make sure that the money laundering activity is
facilitated through a bank account opened prior to
2001. Lilia Cheng admits that "actual money
launderers could utilize the ex post facto provision
of the Constitution as a shield" but that the remedy
lay with Congress to amend the law. We can hardly
presume that Congress intended to enact a self-
defeating law in the first place, and the courts are
inhibited from such a construction by the cardinal
rule that "a law should be interpreted with a view to
upholding rather than destroying it."101
Besides, nowhere in the legislative record cited by
Lilia Cheng does it appear that there was an
unequivocal intent to exempt from the bank inquiry
order all bank accounts opened prior to the passage
of the AMLA. There is a cited exchange between
Representatives Ronaldo Zamora and Jaime Lopez
where the latter confirmed to the former that
"deposits are supposed to be exempted from
scrutiny or monitoring if they are already in place as
of the time the law is enacted."102 That statement
does indicate that transactions already in place when
the AMLA was passed are indeed exempt from
scrutiny through a bank inquiry order, but it cannot
yield any interpretation that records of transactions
undertaken after the enactment of the AMLA are
similarly exempt. Due to the absence of cited
authority from the legislative record that
unqualifiedly supports respondent Lilia Cheng’s
thesis, there is no cause for us to sustain her
interpretation of the AMLA, fatal as it is to
the anima of that law.
IX.
We are well aware that Lilia Cheng’s petition
presently pending before the Court of Appeals
40
likewise assails the validity of the subject bank
inquiry orders and precisely seeks the annulment of
said orders. Our current declarations may indeed
have the effect of preempting that0 petition. Still, in
order for this Court to rule on the petition at bar
which insists on the enforceability of the said bank
inquiry orders, it is necessary for us to consider and
rule on the same question which after all is a pure
question of law.
WHEREFORE, the PETITION is DISMISSED.
No pronouncement as to costs.
SO ORDERED.
EN BANC
[G.R. No. 94723. August 21, 1997]
KAREN E. SALVACION, minor, thru Federico
N. Salvacion, Jr., father and Natural
Guardian, and Spouses FEDERICO N.
SALVACION, JR., and EVELINA E.
SALVACION, petitioners, vs. CENTRAL
BANK OF THE PHILIPPINES, CHINA
BANKING CORPORATION and GREG
BARTELLI y for criminals like the herein
NORTHCOTT, respondents.
DECISION
TORRES, JR., J.:
In our predisposition to discover the original
intent of a statute, courts become the unfeeling pillars
of the status quo. Little do we realize that statutes or
even constitutions are bundles of compromises
thrown our way by their framers. Unless we exercise
vigilance, the statute may already be out of tune and
irrelevant to our day.
The petition is for declaratory relief. It prays for
the following reliefs:
a.) Immediately upon the filing of this
petition, an Order be issued restraining the
respondents from applying and enforcing
Section 113 of Central Bank Circular No.
960;
b.) After hearing, judgment be rendered:
1.) Declaring the respective
rights and duties of petitioners
and respondents;
2.) Adjudging Section 113 of
Central Bank Circular No. 960 as
contrary to the provision of the
Constitution, hence void; because
its provision that Foreign
currency deposits shall be
exempt from attachment,
garnishment, or any other order
to process of any court,
legislative body, government
agency or any administrative
body whatsoever
i.) has taken away the right of
petitioners to have the bank
deposit of defendant Greg
Bartelli y Northcott garnished
to satisfy the judgment
rendered in petitioners favor
in violation of substantive
due process guaranteed by
the Constitution;
ii.) has given foreign
currency depositors an undue
favor or a class privilege in
violation of the equal
protection clause of the
Constitution;
iii.) has provided a safe haven
respondent Greg Bartelli y
Northcott since criminals
could escape civil liability for
their wrongful acts by merely
converting their money to a
foreign currency and
depositing it in a foreign
currency deposit account with
an authorized bank.
The antecedents facts:
On February 4, 1989, Greg Bartelli y Northcott,
an American tourist, coaxed and lured petitioner
Karen Salvacion, then 12 years old to go with him to
his apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989
and was able to rape the child once on February 4,
and three times each day on February 5, 6, and 7,
1989. On February 7, 1989, after policemen and
people living nearby, rescued Karen, Greg Bartelli
was arrested and detained at the Makati Municipal
Jail. The policemen recovered from Bartelli the
following items: 1.) Dollar Check No. 368, Control
No. 021000678-1166111303, US
3,903.20; 2.) COCOBANK Bank Book No. 104-
108758-8 (Peso Acct.); 3.) Dollar Account China
Banking Corp., US $/A#54105028-2; 4.) ID-122-30-
41
8877; 5.) Philippine Money (P234.00)
cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll
(Teddy Bear) used in seducing the complainant.
On February 16, 1989, Makati Investigating
Fiscal Edwin G. Condaya filed against Greg Bartelli,
Criminal Case No. 801 for Serious Illegal Detention
and Criminal Cases Nos. 802, 803, 804, and 805 for
four (4) counts of Rape. On the same day, petitioners
filed with the Regional Trial Court of Makati Civil
Case No. 89-3214 for damages with preliminary
attachment against Greg Bartelli. On February 24,
1989, the day there was a scheduled hearing for
Bartellis petition for bail the latter escaped from jail.
On February 28, 1989, the court granted the
fiscals Urgent Ex-Parte Motion for the Issuance of
Warrant of Arrest and Hold Departure
Order. Pending the arrest of the accused Greg
Bartelli y Northcott, the criminal cases were archived
in an Order dated February 28, 1989.
Meanwhile, in Civil Case No. 89-3214, the
Judge issued an Order dated February 22, 1989
granting the application of herein petitioners, for the
issuance of the writ of preliminary attachment. After
petitioners gave Bond No. JCL (4) 1981 by FGU
Insurance Corporation in the amount P100,000.00, a
Writ of Preliminary Attachment was issued by the
trial court on February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati
served a Notice of Garnishment on China Banking
Corporation. In a letter dated March 13, 1989 to the
Deputy Sheriff of Makati, China Banking
Corporation invoked Republic Act No. 1405 as its
answer to the notice of garnishment served on it. On
March 15, 1989, Deputy Sheriff of Makati Armando
de Guzman sent his reply to China Banking
Corporation saying that the garnishment did not
violate the secrecy of bank deposits since the
disclosure is merely incidental to a garnishment
properly and legally made by virtue of a court order
which has placed the subject deposits in custodia
legis. In answer to this letter of the Deputy Sheriff of
Makati, China Banking Corporation, in a letter dated
March 20, 1989, invoked Section 113 of Central
Bank Circular No. 960 to the effect that the dollar
deposits of defendant Greg Bartelli are exempt from
attachment, garnishment, or any other order or
process of any court, legislative body, government
agency or any administrative body, whatsoever.
This prompted the counsel for petitioners to
make an inquiry with the Central Bank in a letter
dated April 25, 1989 on whether Section 113 of CB
Circular No. 960 has any exception or whether said
section has been repealed or amended since said
section has rendered nugatory the substantive right of
the plaintiff to have the claim sought to be enforced
by the civil action secured by way of the writ of
preliminary attachment as granted to the plaintiff
under Rule 57 of the Revised Rules of Court. The
Central Bank responded as follows:
May 26, 1989
Ms. Erlinda S. Carolino
12 Pres. Osmea Avenue
South Admiral Village
Paranaque, Metro Manila
Dear Ms. Carolino:
This is in reply to your letter dated April
25, 1989 regarding your inquiry on Section
113, CB Circular No. 960 (1983).
The cited provision is absolute in
application. It does not admit of any
exception, nor has the same been repealed
nor amended.
The purpose of the law is to encourage
dollar accounts within the countrys banking
system which would help in the
development of the economy. There is no
intention to render futile the basic rights of
a person as was suggested in your subject
letter. The law may be harsh as some
perceive it, but it is still the
law. Compliance is, therefore, enjoined.
Very truly yours,
(SGD) AGAPITO S. FAJARDO
Director[1]
Meanwhile, on April 10, 1989, the trial court
granted petitioners motion for leave to serve
summons by publication in the Civil Case No. 89-
3214 entitled Karen Salvacion. et al. vs. Greg
Bartelli y Northcott. Summons with the complaint
was published in the Manila Times once a week for
three consecutive weeks. Greg Bartelli failed to file
his answer to the complaint and was declared in
default on August 7, 1989. After hearing the case ex-
parte, the court rendered judgment in favor of
petitioners on March 29, 1990, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby
rendered in favor of plaintiffs and against
defendant, ordering the latter:
42
 1. To pay plaintiff Karen E. Salvacion the
amount of P500,000.00 as moral damages;
2. To pay her parents, plaintiffs spouses
Federico N. Salvacion, Jr., and Evelina E.
Salvacion the amount of P150,000.00 each
or a total of P300,000.00 for both of them;
3. To pay plaintiffs exemplary damages
of P100,000.00; and
4. To pay attorneys fees in an amount
equivalent to 25% of the total amount of
damages herein awarded;
5. To pay litigation expenses
of P10,000.00; plus
6. Costs of the suit.
SO ORDERED.
The heinous acts of respondents Greg Bartelli
which gave rise to the award were related in graphic
detail by the trial court in its decision as follows:
The defendant in this case was originally
detained in the municipal jail of Makati but
was able to escape therefrom on February
24, 1989 as per report of the Jail Warden of
Makati to the Presiding Judge, Honorable
Manuel M. Cosico of the Regional Trial
Court of Makati, Branch 136, where he was
charged with four counts of Rape and
Serious Illegal Detention (Crim. Cases Nos.
802 to 805).Accordingly, upon motion of
plaintiffs, through counsel, summons was
served upon defendant by publication in the
Manila Times, a newspaper of general
circulation as attested by the Advertising
Manager of the Metro Media Times, Inc.,
the publisher of the said
newspaper. Defendant, however, failed to
file his answer to the complaint despite the
lapse of the period of sixty (60) days from
the last publication; hence, upon motion of
the plaintiffs through counsel, defendant
was declared in default and plaintiffs were
authorized to present their evidence ex
parte.
In support of the complaint, plaintiffs
presented as witness the minor Karen E.
Salvacion, her father, Federico N. Salacion,
Jr., a certain Joseph Aguilar and a certain
Liberato Mandulio, who gave the following
testimony:
Karen took her first year high school in St. Marys
Academy in Pasay City but has recently transferred
to Arellano University for her second year.
In the afternoon of February 4, 1989, Karen was at
the Plaza Fair Makati Cinema Square, with her
friend Edna Tangile whiling away her free time. At
about 3:30 p.m. while she was finishing her snack
on a concrete bench in front of Plaza Fair, an
American approached her. She was then alone
because Edna Tangile had already left, and she was
about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
The American asked her name and introduced
himself as Greg Bartelli. He sat beside her when he
talked to her. He said he was a Math teacher and
told her that he has a sister who is a nurse in New
York. His sister allegedly has a daughter who is
about Karens age and who was with him in his
house along Kalayaan Avenue. (TSN, Aug. 15,
1989, pp. 4-5).
The American asked Karen what was her favorite
subject and she told him its Pilipino. He then invited
her to go with him to his house where she could
teach Pilipino to his niece. He even gave her a
stuffed toy to persuade her to teach his niece. (Id.,
pp.5-6)
They walked from Plaza Fair along Pasong Tamo,
turning right to reach the defendants house along
Kalayaan Avenue. (Id., p.6)
When they reached the apartment house, Karen
notices that defendants alleged niece was not
outside the house but defendant told her maybe his
niece was inside. When Karen did not see the
alleged niece inside the house, defendant told her
maybe his niece was upstairs, and invited Karen to
go upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly
locked the door. Karen became nervous because his
niece was not there. Defendant got a piece of cotton
cord and tied Karens hands with it, and then he
undressed her. Karen cried for help but defendant
strangled her. He took a packing tape and he
covered her mouth with it and he circled it around
her head. (Id., p. 7)
Then, defendant suddenly pushed Karen towards the
bed which was just near the door. He tied her feet
and hands spread apart to the bed posts. He knelt in
front of her and inserted his finger in her sex
organ.She felt severe pain. She tried to shout but no
sound could come out because there were tapes on
her mouth. When defendant withdrew his finger it
43
was full of blood and Karen felt more pain after the
withdrawal of the finger. (Id., p.8)
He then got a Johnsons Baby Oil and he applied it
to his sex organ as well as to her sex organ. After
that he forced his sex organ into her but he was not
able to do so. While he was doing it, Karen found it
difficult to breathe and she perspired a lot while
feeling severe pain. She merely presumed that he
was able to insert his sex organ a little, because she
could not see. Karen could not recall how long the
defendant was in that position. (Id., pp. 8-9)
After that, he stood up and went to the bathroom to
wash. He also told Karen to take a shower and he
untied her hands. Karen could only hear the sound
of the water while the defendant, she presumed, was
in the bathroom washing his sex organ. When she
took a shower more blood came out from her. In the
meantime, defendant changed the mattress because
it was full of blood. After the shower, Karen was
allowed by defendant to sleep. She fell asleep
because she got tired crying. The incident happened
at about 4:00 p.m. Karen had no way of determining
the exact time because defendant removed her
watch.Defendant did not care to give her food
before she went to sleep. Karen woke up at about
8:00 oclock the following morning. (Id., pp. 9-10)
The following day, February 5, 1989, a Sunday,
after breakfast of biscuit and coke at about 8:30 to
9:00 a.m. defendant raped Karen while she was still
bleeding. For lunch, they also took biscuit and
coke. She was raped for the second time at about
12:00 to 2:00 p.m. In the evening, they had rice for
dinner which defendant had stored downstairs; it
was he who cooked the rice that is why it looks like
lugaw. For the third time, Karen was raped again
during the night. During those three times defendant
succeeded in inserting his sex organ but she could
not say whether the organ was inserted wholly.
Karen did not see any firearm or any bladed
weapon. The defendant did not tie her hands and
feet nor put a tape on her mouth anymore but she
did not cry for help for fear that she might be killed;
besides, all those windows and doors were
closed. And even if she shouted for help, nobody
would hear her. She was so afraid that if somebody
would hear her and would be able to call a police, it
was still possible that as she was still inside the
house, defendant might kill her. Besides, the
defendant did not leave that Sunday, ruling out her
chance to call for help. At nighttime he slept with
her again. (TSN, Aug. 15, 1989, pp. 12-14)
On February 6, 1989, Monday, Karen was raped
three times, once in the morning for thirty minutes
after breakfast of biscuits; again in the afternoon;
and again in the evening. At first, Karen did not
know that there was a window because everything
was covered by a carpet, until defendant opened the
window for around fifteen minutes or less to let
some air in, and she found that the window was
covered by styrofoam and plywood. After that, he
again closed the window with a hammer and he put
the styrofoam, plywood, and carpet back. (Id., pp.
14-15)
That Monday evening, Karen had a chance to call
for help, although defendant left but kept the door
closed. She went to the bathroom and saw a small
window covered by styrofoam and she also spotted
a small hole. She stepped on the bowl and she cried
for help through the hole. She cried: Maawa na po
kayo sa akin. Tulungan nyo akong makalabas
dito. Kinidnap ako! Somebody heard her. It was a
woman, probably a neighbor, but she got angry and
said she was istorbo. Karen pleaded for help and the
woman told her to sleep and she will call the
police. She finally fell asleep but no policeman
came. (TSN, Aug. 15, 1989, pp. 15-16)
She woke up at 6:00 oclock the following morning,
and she saw defendant in bed, this time
sleeping. She waited for him to wake up. When he
woke up, he again got some food but he always kept
the door locked. As usual, she was merely fed with
biscuit and coke. On that day, February 7, 1989, she
was again raped three times. The first at about 6:30
to 7:00 a.m., the second at about 8:30 9:00, and the
third was after lunch at 12:00 noon. After he had
raped her for the second time he left but only for a
short while. Upon his return, he caught her shouting
for help but he did not understand what she was
shouting about.After she was raped the third time,
he left the house. (TSN, Aug. 15, 1989, pp. 16-
17) She again went to the bathroom and shouted for
help. After shouting for about five minutes, she
heard many voices. The voices were asking for her
name and she gave her name as Karen
Salvacion. After a while, she heard a voice of a
woman saying they will just call the police. They
were also telling her to change her clothes.She went
from the bathroom to the room but she did not
change her clothes being afraid that should the
44
neighbors call the police and the defendant see her
in different clothes, he might kill her. At that time
she was wearing a T-shirt of the American bacause
the latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and opened the
door. He asked her if she had asked for help because
there were many policemen outside and she denied
it. He told her to change her clothes, and she did
change to the one she was wearing on Saturday. He
instructed her to tell the police that she left home
and willingly; then he went downstairs but he
locked the door. She could hear people conversing
but she could not understand what they were
saying. (Id., p. 19)
When she heard the voices of many people who
were conversing downstairs, she knocked
repeatedly at the door as hard as she could. She
heard somebody going upstairs and when the door
was opened, she saw a policeman. The policeman
asked her name and the reason why she was
there. She told him she was kidnapped. Downstairs,
he saw about five policemen in uniform and the
defendant was talking to them. Nakikipag-areglo po
sa mga pulis, Karen added. The policeman told him
to just explain at the precinct. (Id., p. 20)
They went out of the house and she saw some of her
neighbors in front of the house. They rode the car of
a certain person she called Kuya Boy together with
defendant, the policeman, and two of her neighbors
whom she called Kuya Bong Lacson and one Ate
Nita. They were brought to Sub-Station I and there
she was investigated by a policeman. At about 2:00
a.m., her father arrived, followed by her mother
together with some of their neighbors. Then they
were brought to the second floor of the police
headquarters. (Id., p. 21)
At the headquarters, she was asked several
questions by the investigator. The written statement
she gave to the police was marked Exhibit A. Then
they proceeded to the National Bureau of
Investigation together with the investigator and her
parents. At the NBI, a doctor, a medico-
legal officer, examined her private parts. It was
already 3:00 in early morning, of the following day
when they reached the NBI, (TSN, Aug. 15, 1989,
p. 22) The findings of the medico-legal officer has
been marked as Exhibit B.
She was studying at the St. Marys Academy in
Pasay City at the time of the Incident but she
subsequently transferred to Apolinario Mabini,
Arellano University, situated along Taft Avenue,
because she was ashamed to be the subject of
conversation in the school. She first applied for
transfer to Jose Abad Santos, Arellano University
along Taft Avenue near the Light Rail Transit
Station but she was denied admission after she told
the school the true reason for her transfer. The
reason for their denial was that they might be
implicated in the case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx
After the incident, Karen has changed a lot. She
does not play with her brother and sister anymore,
and she is always in a state of shock; she has been
absent-minded and is ashamed even to go out of the
house. (TSN, Sept. 12, 1989, p. 10) She appears to
be restless or sad. (Id., p. 11) The father prays
for P500,000.00 moral damages for Karen for this
shocking experience which probably, she would
always recall until she reaches old age, and he is not
sure if she could ever recover from this
experience. (TSN, Sept. 24, 1989, pp. 10-11)
Pursuant to an Order granting leave to publish
notice of decision, said notice was published in the
Manila Bulletin once a week for three consecutive
weeks. After the lapse of fifteen (15) days from the
date of the last publication of the notice of judgment
and the decision of the trial court had become final,
petitioners tried to execute on Bartellis dollar deposit
with China Banking Corporation. Likewise, the bank
invoked Section 113 of Central Bank Circular No.
960.
Thus, petitioners decided to seek relief from this
Court.
The issues raised and the arguments articulated
by the parties boil down to two:
May this Court entertain the instant petition
despite the fact that original jurisdiction in petitions
for declaratory relief rests with the lower court? She
Section 113 of Central Bank Circular No. 960 and
Section 8 of R.A. 6426, as amended by P.D. 1246,
otherwise known as the Foreign Currency Deposit
Act be made applicable to a foreign transient?
Petitioners aver as heretofore stated that Section
113 of Central Bank Circular No. 960 providing that
Foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or
process of any court, legislative body, government
agency or any administrative body whatsoever.
should be adjudged as unconstitutional on the
grounds that: 1.) it has taken away the right of
45
petitioners to have the bank deposit of defendant
Greg Bartelli y Northcott garnished to satisfy the
judgment rendered in petitioners favor in violation of
substantive due process guaranteed by the
Constitution; 2.) it has given foreign currency
depositors an undue favor or a class privilege n
violation of the equal protection clause of the
Constitution; 3.) it has provided a safe haven for
criminals like the herein respondent Greg Bartelli y
Northcott since criminal could escape civil liability
for their wrongful acts by merely converting their
money to a foreign currency and depositing it in a
foreign currency deposit account with an authorized
bank; and 4.) The Monetary Board, in issuing
Section 113 of Central Bank Circular No. 960 has
exceeded its delegated quasi- legislative power when
it took away: a.) the plaintiffs substantive right to
have the claim sought to be enforced by the civil
action secured by way of the writ of preliminary
attachment as granted by Rule 57 of the Revised
Rules of Court; b.) the plaintiffs substantive right to
have the judgment credit satisfied by way of the writ
of execution out of the bank deposit of the judgment
debtor as granted to the judgment creditor by Rule 39
of the Revised Rules of Court, which is beyond its
power to do so.
On the other hand, respondent Central Bank, in
its Comment alleges that the Monetary Board in
issuing Section 113 of CB Circular No. 960 did not
exceed its power or authority because the subject
Section is copied verbatim from a portion of R.A.
No. 6426 as amended by P.D. 1246. Hence, it was
not the Monetary Board that grants exemption from
attachment or garnishment to foreign currency
deposits, but the law (R.A. 6426 as amended) itself;
that it does not violate the substantive due process
guaranteed by the Constitution because a.) it was
based on a law; b.) the law seems to be
reasonable; c.) it is enforced according to regular
methods of procedure; and d.) it applies to all
members of a class.
Expanding, the Central Bank said; that one
reason for exempting the foreign currency deposits
from attachment, garnishment or any other order
process of any court, is to assure the development
and speedy growth of the Foreign Currency Deposit
System and the Offshore Banking System in the
Philippines; that another reason is to encourage the
inflow of foreign currency deposits into the banking
institutions thereby placing such institutions more in
a position to properly channel the same to loans and
investments in the Philippines, thus directly
contributing to the economic development of the
country; that the subject section is being enforced
according to the regular methods of procedure; and
that it applies to all currency deposits made by any
person and therefore does not violate the equal
protection clause of the Constitution.
Respondent Central Bank further avers that the
questioned provision is needed to promote the public
interest and the general welfare; that the State cannot
just stand idly by while a considerable segment of the
society suffers from economic distress; that the State
had to take some measures to encourage economic
development; and that in so doing persons and
property may be subjected to some kinds of restraints
or burdens to secure the general welfare or public
interest. Respondent Central Bank also alleges that
Rule 39 and Rule 57 of the Revised Rules of Court
provide that some properties are exempted from
execution/attachment especially provided by law and
R.A. No. 6426 as amended is such a law, in that it
specifically provides, among others, that foreign
currency deposits shall be exempted from
attachment, garnishment, or any other order or
process of any court, legislative body, government
agency or any administrative body whatsoever.
For its part, respondent China Banking
Corporation, aside from giving reasons similar to that
of respondent Central Bank, also stated that
respondent China Bank is not unmindful of the
inhuman sufferings experienced by the minor Karen
E. Salvacion from the beastly hands of Greg Bartelli;
that it is not only too willing to release the dollar
deposit of Bartelli which may perhaps partly mitigate
the sufferings petitioner has undergone; but it is
restrained from doing so in view of R.A. No. 6426
and Section 113 of Central Bank Circular No. 960;
and that despite the harsh effect to these laws on
petitioners, CBC has no other alternative but to
follow the same.
This court finds the petition to be partly
meritorious.
Petitioner deserves to receive the damages
awarded to her by the court. But this petition for
declaratory relief can only be entertained and treated
as a petition for mandamus to require respondents to
honor and comply with the writ of execution in Civil
Case No. 89-3214.
46
 The Court has no original and exclusive
jurisdiction over a petition for declatory
relief.[2] However, exceptions to this rule have been
recognized. Thus, where the petition has far-reaching
implications and raises questions that should be
resolved, it may be treated as one for mandamus.[3]
Here is a child, a 12-year old girl, who in her
belief that all Americans are good and in her gesture
of kindness by teaching his alleged niece the Filipino
language as requested by the American, trustingly
went with said stranger to his apartment, and there
she was raped by said American tourist Greg
Bartelli. Not once, but ten times. She was detained
therein for four (4) days. This American tourist was
able to escape from the jail and avoid
punishment. On the other hand, the child, having
received a favorable judgment in the Civil Case for
damages in the amount of more than P1,000,000.00,
which amount could alleviate the humiliation,
anxiety, and besmirched reputation she had suffered
and may continue to suffer for a long, long time; and
knowing that this person who had wronged her has
the money, could not, however get the award of
damages because of this unreasonable law. This
questioned law, therefore makes futile the favorable
judgment and award of damages that she and her
parents fully deserve. As stated by the trial court in
its decision,
Indeed, after hearing the testimony of
Karen, the Court believes that it was
indoubtedly a shocking and traumatic
experience she had undergone which could
haunt her mind for a long, long time, the
mere recall of which could make her feel so
humiliated, as in fact she had been actually
humiliated once when she was refused
admission at the Abad Santos High School,
Arellano University, where she sought to
transfer from another school, simply
because the school authorities of the said
High School learned about what happened
to her and allegedly feared that they might
be implicated in the case.
xxx
The reason for imposing exemplary or
corrective damages is due to the wanton
and bestial manner defendant had
committed the acts of rape during a period
of serious illegal detention of his hapless
victim, the minor Karen Salvacion whose
only fault was in her being so naive and
credulous to believe easily that defendant,
an American national, could not have such
a bestial desire on her nor capable of
committing such heinous crime. Being only
12 years old when that unfortunate incident
happened, she has never heard of an old
Filipino adage that in every forest there is a
snake, xxx.[4]
If Karens sad fate had happened to anybodys
own kin, it would be difficult for him to fathom how
the incentive for foreign currency deposit could be
more important than his childs right to said award of
damages; in this case, the victims claim for damages
from this alien who had the gall to wrong a child of
tender years of a country where he is mere
visitor. This further illustrates the flaw in the
questioned provisions.
It is worth mentioning that R.A. No. 6426 was
enacted in 1983 or at a time when the countrys
economy was in a shambles; when foreign
investments were minimal and presumably, this was
the reason why said statute was enacted. But the
realities of the present times show that the country
has recovered economically; and even if not, the
questioned law still denies those entitled to due
process of law for being unreasonable and
oppressive. The intention of the questioned law may
be good when enacted. The law failed to anticipate
the inquitous effects producing outright injustice and
inequality such as as the case before us.
It has thus been said that-
But I also know,[5] that laws and institutions
must go hand in hand with the progress of
the human mind. As that becomes more
developed, more enlightened, as new
discoveries are made, new truths are
disclosed and manners and opinions change
with the change of circumstances,
institutions must advance also, and keep
pace with the times We might as well
require a man to wear still the coat which
fitted him when a boy, as civilized society
to remain ever under the regimen of their
barbarous ancestors.
In his comment, the Solicitor General correctly
opined, thus:
"The present petition has far-reaching
implications on the right of a national to
obtain redress for a wrong committed by an
47
 alien who takes refuge under a law and
regulation promulgated for a purpose which
does not contemplate the application
thereof envisaged by the allien. More
specifically, the petition raises the question
whether the protection against attachment,
garnishment or other court process
accorded to foreign currency deposits PD
No. 1246 and CB Circular No. 960 applies
when the deposit does not come from a
lender or investor but from a mere transient
who is not expected to maintain the deposit
in the bank for long.
The resolution of this question is important
for the protection of nationals who are
victimized in the forum by foreigners who
are merely passing through.
xxx
xxx Respondents China Banking
Corporation and Central Bank of the
Philippines refused to honor the writ of
execution issued in Civil Case No. 89-3214
on the strength of the following provision
of Central Bank Circular No. 960:
Sec. 113 Exemption from
attachment. Foreign currency
deposits shall be exempt from
attachment, garnishment, or any
other order or process of any
court, legislative body,
government agency or any
administrative body whatsoever.
Central Bank Circular No. 960 was issued pursuant
to Section 7 of Republic Act No. 6426:
Sec. 7. Rules
and Regulations. The Monetary
Board of the Central Bank shall
promulgate such rules and
regulations as may be necessary
to carry out the provisions of this
Act which shall take effect after
the publication of such rules and
regulations in the Official
Gazette and in a newspaper of
national circulation for at least
once a week for three
consecutive weeks. In case the
Central Bank promulgates new
rules and regulations decreasing
the rights of depositors, the rules
and regulations at the time the
deposit was made shall govern.
The aforecited Section 113 was copied
from Section 8 of Republic Act No. 6426.
As amended by P.D. 1246, thus:
Sec. 8. Secrecy of
Foreign Currency Deposits. -- All
foreign currency deposits
authorized under this Act, as
amended by Presidential Decree
No. 1035, as well as foreign
currency deposits authorized
under Presidential Decree No.
1034, are hereby declared as and
considered of an absolutely
confidential nature and, except
upon the written permission of
the depositor, in no instance shall
such foreign currency deposits be
examined, inquired or looked
into by any person, government
official, bureau or office whether
judicial or administrative or
legislative or any other entity
whether public or
private: Provided, however, that
said foreign currency deposits
shall be exempt from attachment,
garnishment, or any other order
or process of any court,
legislative body, government
agency or any administrative
body whatsoever.
The purpose of PD 1246 in according
protection against attachment, garnishment
and other court process to foreign currency
deposits is stated in its whereases, viz.:
WHEREAS, under Republic Act
No. 6426, as amended by
Presidential Decree No. 1035,
certain Philippine banking
institutions and branches of
foreign banks are authorized to
accept deposits in foreign
currency;
WHEREAS, under provisions of
Presidential Decree No. 1034
authorizing the establishment of
an offshore banking system in the
Philippines, offshore banking
48
 units are also authorized to
receive foreign currency deposits
in certain cases;
WHEREAS, in order to assure
the development and
speedy growth of the Foreign
Currency Deposit System and the
Offshore Banking System in the
Philippines, certain incentives
were provided for under the
two Systems such as
confidentiality subject to certain
exceptions and tax exemptions
on the interest income of
depositors who are nonresidents
and are not engaged in trade or
business in the Philippines;
WHEREAS, making absolute the
protective cloak of
confidentiality over such foreign
currency deposits, exempting
such deposits from tax, and
guaranteeing the vested right of
depositors would better
encourage the inflow of foreign
currency deposits into the
banking institutions authorized to
accept such deposits in the
Philippines thereby placing such
institutions more in a position to
properly channel the same to
loans and investments in the
Philippines, thus directly
contributing to the economic
development of the country;
Thus, one of the principal purposes of the
protection accorded to foreign currency
deposits is to assure the development and
speedy growth of the Foreign Currency
Deposit system and the Offshore Banking
in the Philippines (3rd Whereas).
The Offshore Banking System was
established by PD No. 1034. In turn, the
purposes of PD No. 1034 are as follows:
WHEREAS, conditions
conducive to the establishment of
an offshore banking system, such
as political stability, a growing
economy and adequate
communication facilities, among
others, exist in the Philippines;
WHEREAS, it is in the interest
of developing countries to have
as wide access as possible to the
sources of capital funds for
economic development;
WHEREAS, an offshore banking
system based in the Philippines
will be advantageous and
beneficial to the country by
increasing our links with foreign
lenders, facilitating the flow of
desired investments into the
Philippines, creating employment
opportunities and expertise in
international finance, and
contributing to the national
development effort.
WHEREAS, the geographical
location, physical and human
resources, and other positive
factors provide the Philippines
with the clear potential to
develop as another financial
center in Asia;
On the other hand, the Foreign Currency
Deposit system was created by PD No.
1035. Its purpose are as follows:
WHEREAS, the establishment of
an offshore banking system in the
Philippines has been authorized
under a separate decree;
WHEREAS, a number of local
commercial banks, as depository
bank under the Foreign Currency
Deposit Act (RA No. 6426), have
the resources and managerial
competence to more actively
engage in foreign exchange
transactions and participate in the
grant of foreign currency loans to
resident corporations and firms;
WHEREAS, it is timely to
expand the foreign currency
lending authority of the said
depository banks under RA 6426
and apply to their transactions the
same taxes as would be
49
 applicable to transaction of the
proposed offshore banking units;
It is evident from the above [Whereas
clauses] that the Offshore Banking System
and the Foreign Currency Deposit System
were designed to draw deposits from
foreign lenders and investors (Vide second
Whereas of PD No. 1034; third Whereas of
PD No. 1035). It is these depositors that are
induced by the two laws and given
protection and incentives by them.
Obviously, the foreign currency deposit
made by a transient or a tourist is not the
kind of deposit encourage by PD Nos. 1034
and 1035 and given incentives and
protection by said laws because such
depositor stays only for a few days in the
country and, therefore, will maintain his
deposit in the bank only for a short time.
Respondent Greg Bartelli, as stated, is just
a tourist or a transient. He deposited his
dollars with respondent China Banking
Corporation only for safekeeping during his
temporary stay in the Philippines.
For the reasons stated above, the Solicitor
General thus submits that the dollar deposit
of respondent Greg Bartelli is not entitled
to the protection of Section 113 of Central
Bank Circular No. 960 and PD No. 1246
against attachment, garnishment or other
court processes.[6]
In fine, the application of the law depends on the
extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No.
960 which exempts from attachment, garnishment, or
any other order or process of any court. Legislative
body, government agency or any administrative body
whatsoever, is applicable to a foreign transient,
injustice would result especially to a citizen
aggrieved by a foreign guest like accused Greg
Bartelli. This would negate Article 10 of the New
Civil Code which provides that in case of doubt in
the interpretation or application of laws, it is
presumed that the lawmaking body intended right
and justice to prevail. Ninguno non deue
enriquecerse tortizerzmente con damo de
otro.Simply stated, when the statute is silent or
ambiguous, this is one of those fundamental
solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377)
It would be unthinkable, that the questioned
Section 113 of Central Bank No. 960 would be used
as a device by accused Greg Bartelli for wrongdoing,
and in so doing, acquitting the guilty at the expense
of the innocent.
Call it what it may but is there no conflict of
legal policy here? Dollar against Peso? Upholding
the final and executory judgment of the lower court
against the Central Bank Circular protecting the
foreign depositor? Shielding or protecting the dollar
deposit of a transient alien depositor against injustice
to a national and victim of a crime? This situation
calls for fairness legal tyranny.
We definitely cannot have both ways and rest in
the belief that we have served the ends of justice.
IN VIEW WHEREOF, the provisions of
Section 113 of CB Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of R.A. 6426 are
hereby held to be INAPPLICABLE to this case
because of its peculiar circumstances. Respondents
are hereby REQUIRED to COMPLY with the writ of
execution issued in Civil Case No. 89-3214, Karen
Salvacion, et al. vs. Greg Bartelli y Northcott, by
Branch CXLIV, RTC Makati and to RELEASE to
petitioners the dollar deposit of respondent Greg
Bartelli y Northcott in such amount as would satisfy
the judgment.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-34964 January 31, 1973
CHINA BANKING CORPORATION and TAN
KIM LIONG, petitioners-appellants,
vs.
HON. WENCESLAO ORTEGA, as Presiding
Judge of the Court of First Instance of Manila,
Branch VIII, and VICENTE G.
ACABAN, respondents-appellees.
Sy Santos, Del Rosario and Associates for
petitioners-appellants.
Tagalo, Gozar and Associates for respondents-
appellees.
MAKALINTAL, J.:
50
The only issue in this petition for certiorari to
review the orders dated March 4, 1972 and March
27, 1972, respectively, of the Court of First Instance
of Manila in its Civil Case No. 75138, is whether or
not a banking institution may validly refuse to
comply with a court process garnishing the bank
deposit of a judgment debtor, by invoking the
provisions of Republic Act No. 1405. *
On December 17, 1968 Vicente Acaban filed a
complaint in the court a quo against Bautista
Logging Co., Inc., B & B Forest Development
Corporation and Marino Bautista for the collection
of a sum of money. Upon motion of the plaintiff the
trial court declared the defendants in default for
failure to answer within the reglementary period,
and authorized the Branch Clerk of Court and/or
Deputy Clerk to receive the plaintiff's evidence. On
January 20, 1970 judgment by default was rendered
against the defendants.
To satisfy the judgment, the plaintiff sought the
garnishment of the bank deposit of the defendant B
& B Forest Development Corporation with the
China Banking Corporation. Accordingly, a notice
of garnishment was issued by the Deputy Sheriff of
the trial court and served on said bank through its
cashier, Tan Kim Liong. In reply, the bank' cashier
invited the attention of the Deputy Sheriff to the
provisions of Republic Act No. 1405 which, it was
alleged, prohibit the disclosure of any information
relative to bank deposits. Thereupon the plaintiff
filed a motion to cite Tan Kim Liong for contempt
of court.
In an order dated March 4, 1972 the trial court
denied the plaintiff's motion. However, Tan Kim
Liong was ordered "to inform the Court within five
days from receipt of this order whether or not there
is a deposit in the China Banking Corporation of
defendant B & B Forest Development Corporation,
and if there is any deposit, to hold the same intact
and not allow any withdrawal until further order
from this Court." Tan Kim Liong moved to
reconsider but was turned down by order of March
27, 1972. In the same order he was directed "to
comply with the order of this Court dated March 4,
1972 within ten (10) days from the receipt of copy
of this order, otherwise his arrest and confinement
will be ordered by the Court." Resisting the two
orders, the China Banking Corporation and Tan
Kim Liong instituted the instant petition.
The pertinent provisions of Republic Act No. 1405
relied upon by the petitioners reads:
Sec. 2. All deposits of whatever
nature with banks or banking
institutions in the Philippines
including investments in bonds
issued by the Government of the
Philippines, its political subdivisions
and its instrumentalities, are hereby
considered as of absolutely
confidential nature and may not be
examined, inquired or looked into by
any person, government official,
bureau or office, except upon written
permission of the depositor, or in
cases of impeachment, or upon order
of a competent court in cases of
bribery or dereliction of duty of
public officials, or in cases where the
money deposited or invested is the
subject matter of the litigation.
Sec 3. It shall be unlawful for any
official or employee of a banking
institution to disclose to any person
other than those mentioned in
Section two hereof any information
concerning said deposits.
Sec. 5. Any violation of this law will
subject offender upon conviction, to
an imprisonment of not more than
five years or a fine of not more than
twenty thousand pesos or both, in the
discretion of the court.
The petitioners argue that the disclosure of the
information required by the court does not fall
within any of the four (4) exceptions enumerated in
Section 2, and that if the questioned orders are
complied with Tan Kim Liong may be criminally
liable under Section 5 and the bank exposed to a
possible damage suit by B & B Forest Development
Corporation. Specifically referring to this case, the
position of the petitioners is that the bank deposit of
judgment debtor B & B Forest Development
Corporation cannot be subject to garnishment to
satisfy a final judgment against it in view of the
aforequoted provisions of law.
We do not view the situation in that light. The lower
court did not order an examination of or inquiry into
the deposit of B & B Forest Development
Corporation, as contemplated in the law. It merely
51
required Tan Kim Liong to inform the court
whether or not the defendant B & B Forest
Development Corporation had a deposit in the
China Banking Corporation only for purposes of the
garnishment issued by it, so that the bank would
hold the same intact and not allow any withdrawal
until further order. It will be noted from the
discussion of the conference committee report on
Senate Bill No. 351 and House Bill No. 3977,
which later became Republic Act 1405, that it was
not the intention of the lawmakers to place bank
deposits beyond the reach of execution to satisfy a
final judgment. Thus:
Mr. MARCOS. Now, for purposes of
the record, I should like the
Chairman of the Committee on Ways
and Means to clarify this further.
Suppose an individual has a tax case.
He is being held liable by the Bureau
of Internal Revenue for, say,
P1,000.00 worth of tax liability, and
because of this the deposit of this
individual is attached by the Bureau
of Internal Revenue.
Mr. RAMOS. The attachment will
only apply after the court has
pronounced sentence declaring the
liability of such person. But where
the primary aim is to determine
whether he has a bank deposit in
order to bring about a proper
assessment by the Bureau of Internal
Revenue, such inquiry is not
authorized by this proposed law.
Mr. MARCOS. But under our rules
of procedure and under the Civil
Code, the attachment or garnishment
of money deposited is allowed. Let
us assume, for instance, that there is
a preliminary attachment which is for
garnishment or for holding liable all
moneys deposited belonging to a
certain individual, but such
attachment or garnishment will bring
out into the open the value of such
deposit. Is that prohibited by this
amendment or by this law?
Mr. RAMOS. It is only prohibited to
the extent that the inquiry is limited,
or rather, the inquiry is made only
for the purpose of satisfying a tax
liability already declared for the
protection of the right in favor of the
government; but when the object is
merely to inquire whether he has a
deposit or not for purposes of
taxation, then this is fully covered by
the law.
Mr. MARCOS. And it protects the
depositor, does it not?
Mr. RAMOS. Yes, it protects the
depositor.
Mr. MARCOS. The law prohibits a
mere investigation into the existence
and the amount of the deposit.
Mr. RAMOS. Into the very nature of
such deposit.
Mr. MARCOS. So I come to my
original question. Therefore,
preliminary garnishment or
attachment of the deposit is not
allowed?
Mr. RAMOS. No, without judicial
authorization.
Mr. MARCOS. I am glad that is
clarified. So that the established rule
of procedure as well as the
substantive law on the matter is
amended?
Mr. RAMOS. Yes. That is the effect.
Mr. MARCOS. I see. Suppose there
has been a decision, definitely
establishing the liability of an
individual for taxation purposes and
this judgment is sought to be
executed ... in the execution of that
judgment, does this bill, or this
proposed law, if approved, allow the
investigation or scrutiny of the bank
deposit in order to execute the
judgment?
Mr. RAMOS. To satisfy a judgment
which has become executory.
Mr. MARCOS. Yes, but, as I said
before, suppose the tax liability is
P1,000,000 and the deposit is half a
million, will this bill allow scrutiny
into the deposit in order that the
judgment may be executed?
52
 Mr. RAMOS. Merely to determine
the amount of such money to satisfy
that obligation to the Government,
but not to determine whether a
deposit has been made in evasion of
taxes.
xxx xxx xxx
Mr. MACAPAGAL. But let us
suppose that in an ordinary civil
action for the recovery of a sum of
money the plaintiff wishes to attach
the properties of the defendant to
insure the satisfaction of the
judgment. Once the judgment is
rendered, does the gentleman mean
that the plaintiff cannot attach the
bank deposit of the defendant?
Mr. RAMOS. That was the question
raised by the gentleman from
Pangasinan to which I replied that
outside the very purpose of this law
it could be reached by attachment.
Mr. MACAPAGAL. Therefore, in
such ordinary civil cases it can be
attached?
Mr. RAMOS. That is so.
(Vol. II, Congressional Record,
House of Representatives, No. 12,
pp. 3839-3840, July 27, 1955).
It is sufficiently clear from the foregoing discussion
of the conference committee report of the two
houses of Congress that the prohibition against
examination of or inquiry into a bank deposit under
Republic Act 1405 does not preclude its being
garnished to insure satisfaction of a judgment.
Indeed there is no real inquiry in such a case, and if
the existence of the deposit is disclosed the
disclosure is purely incidental to the execution
process. It is hard to conceive that it was ever within
the intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the
Court, through the expedient of converting their
assets into cash and depositing the same in a bank.
WHEREFORE, the orders of the lower court dated
March 4 and 27, 1972, respectively, are hereby
affirmed, with costs against the petitioners-
appellants.
Zaldivar, Castro, Fernando, Barredo, Makasiar,
Antonio and Esguerra, JJ., concur.
Concepcion, C.J. and Teehankee, J., took no part.
SECOND DIVISION
[G.R. No. 84526. January 28, 1991.]
PHILIPPINE COMMERCIAL & INDUSTRIAL
BANK and JOSE HENARES, Petitioners, v.
THE HON. COURT OF APPEALS and
MARINDUQUE MINING AND INDUSTRIAL
CORPORATION, Respondents.
Bengzon, Zarraga, Narciso, Cudala, Pecson &
Bengson, for Petitioners.
Rexes V . Alejano for Private Respondent.
SYLLABUS
1. REMEDIAL LAW; PROVISIONAL
REMEDIES; GARNISHMENT; CONSTRUED. —
Garnishment is considered as a specie of attachment
for reaching credits belonging to the judgment
debtor and owing to him from a stranger to the
litigation. Under the provision of Section 8, Rule 57
of the Rules of Court, the garnishee [the third
person] is obliged to deliver the credits, etc. to the
proper officer issuing the writ and "the law exempts
from liability the person having in his possession or
under his control any credits or other personal
property belonging to the defendant, . . ., if such
property be delivered or transferred, . . ., to the
clerk, sheriff, or other officer of the court in which
the action is pending." (Engineering Construction,
Inc. v. National Power Corp., G.R. No. L-34589,
June 29, 1988)
2. ID.; ACTIONS; EXECUTION; IMMEDIATE
RELEASE OF FUNDS UNDER GARNISHMENT
AND PURSUANT TO A WRIT OF EXECUTION,
ENJOYS PRESUMPTION OF REGULARITY. —
The immediate release of the funds by the
petitioners on the strength of the notice of
garnishment and writ of execution, whose issuance,
absent any patent defect, enjoys the presumption of
regularity, sufficiently supported by Sec. 41, Rule
39 of the Rules of Court.
53
3. MERCANTILE LAW; SECRECY OF BANK
DEPOSITS ACT; NOT VIOLATED WHERE
DISCLOSURE WAS MADE INCIDENTAL TO
THE EXECUTION PROCESS. — It is clear from
the discussion of the conference committee report
on Senate Bill No. 351 and House Bill No. 3977,
which later became Republic Act 1405, that the
prohibition against examination of or inquiry into a
bank deposit under Republic Act 1405 does not
preclude its being garnished to insure satisfaction of
a judgment. Indeed there is no real inquiry in such a
case, and if existence of the deposit is disclosed the
disclosure is purely incidental to the execution
process. It is hard to conceive that it was ever within
the intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the
Court, through the expedient of converting their
assets into cash and depositing the same in a bank.
(CBC v. Ortega, G.R. No. L-34964, January 31,
1973)
4. REMEDIAL LAW; EVIDENCE; FINDINGS OF
FACT OF THE APPELLATE COURT,
GENERALLY BINDING ON APPEAL; CASE AT
BAR, AN EXCEPTION. — The findings of fact of
the appellate court are binding on this Court, the
said rule however admits of exceptions, such as
when the Court of Appeals clearly misconstrued and
misapplied the law, drawn from the incorrect
conclusions of fact established by evidence and
otherwise at certain conclusions which are based on
misapprehension of facts, as in the case at bar.
DECISION
SARMIENTO, J.:
This is a petition for review on certiorari which
assails both the resolution 1 dated June 27, 1988 of
the Court of Appeals 2 which reconsidered and set
aside its earlier decision 3 dated February 26, 1988
reversing the decision 4 of the trial court and
subsequent resolution 5 dated August 3, 1988 which
denied the petitioners’ motion for reconsideration.
The dispositive portion of the resolution in question
dated June 27, 1988 reads as follows:chanrob1es
virtual 1aw library
x x x
For the reasons above adduced, We are constrained
to reconsider Our aforesaid decision and to set it
aside and in lieu thereof hereby enter another
decision AFFIRMING the decision dated January
15, 1985 of the Regional Trial Court of Manila,
Branch 11, in Civil Case No. 103100 entitled
"Marinduque Mining and Industrial Corporation
(MMIC) v. Philippine Commercial and Industrial
Bank, Et. Al." 6
The undisputed facts 7 as gathered from the
findings of the trial court are as follows:chanrob1es
virtual 1aw library
The instant case originated from an action 8 filed
with the National Labor Relations Commission
(NLRC) by a group of laborers who obtained
therefrom a favorable judgment for the payment of
backwages amounting to P205,853.00 against the
private Respondent.chanroblesvirtualawlibrary
On April 26, 1976, the said Commission issued a
writ of execution directing the Deputy Sheriff of
Negros Occidental, one Damian Rojas, to enforce
the aforementioned judgment. The pertinent portion
of the said writ reads as follows:chanrob1es virtual
1aw library
x x x
Further, you are to collect from same respondent the
total amount of P205,853.00 as their backwage (sic)
for twelve (12) months and then turn over said
amount to this commission for further disposition.
In case you fail to collect said amount in cash, you
are to cause the satisfaction of the same on the
movable or immovable properties of the respondent
not exempt from execution. (Exhs. G, G-1 and G-3,
also Exh. 3; Emphasis supplied). 9
Accordingly, on April 28, 1976, the aforenamed
deputy sheriff went to the mining site of the private
respondent and served the writ of execution on the
persons concerned, but nothing seemed to have
happened thereat.
Thereafter, the Sheriff prepared on his own a Notice
54
of Garnishment dated April 29, 1976 addressed to
six (6) banks, all located in Bacolod City, one of
which being the petitioner herein, directing the bank
concerned to immediately issue a check in the name
of the Deputy Provincial Sheriff of Negros
Occidental in an amount equivalent to the amount
of the garnishment and that proper receipt would be
issued therefor.
Incidentally, the house lawyer of the private
respondent, Atty. Rexes V. Alejano, acting on a tip
regarding the existence of the said notice of
garnishment, communicated with the bank manager,
the petitioner Jose Henares, verbally at first at
around 2:00 o’clock in the afternoon of that day,
April 29, 1976, and later confirmed in a formal
letter received by the petitioner Henares at about
5:00 o’clock of that same day, requesting the
withholding of any release of the deposit of the
private respondent with the petitioner bank.
Meanwhile, at about 9:30 in the morning of April
29, 1976, the deputy sheriff presented the Notice of
Garnishment and the Writ of Execution attached
therewith to the petitioner Henares and later in the
afternoon, demanded from the latter, under pain of
contempt, the release of the deposit of the
private Respondent.
The petitioner Henares, upon knowing from the
Acting Provincial Sheriff that there was no
restraining order from the National Labor Relations
Commission and on the favorable advice of the
bank’s legal counsel, issued a debit memo for the
full balance of the private respondent’s account with
the petitioner bank. Thereafter, he issued a
manager’s check in the name of the Deputy
Provincial Sheriff of Negros Occidental for the
amount of P37,466.18, which was the exact balance
of the private respondent’s account as of that day.
On the following day, April 30, 1976, at about 1:00
o’clock in the afternoon, the deputy sheriff returned
to the bank in order to encash the check but before
the actual encashment, the petitioner Henares once
again inquired about any existing restraining order
from the NLRC and upon being told that there was
none, the latter allowed the said
encashment.chanroblesvirtualawlibrary
On July 6, 1976, the private respondent, then
plaintiff, filed a complaint before the Regional Trial
Court of Manila, Branch II, against the petitioners
and Damian Rojas, the Deputy Provincial Sheriff of
Negros Occidental, then defendants, alleging that
the former’s current deposit with the petitioner bank
was levied upon, garnished, and with undue haste
unlawfully allowed to be withdrawn, and
notwithstanding the alleged unauthorized disclosure
of the said current deposit and unlawful release
thereof, the latter have failed and refused to restore
the amount of P37,466.18 to the formers account
despite repeated demands.
Both the petitioners and the Deputy Sheriff filed
their respective answers denying the material
averments of the said complaint and alleged that
their actuations were all in accordance with law and
likewise filed counterclaims for damages, including
a cross-claim of the former against the latter. The
third-party complaint of the petitioners against the
forty-nine (49) laborers in the NLRC case was,
however, dismissed for failure of the sheriff to serve
summons upon the latter.
On January 23, 1982, after several postponements,
the pre-trial was finally conducted and terminated
with only the petitioners and the private respondent
participating, through their respective counsel.
On January 15, 1985, the trial court rendered its
judgment in favor of the private respondent, the
dispositive portion of which reads:chanrob1es
virtual 1aw library
WHEREFORE, judgment is hereby rendered in
favor of the plaintiff and against the three (3)
defendants by ordering the latter to pay, jointly and
severally, the plaintiff the following amounts, to
wit:chanrob1es virtual 1aw library
(a) the sum of P37,466.18, with interest thereon at
the rate of 12% per annum from date of first
demand on April 29, 1976 until the amount shall
have been fully and completely restored and paid;
(b) the sum of P10,000.00 as attorney’s fees.
Defendants are ordered to pay, jointly and severally,
double costs.10
55
 x x x not have the effect of delivering the money
On appeal, the respondent court in a decision dated
February 26, 1988, first reversed the said judgment
of the lower court, but however, on the motion for
reconsideration filed by the private respondent,
subsequently annulled and set aside its said decision
in a resolution dated June 27, 1988. On August 3,
1988, the respondent court denied the petitioners’
own motion for reconsideration.
Hence, this petition.
The petitioners raise two issues, 11 to
wit:chanrob1es virtual 1aw library
1. Whether or not petitioners had legal basis in
releasing the garnished deposit of private
respondent to the sheriff.
2. Whether or not petitioners violated Republic Act
No. 1405, otherwise known as the Secrecy of Bank
Deposits Act when they allowed the sheriff to
garnish the deposit of private Respondent.
The petition is impressed with merit.
The crux of the instant controversy boils down to
the question of whether or not a bank is liable for
releasing its depositor’s funds on the strength of the
notice of garnishment made by the deputy sheriff
pursuant to a writ of execution issued by the
National Labor Relations Commission (NLRC).
The respondent court in its questioned resolution
dated June 27, 1988, held that the petitioners were
liable, in this wise:chanrob1es virtual 1aw library
In the case at bar, Defendant-Appellant PCIB,
despite vigorous objections from plaintiff-appellee,
with indecent haste disclosed and released the
deposit of plaintiff-appellee on the strength of a
mere notice of garnishment which the Honorable
Supreme Court ruled upon is no authority for the
release of the deposit, thus:chanrob1es virtual 1aw
library
In the second place, the mere garnishment of funds
belonging to a party upon order of the court does
garnished to the sheriff or to the party in whose
favor the attachment is issued. The fund is retained
by the garnishee or the person holding the money
for the defendant.chanrobles lawlibrary : rednad
The garnishee, or one in whose hands property is
attached or garnished, is universally regarded as
charged with its legal custody pending outcome of
the attachment or garnishment unless, by local
statute and practice, he is permitted to surrender or
pay the garnished property or funds into court, to
the attaching officer, or to a receiver or trustee
appointed to receive them. (5 Am. Jur. 14)
The effect of the garnishment, therefore, was to
require the Philippine Trust Company, holder of the
funds of the Luzon Surety Co., to set aside said
amount from the funds of the Luzon Surety Co., and
keep the same subject to the final orders of the
Court. In the case at bar there was never an order to
deliver the full amount garnished to the plaintiff-
appellee; all that was ordered to be delivered after
the judgment had become final was the amount
found by the Court of Appeals to be due. The
balance of the amount garnished, therefore,
remained all the time in the possession of the bank
as part of the funds of the Luzon Surety Co.
although the same could not be disposed of by the
owner. (De la Rama v. Villarosa, Et Al., L-17927,
June 29, 1963, 8 SCRA 413, 418-419; Emphasis
supplied). 12
The above-mentioned contention citing De la Rama
is not exactly on all fours with the facts of the case
at bar. In De la Rama, the amount garnished was not
actually taken possession of by the sheriff, even
from the time of garnishment, because the judgment
debtor was able to appeal to the Court of Appeals
and obtain from the Court an injunction prohibiting
execution of the judgment.
On the other hand, nowhere in the record of the
present case is there any evidence of an appeal by
the private respondent from the decision of the
NLRC or the existence of any restraining order to
prevent the release of the private respondent’s
deposit to the deputy sheriff at the time of the
service of the notice of garnishment and writ of
execution to the petitioners.
56

On the contrary, the uncontroverted statements in
the deposition of the petitioner Henares that he had
previously sought the advice of the bank’s counsel
and that he had checked twice with the Acting
Provincial Sheriff who had informed him of the
absence of any restraining order, belie any
allegation of undue and indecent haste in the release
of the said deposit in question.
The cases more in point to the present controversy
are the recent decisions in Engineering Construction
Inc. v. National Power Corporation 13 and Rizal
Commercial Banking Corporation (RCBC) v. De
Castro 14 where the Court absolved both
garnishees, MERALCO and RCBC, respectively,
from any liability for their prompt compliance in the
release of garnished funds,
The rationale behind Engineering Construction, Inc.
and which was quoted in Rizal Commercial
Banking Corporation is persuasive:chanrob1es
virtual 1aw library
x x x Applying the foregoing to the case at bar,
But while partial restitution is warranted in favor of
NPC, we find that the Appellate Court erred in not
absolving MERALCO, the garnishee, from its
obligations to NPC with respect to the payment to
ECI of P1,114,543.23, thus in effect subjecting
MERALCO to double liability MERALCO should
not have been faulted for its prompt obedience to a
writ of garnishment. Unless there are compelling
reasons such as: a defect on the face of the writ or
actual knowledge on the part of the garnishee of
lack of entitlement on the part of the garnisher, it is
not incumbent upon the garnishee to inquire or to
judge for itself whether or not the order for the
advance execution of a judgment is valid.chanrobles
virtual lawlibrary
Section 8, Rule 57 of the Rules of Court
provides:chanrob1es virtual 1aw library
Effect of attachment of debts and credits. — All
persons having in their possession or under their
control any credits or other similar personal
property belonging to the party against whom
attachment is issued, or owing any debts to the
same, at the time of service upon them of a copy of
the order of attachment and notice as provided in
the last preceding section, shall be liable to the
applicant of the amount of such credits, debts or
other property, until the attachment be discharged,
or any judgment recovered by him be satisfied,
unless such property be delivered or transferred, or
such debts be paid, to the clerk, sheriff or other
proper officer of the court issuing the attachment.
Garnishment is considered as a specie of attachment
for reaching credits belonging to the judgment
debtor and owing to him from a stranger to the
litigation. Under the above cited rule, the garnishee
[the third person] is obliged to deliver the credits,
etc. to the proper officer issuing the writ and "the
law exempts from liability the person having in his
possession or under his control any credits or other
personal property belonging to the defendant, . . ., if
such property be delivered or transferred, . . ., to the
clerk, sheriff, or other officer of the court in which
the action is pending."cralaw virtua1aw library
MERALCO, as garnishee, after having been
judicially compelled to pay the amount of the
judgment represented by funds in its possession
belonging to the judgment debtor or NPC, should be
released from all responsibilities over such amount
after delivery thereof to the sheriff. The reason for
the rule is self evident. To expose garnishees to
risks for obeying court orders and processes would
only undermine the administration of justice.
(Emphasis ours.) 15
x x x
Moreover, there is no issue concerning the
indebtedness of the petitioner bank to the private
respondent since the latter has never denied the
existence of its deposit with the former, the said
deposit being considered a credit in favor of the
depositor against the bank. 16 We therefore see no
application for Sec. 39, Rule 39 of the Rules of
Court invoked by the private respondent as to
necessitate the "examination of the debtor of the
judgment debtor." 17
Rather, we find the immediate release of the funds
by the petitioners on the strength of the notice of
57
garnishment and writ of execution, whose issuance,
absent any patent defect, enjoys the presumption of
regularity, sufficiently supported by Sec. 41, Rule
39 of the Rules of Court which reads:chanrob1es
virtual 1aw library
x x x themselves divulged the information that the private
After an execution against property has issued, a
person indebted to the judgment debtor may pay to
the officer holding the execution the amount of his
debt or so much thereof as may be necessary to
satisfy the execution, and the officer’s receipt shall
be a sufficient discharge for the amount so paid or
directed to be credited by the judgment creditor on
the execution.chanrobles law library
x x x said rule however admits of exceptions, such as
Finally, we likewise take cognizance of the subject
of the judgment sought to be enforced in the writ of
execution in question, namely, laborers’ backwages.
We believe that the petitioners should rather be
commended for having acted with urgent dispatch
despite attempts by the private respondent, as with
so many scheming employers, to frustrate or
unjustifiably delay the prompt satisfaction of final
judgments which often result in undue prejudice to
the legitimate claims of labor.
With regard to the second issue, we find no
violation whatsoever by the petitioners of Republic
Act No. 1405, otherwise known as the Secrecy of
Bank Deposits Act. The Court in China Banking
Corporation v. Ortega 18 had the occasion to
dispose of this issue when it stated, thus:chanrob1es
virtual 1aw library
It is clear from the discussion of the conference
committee report on Senate Bill No. 351 and House
Bill No. 3977, which later became Republic Act
1405, that the prohibition against examination of or
inquiry into a bank deposit under Republic Act
1405 does not preclude its being garnished to insure
satisfaction of a judgment. Indeed there is no real
inquiry in such a case, and if existence of the
deposit is disclosed the disclosure is purely
incidental to the execution process. It is hard to
conceive that it was ever within the intention of
Congress to enable debtors to evade payment of
their just debts, even if ordered by the Court,
through the expedient of converting their assets into
cash and depositing the same in a bank.
Since there is no evidence that the petitioners
respondent had an account with the petitioner bank
and it is undisputed that the said account was
properly the object of the notice of garnishment and
writ of execution carried out by the deputy sheriff, a
duly authorized officer of the court, we can not
therefore hold the petitioners liable under R.A.
1405.
While the general rule is that the findings of fact of
the appellate court are binding on this Court, the
when the Court of Appeals clearly misconstrued and
misapplied the law, drawn from the incorrect
conclusions of fact established by evidence and
otherwise at certain conclusions which are based on
misapprehension of facts, 19 as in the case at bar.
The petitioners are therefore absolved from any
liability for the disclosure and release of the private
respondent’s deposit to the custody of the deputy
sheriff in satisfaction of the final judgment for the
laborers’ backwages.
WHEREFORE, the petition is GRANTED and the
challenged Resolutions dated June 27, 1988 and
August 13, 1988 of the Court of Appeals are hereby
ANNULLED and SET ASIDE and its Decision
dated February 26, 1988 dismissing the complaint is
hereby REINSTATED. With costs against the
private Respondent.chanrobles law library : red
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-34548 November 29, 1988
RIZAL COMMERCIAL BANKING
CORPORATION, petitioner,
vs.
THE HONORABLE PACIFICO P. DE
58
CASTRO and PHILIPPINE VIRGINIA
TOBACCO ADMINISTRATION, respondents
Meer, Meer & Meer for petitioner.
The Solicitor General for respondents.
CORTES, J.:
The crux of the instant controversy dwells on the
liability of a bank for releasing its depositor's funds
upon orders of the court, pursuant to a writ of
garnishment. If in compliance with the court order,
the bank delivered the garnished amount to the
sheriff, who in turn delivered it to the judgment
creditor, but subsequently, the order of the court
directing payment was set aside by the same judge,
should the bank be held solidarily liable with the
judgment creditor to its depositor for reimbursement
of the garnished funds? The Court does not think so.
In Civil Case No. Q-12785 of the Court of First
Instance of Rizal, Quezon City Branch IX entitled
"Badoc Planters, Inc. versus Philippine Virginia
Tobacco Administration, et al.," which was an
action for recovery of unpaid tobacco deliveries, an
Order (Partial Judgment) was issued on January 15,
1970 by the Hon. Lourdes P. San Diego, then
Presiding Judge, ordering the defendants therein to
pay jointly and severally, the plaintiff Badoc
Planters, Inc. (hereinafter referred to as "BADOC")
within 48 hours the aggregate amount of
P206,916.76, with legal interests thereon.
On January 26,1970, BADOC filed an Urgent Ex-
Parte Motion for a Writ of Execution of the said
Partial Judgment which was granted on the same
day by the herein respondent judge who acted in
place of the Hon. Judge San Diego who had just
been elevated as a Justice of the Court of Appeals.
Accordingly, the Branch Clerk of Court on the very
same day, issued a Writ of Execution addressed to
Special Sheriff Faustino Rigor, who then issued a
Notice of Garnishment addressed to the General
Manager and/or Cashier of Rizal Commercial
Banking Corporation (hereinafter referred to as
RCBC), the petitioner in this case, requesting a
reply within five (5) days to said garnishment as to
any property which the Philippine Virginia Tobacco
Administration (hereinafter referred to as "PVTA")
might have in the possession or control of petitioner
or of any debts owing by the petitioner to said
defendant. Upon receipt of such Notice, RCBC
notified PVTA thereof to enable the PVTA to take
the necessary steps for the protection of its own
interest [Record on Appeal, p. 36]
Upon an Urgent Ex-Parte Motion dated January 27,
1970 filed by BADOC, the respondent Judge issued
an Order granting the Ex-Parte Motion and directing
the herein petitioner "to deliver in check the amount
garnished to Sheriff Faustino Rigor and Sheriff
Rigor in turn is ordered to cash the check and
deliver the amount to the plaintiff's representative
and/or counsel on record." [Record on Appeal, p.
20; Rollo, p. 5.] In compliance with said Order,
petitioner delivered to Sheriff Rigor a certified
check in the sum of P 206,916.76.
Respondent PVTA filed a Motion for
Reconsideration dated February 26,1970 which was
granted in an Order dated April 6,1970, setting
aside the Orders of Execution and of Payment and
the Writ of Execution and ordering petitioner and
BADOC "to restore, jointly and severally, the
account of PVTA with the said bank in the same
condition and state it was before the issuance of the
aforesaid Orders by reimbursing the PVTA of the
amount of P 206, 916.76 with interests at the legal
rate from January 27, 1970 until fully paid to the
account of the PVTA This is without prejudice to
the right of plaintiff to move for the execution of the
partial judgment pending appeal in case the motion
for reconsideration is denied and appeal is taken
from the said partial judgment." [Record on Appeal,
p. 58]
The Motion for Reconsideration of the said Order of
April 6, 1970 filed by herein petitioner was denied
in the Order of respondent judge dated June 10,
1970 and on June 19, 1970, which was within the
period for perfecting an appeal, the herein petitioner
filed a Notice of Appeal to the Court of Appeals
from the said Orders.
This case was then certified by the Court of Appeals
to this Honorable Court, involving as it does purely
questions of law.
The petitioner raises two principal queries in the
instant case: 1) Whether or not PVTA funds are
public funds not subject to garnishment; and 2)
Whether or not the respondent Judge correctly
ordered the herein petitioner to reimburse the
amount paid to the Special Sheriff by virtue of the
execution issued pursuant to the Order/Partial
Judgment dated January 15, 1970.
The record reveals that on February 2, 1970, private
respondent PVTA filed a Motion for
59
Reconsideration of the Order/ Partial Judgment of
January 15, 1970. This was granted and the
aforementioned Partial Judgment was set aside. The
case was set for hearings on November 4, 9 and 11,
1970 [Rollo, pp. 205-207.] However, in view of the
failure of plaintiff BADOC to appear on the said
dates, the lower court ordered the dismissal of the
case against PVTA for failure to prosecute [Rollo,
p. 208.]
It must be noted that the Order of respondent Judge
dated April 6, 1970 directing the plaintiff to
reimburse PVTA t e amount of P206,916.76 with
interests became final as to said plaintiff who failed
to even file a motion for reconsideration, much less
to appeal from the said Order. Consequently, the
order to restore the account of PVTA with RCBC in
the same condition and state it was before the
issuance of the questioned orders must be upheld as
to the plaintiff, BADOC.
However, the questioned Order of April 6, 1970
must be set aside insofar as it ordered the petitioner
RCBC, jointly and severally with BADOC, to
reimburse PVTA.
The petitioner merely obeyed a mandatory directive
from the respondent Judge dated January 27, 1970,
ordering petitioner 94 "to deliver in check the
amount garnished to Sheriff Faustino Rigor and
Sheriff Rigor is in turn ordered to cash the check
and deliver the amount to the plaintiffs
representative and/or counsel on record." [Record
on Appeal, p. 20.]
PVTA however claims that the manner in which the
bank complied with the Sheriffs Notice of
Garnishment indicated breach of trust and
dereliction of duty on the part of the bank as
custodian of government funds. It insistently urges
that the premature delivery of the garnished amount
by RCBC to the special sheriff even in the absence
of a demand to deliver made by the latter, before the
expiration of the five-day period given to reply to
the Notice of Garnishment, without any reply
having been given thereto nor any prior
authorization from its depositor, PVTA and even if
the court's order of January 27, 1970 did not require
the bank to immediately deliver the garnished
amount constitutes such lack of prudence as to
make it answerable jointly and severally with the
plaintiff for the wrongful release of the money from
the deposit of the PVTA. The respondent Judge in
his controverted Order sustained such contention
and blamed RCBC for the supposed "hasty release
of the amount from the deposit of the PVTA
without giving PVTA a chance to take proper steps
by informing it of the action being taken against its
deposit, thereby observing with prudence the five-
day period given to it by the sheriff." [Rollo, p. 81.]
Such allegations must be rejected for lack of merit.
In the first place, it should be pointed out that
RCBC did not deliver the amount on the strength
solely of a Notice of Garnishment; rather, the
release of the funds was made pursuant to the
aforesaid Order of January 27, 1970. While the
Notice of Garnishment dated January 26, 1970
contained no demand of payment as it was a mere
request for petitioner to withold any funds of the
PVTA then in its possession, the Order of January
27, 1970 categorically required the delivery in
check of the amount garnished to the special sheriff,
Faustino Rigor.
In the second place, the bank had already filed a
reply to the Notice of Garnishment stating that it
had in its custody funds belonging to the PVTA,
which, in fact was the basis of the plaintiff in filing
a motion to secure delivery of the garnished amount
to the sheriff. [See Rollo, p. 93.]
Lastly, the bank, upon the receipt of the Notice of
Garnishment, duly informed PVTA thereof to
enable the latter to take the necessary steps for the
protection of its own interest [Record on Appeal, p.
36]
It is important to stress, at this juncture, that there
was nothing irregular in the delivery of the funds of
PVTA by check to the sheriff, whose custody is
equivalent to the custody of the court, he being a
court officer. The order of the court dated January
27, 1970 was composed of two parts, requiring: 1)
RCBC to deliver in check the amount garnished to
the designated sheriff and 2) the sheriff in turn to
cash the check and deliver the amount to the
plaintiffs representative and/or counsel on record. It
must be noted that in delivering the garnished
amount in check to the sheriff, the RCBC did not
thereby make any payment, for the law mandates
that delivery of a check does not produce the effect
of payment until it has been cashed. [Article 1249,
Civil Code.]
Moreover, by virtue of the order of garnishment, the
same was placed in custodia legis and therefore,
from that time on, RCBC was holding the funds
subject to the orders of the court a quo. That the
60
sheriff, upon delivery of the check to him by RCBC that the Appellate Court erred in not
encashed it and turned over the proceeds thereof to absolving MERALCO, the
the plaintiff was no longer the concern of RCBC as garnishee, from its obligations to
the responsibility over the garnished funds passed to NPC with respect to the payment of
the court. Thus, no breach of trust or dereliction of ECI of P 1,114,543.23, thus in effect
duty can be attributed to RCBC in delivering its subjecting MERALCO to double
depositor's funds pursuant to a court order which liability. MERALCO should not
was merely in the exercise of its power of control have been faulted for its prompt
over such funds. obedience to a writ of garnishment.
... The garnishment of property to Unless there are compelling reasons
satisfy a writ of execution operates such as: a defect on the face of the
as an attachment and fastens upon writ or actual knowledge on the part
the property a lien by which the of the garnishee of lack of
property is brought under the entitlement on the part of the
jurisdiction of the court issuing the garnisher, it is not incumbent upon
writ. It is brought into custodia legis, the garnishee to inquire or to judge
under the sole control of such court for itself whether or not the order for
[De Leon v. Salvador, G.R. Nos. L- the advance execution of a judgment
30871 and L-31603, December is valid.
28,1970, 36 SCRA 567, 574.] Section 8, Rule 57 of the Rules of
The respondent judge however, censured the Court provides:
petitioner for having released the funds "simply on Effect of attachment
the strength of the Order of the court which. far of debts and
from ordering an immediate release of the amount credits.—All persons
involved, merely serves as a standing authority to having in their
make the release at the proper time as prescribed by possession or under
the rules." [Rollo, p. 81.] their control any
This argument deserves no serious consideration. credits or other
As stated earlier, the order directing the bank to similar personal
deliver the amount to the sheriff was distinct and property belonging to
separate from the order directing the sheriff to the party against
encash the said check. The bank had no choice but whom attachment is
to comply with the order demanding delivery of the issued, or owing any
garnished amount in check. The very tenor of the debts to the same, all
order called for immediate compliance therewith. the time of service
On the other hand, the bank cannot be held liable upon them of a copy
for the subsequent encashment of the check as this of the order of
was upon order of the court in the exercise of its attachment and notice
power of control over the funds placed in custodia as provided in the last
legis by virtue of the garnishment. preceding section,
In a recent decision [Engineering Construction Inc., shall be liable to the
v. National Power Corporation, G.R. No. L-34589, applicant for the
June 29, 1988] penned by the now Chief Justice amount of such
Marcelo Fernan, this Court absolved a garnishee credits, debts or other
from any liability for prompt compliance with its property, until the
order for the delivery of the garnished funds. The attachment be
rationale behind such ruling deserves emphasis in discharged, or any
the present case: judgment recovered
But while partial restitution is by him be satisfied,
warranted in favor of NPC, we find unless such property
61
 be delivered or
transferred, or such
debts be paid, to the
clerk, sheriff or other
proper officer of the
court issuing the
attachment.
Garnishment is considered as a
specie of attachment for reaching
credits belonging to the judgment
debtor and owing to him from a
stranger to the litigation. Under the
above-cited rule, the garnishee [the
third person] is obliged to deliver the
credits, etc. to the proper officer
issuing the writ and "the law exempts
from liability the person having in
his possession or under his control
any credits or other personal property
belonging to the defendant, ..., if
such property be delivered or
transferred, ..., to the clerk, sheriff, or
other officer of the court in which the
action is pending. [3 Moran,
Comments on the Rules of Court 34
(1970 ed.)]
Applying the foregoing to the case at bar,
MERALCO, as garnishee, after having been
judicially compelled to pay the amount of the
judgment represented by funds in its possession
belonging to the judgment debtor or NPC, should be
released from all responsibilities over such amount
after delivery thereof to the sheriff. The reason for
the rule is self-evident. To expose garnishees to
risks for obeying court orders and processes would
only undermine the administration of justice.
[Emphasis supplied.]
The aforequoted ruling thus bolsters RCBC's stand
that its immediate compliance with the lower court's
order should not have been met with the harsh
penalty of joint and several liability. Nor can its
liability to reimburse PVTA of the amount delivered
in check be premised upon the subsequent
declaration of nullity of the order of delivery. As
correctly pointed out by the petitioner:
xxx xxx xxx
That the respondent Judge, after his
Order was enforced, saw fit to recall
said Order and decree its nullity,
should not prejudice one who
dutifully abided by it, the
presumption being that judicial
orders are valid and issued in the
regular performance of the duties of
the Court" [Section 5(m) Rule 131,
Revised Rules of Court]. This should
operate with greater force in relation
to the herein petitioner which, not
being a party in the case, was just
called upon to perform an act in
accordance with a judicial flat. A
contrary view will invite disrespect
for the majesty of the law and induce
reluctance in complying with judicial
orders out of fear that said orders
might be subsequently invalidated
and thereby expose one to suffer
some penalty or prejudice for
obeying the same. And this is what
will happen were the controversial
orders to be sustained. We need not
underscore the danger of this as a
precedent.
xxx xxx xxx
[ Brief for the Petitioner, Rollo, p.
212; Emphasis supplied.]
From the foregoing, it may be concluded that the
charge of breach of trust and/or dereliction of duty
as well as lack of prudence in effecting the
immediate payment of the garnished amount is
totally unfounded. Upon receipt of the Notice of
Garnishment, RCBC duly informed PVTA thereof
to enable the latter to take the necessary steps for its
protection. However, right on the very next day
after its receipt of such notice, RCBC was already
served with the Order requiring delivery of the
garnished amount. Confronted as it was with a
mandatory directive, disobedience to which exposed
it to a contempt order, it had no choice but to
comply.
The respondent Judge nevertheless held that the
liability of RCBC for the reimbursement of the
garnished amount is predicated on the ruling of the
Supreme Court in the case of Commissioner of
Public Highways v. Hon. San Diego[G.R. No. L-
30098, February 18, 1970, 31 SCRA 616] which he
found practically on all fours with the case at bar.
The Court disagrees.
The said case which reiterated the rule in Republic
v. Palacio [G.R. No. L-20322, May 29, 1968, 23
62
SCRA 899] that government funds and properties
may not be seized under writs of execution or
garnishment to satisfy such judgment is definitely
distinguishable from the case at bar.
In the Commissioner of Public Highways case
[supra], the bank which precipitately allowed the
garnishment and delivery of the funds failed to
inform its depositor thereof, charged as it was with
knowledge of the nullity of the writ of execution
and notice of garnishment against government
funds. In the aforementioned case, the funds
involved belonged to the Bureau of Public
Highways, which being an arm of the executive
branch of the government, has no personality of its
own separate from the National Government. The
funds involved were government funds covered by
the rule on exemption from execution.
This brings us to the first issue raised by the
petitioner: Are the PVTA funds public funds
exempt from garnishment? The Court holds that
they are not.
Republic Act No. 2265 created the PVTA as an
ordinary corporation with all the attributes of a
corporate entity subject to the provisions of the
Corporation Law. Hence, it possesses the power "to
sue and be sued" and "to acquire and hold such
assets and incur such liabilities resulting directly
from operations authorized by the provisions of this
Act or as essential to the proper conduct of such
operations." [Section 3, Republic Act No. 2265.]
Among the specific powers vested in the PVTA are:
1) to buy Virginia tobacco grown in the Philippines
for resale to local bona fide tobacco manufacturers
and leaf tobacco dealers [Section 4(b), R.A. No.
2265]; 2) to contracts of any kind as may be
necessary or incidental to the attainment of its
purpose with any person, firm or corporation, with
the Government of the Philippines or with any
foreign government, subject to existing laws
[Section 4(h), R.A. No. 22651; and 3) generally, to
exercise all the powers of a corporation under the
Corporation Law, insofar as they are not
inconsistent with the provisions of this Act [Section
4(k), R.A. No. 2265.]
From the foregoing, it is clear that PVTA has been
endowed with a personality distinct and separate
from the government which owns and controls it.
Accordingly, this Court has heretofore declared that
the funds of the PVTA can be garnished since
"funds of public corporation which can sue and be
sued were not exempt from garnishment"
[Philippine National Bank v. Pabalan, G.R. No. L-
33112, June 15, 1978, 83 SCRA 595, 598.]
In National Shipyards and Steel Corp. v. CIR [G.R.
No. L-17874, August 31, 1964, 8 SCRA 781], this
Court held that the allegation to the effect that the
funds of the NASSCO are public funds of the
government and that as such, the same may not be
garnished, attached or levied upon is untenable for,
as a government-owned or controlled corporation, it
has a personality of its own, distinct and separate
from that of the government. This court has likewise
ruled that other govemment-owned and controlled
corporations like National Coal Company, the
National Waterworks and Sewerage Authority
(NAWASA), the National Coconut Corporation
(NACOCO) the National Rice and Corn
Corporation (NARIC) and the Price Stabilization
Council (PRISCO) which possess attributes similar
to those of the PVTA are clothed with personalities
of their own, separate and distinct from that of the
government [National Coal Company v. Collector
of Internal Revenue, 46 Phil. 583 (1924); Bacani
and Matoto v. National Coconut Corporation et al.,
100 Phil. 471 (1956); Reotan v. National Rice &
Corn Corporation, G.R. No. L-16223, February 27,
1962, 4 SCRA 418.] The rationale in vesting it with
a separate personality is not difficult to find. It is
well-settled that when the government enters into
commercial business, it abandons its sovereign
capacity and is to be treated like any other
corporation [Manila Hotel Employees' Association
v. Manila Hotel Co. and CIR, 73 Phil. 734 (1941).]
Accordingly, as emphatically expressed by this
Court in a 1978 decision, "garnishment was the
appropriate remedy for the prevailing party which
could proceed against the funds of a corporate entity
even if owned or controlled by the government"
inasmuch as "by engaging in a particular business
thru the instrumentality of a corporation, the
government divests itself pro hac vice of its
sovereign character, so as to render the corporation
subject to the rules of law governing private
corporations" [Philippine National Bank v. CIR,
G.R No. L-32667, January 31, 1978, 81 SCRA 314,
319.]
Furthermore, in the case of PVTA, the law has
expressly allowed it funds to answer for various
obligations, including the one sought to be enforced
by plaintiff BADOC in this case (i.e. for unpaid
63
deliveries of tobacco). Republic Act No. 4155,
which discounted the erstwhile support given by the
Central Bank to PVTA, established in lieu thereof a
"Tobacco Fund" to be collected from the proceeds
of fifty per centum of the tariff or taxes of imported
leaf tobacco and also fifty per centum of the specific
taxes on locally manufactured Virginia type
cigarettes.
Section 5 of Republic Act No. 4155 provides that
this fund shall be expended for the support or
payment of:
1. Indebtedness of the Philippine
Virginia Tobacco Administration and
the former Agricultural Credit and
Cooperative Financing
Administration to FACOMAS and
farmers and planters regarding
Virginia tobacco transactions in
previous years;
2. Indebtedness of the Philippine
Virginia Tobacco Administration and
the former Agricultural Credit and
Cooperative Financing
Administration to the Central Bank
in gradual amounts regarding
Virginia tobacco transactions in
previous years;
3. Continuation of the Philippine
Virginia Tobacco Administration
support and subsidy
operations including the purchase of
locally grown and produced Virginia
leaf tobacco, at the present support
and subsidy prices, its procurement,
redrying, handling, warehousing and
disposal thereof, and the redrying
plants trading within the purview of
their contracts;
4. Operational, office and field
expenses, and the establishment of
the Tobacco Research and Grading
Institute. [Emphasis supplied.]
Inasmuch as the Tobacco Fund, a special fund, was
by law, earmarked specifically to answer
obligations incurred by PVTA in connection with its
proprietary and commercial operations authorized
under the law, it follows that said funds may be
proceeded against by ordinary judicial processes
such as execution and garnishment. If such funds
cannot be executed upon or garnished pursuant to a
judgment sustaining the liability of the PVTA to
answer for its obligations, then the purpose of the
law in creating the PVTA would be defeated. For it
was declared to be a national policy, with respect to
the local Virginia tobacco industry, to encourage the
production of local Virginia tobacco of the qualities
needed and in quantities marketable in both
domestic and foreign markets, to establish this
industry on an efficient and economic basis, and to
create a climate conducive to local cigarette
manufacture of the qualities desired by the
consuming public, blending imported and native
Virginia leaf tobacco to improve the quality of
locally manufactured cigarettes [Section 1, Republic
Act No. 4155.]
The Commissioner of Public Highways case is thus
distinguishable from the case at bar. In said case,
the Philippine National Bank (PNB) as custodian of
funds belonging to the Bureau of Public Highways,
an agency of the government, was chargeable with
knowledge of the exemption of such government
funds from execution and garnishment pursuant to
the elementary precept that public funds cannot be
disbursed without the appropriation required by law.
On the other hand, the same cannot hold true for
RCBC as the funds entrusted to its custody, which
belong to a public corporation, are in the nature of
private funds insofar as their susceptibility to
garnishment is concerned. Hence, RCBC cannot be
charged with lack of prudence for immediately
complying with the order to deliver the garnished
amount. Since the funds in its custody are precisely
meant for the payment of lawfully-incurred
obligations, RCBC cannot rightfully resist a court
order to enforce payment of such obligations. That
such court order subsequently turned out to have
been erroneously issued should not operate to the
detriment of one who complied with its clear order.
Finally, it is contended that RCBC was bound to
inquire into the legality and propriety of the Writ of
Execution and Notice of Garnishment issued against
the funds of the PVTA deposited with said bank.
But the bank was in no position to question the
legality of the garnishment since it was not even a
party to the case. As correctly pointed out by the
petitioner, it had neither the personality nor the
interest to assail or controvert the orders of
respondent Judge. It had no choice but to obey the
same inasmuch as it had no standing at all to
impugn the validity of the partial judgment rendered
64
in favor of the plaintiff or of the processes issued in
execution of such judgment.
RCBC cannot therefore be compelled to make
restitution solidarily with the plaintiff BADOC.
Plaintiff BADOC alone was responsible for the
issuance of the Writ of Execution and Order of
Payment and so, the plaintiff alone should bear the
consequences of a subsequent annulment of such
court orders; hence, only the plaintiff can be ordered
to restore the account of the PVTA.
WHEREFORE, the petition is hereby granted and
the petitioner is ABSOLVED from any liability to
respondent PVTA for reimbursement of the funds
garnished. The questioned Order of the respondent
Judge ordering the petitioner, jointly and severally
with BADOC, to restore the account of PVTA are
modified accordingly.
SO ORDERED.
65