SECOND DIVISION

[G.R. No. 147800. November 11, 2003]

UNITED COCONUT PLANTERS BANK, petitioner, vs. TEOFILO C. RAMOS, respondent. DECISION CALLEJO, SR., J.: Before us is a petition for review on certiorari of the March 30, 2001 Decision1[1] of the Court of Appeals in CAG.R. CV No. 56737 which affirmed the Decision2[2] of the Regional Trial Court (RTC) of Makati City, Branch 148, in Civil Case No. 94-1822. The Antecedents On December 22, 1983, the petitioner United Coconut Planters Bank (UCPB) granted a loan of P2,800,000 to Zamboanga Development Corporation (ZDC) with Venicio Ramos and the Spouses Teofilo Ramos, Sr. and Amelita Ramos as sureties. Teofilo Ramos, Sr. was the Executive Officer of the Iglesia ni Cristo. In March 1984, the petitioner granted an additional loan to ZDC, again with Venicio Ramos and the Spouses Teofilo Ramos and Amelita Ramos as sureties.3[3] However, the ZDC failed to pay its account to the petitioner despite demands. The latter filed a complaint with the RTC of Makati against the ZDC, Venicio Ramos and the Spouses Teofilo Ramos, Sr. for the collection of the corporations account. The case was docketed as Civil Case No. 16453. On February 15, 1989, the RTC of Makati, Branch 134, rendered judgment in favor of the petitioner and against the defendants. The decretal portion of the decision reads: 1. 2. 3. To pay plaintiff the sum of THREE MILLION ONE HUNDRED FIFTY THOUSAND PESOS (P3,150,000.00) plus interest, penalties and other charges; To pay plaintiff the sum of P20,000.00 for attorneys fees; and To pay the cost of suit.4[4]

The decision became final and executory. On motion of the petitioner, the court issued on December 18, 1990 a writ of execution for the enforcement of its decision ordering Deputy Sheriff Pioquinto P. Villapaa to levy and attach all the real and personal properties belonging to the aforesaid defendants to satisfy the judgment. 5[5] In the writ of execution, the name of one of the defendants was correctly stated as Teofilo Ramos, Sr. To help the Sheriff implement the writ, Atty. Cesar Bordalba, the head of the Litigation and Enforcement Division (LED) of the petitioner, requested Eduardo C. Reniva, an appraiser of the petitioners Credit and

Appraisal Investigation Department (CAID) on July 17, 1992 to ascertain if the defendants had any leviable real and personal property. The lawyer furnished Reniva with a copy of Tax Declaration B-023-07600-R covering a property in Quezon City.6[6] In the course of his investigation, Reniva found that the property was a residential lot, identified as Lot 12, Block 5, Ocampo Avenue, Don Jose Subdivision, Quezon City, with an area of 400 square meters, covered by TCT No. 275167 (PR-13108) under the name of Teofilo C. Ramos, President and Chairman of the Board of Directors of the Ramdustrial Corporation, married to Rebecca F. Ramos.7[7] The property was covered by Tax Declaration No. B-023-07600-R under the names of the said spouses. Reniva went to the property to inspect it and to verify the identity of the owner thereof. He saw workers on the property constructing a bungalow.8[8] However, he failed to talk to the owner of the property. Per information gathered from the neighborhood, Reniva confirmed that the Spouses Teofilo C. Ramos and Rebecca Ramos owned the property. On July 22, 1992, Reniva submitted a report on his appraisal of the property. He stated therein that the fair market value of the property as of August 1, 1992 was P900,000 and that the owner thereof was Teofilo C. Ramos, married to Rebecca Ramos. When appraised by the petitioner of the said report, the Sheriff prepared a notice of levy in Civil Case No. 16453 stating, inter alia, that the defendants were Teofilo Ramos, Sr. and his wife Amelita Ramos and caused the annotation thereof by the Register of Deeds on the said title.9[9] Meanwhile, in August of 1993, Ramdustrial Corporation applied for a loan with the UCPB, a sister company of the petitioner, using the property covered by TCT No. 275167 (PR-13108) as collateral therefor. The Ramdustrial Corporation intended to use the proceeds of the loan as additional capital as it needed to participate in a bidding project of San Miguel Corporation.10[10] In a meeting called for by the UCPB, the respondent was informed that upon verification, a notice of levy was annotated in TCT No. 275167 in favor of the petitioner as plaintiff in Civil Case No. 16453, entitled United Coconut Planters Bank v. Zamboanga Realty Development Corporation, Venicio A. Ramos and Teofilo Ramos, Sr., because of which the bank had to hold in abeyance any action on its loan application. The respondent was shocked by the information. He was not a party in the said case; neither was he aware that his property had been levied by the sheriff in the said case. His blood temperature rose so much that immediately after the meeting, he proceeded to his doctor, Dr. Gatchalian, at the St. Lukes Medical Center, who gave the respondent the usual treatment and medication for cardio-vascular and hypertension problems.11[11] Upon advise from his lawyer, Atty. Carmelito Montano, the respondent executed an affidavit of denial12[12] declaring that he and Teofilo Ramos, Sr., one of the judgment debtors in Civil Case No. 16453, were not one and the same person. On September 30, 1993, the respondent, through counsel, Atty. Carmelito A. Montano, wrote Sheriff Villapaa, informing him that a notice of levy was annotated on the title of the residential lot of the respondent, covered by TCT No. 275167 (PR-13108); and that such annotation was irregular and unlawful considering that the respondent was not Teofilo Ramos, Sr. of Iglesia ni Cristo, the defendant in Civil Case No.

16453. He demanded that Sheriff Villapaa cause the cancellation of the said annotation within five days from notice thereof, otherwise the respondent would take the appropriate civil, criminal or administrative action against him. Appended thereto was the respondents affidavit of denial. For his part, Sheriff Villapaa furnished the petitioner with a copy of the said letter. In a conversation over the phone with Atty. Carmelito Montano, Atty. Cesar Bordalba, the head of the petitioners LED, suggested that the respondent file the appropriate pleading in Civil Case No. 16453 to prove his claim that Atty. Montanos client, Teofilo C. Ramos, was not defendant Teofilo Ramos, Sr., the defendant in Civil Case No. 16453. On October 21, 1993, the respondent was informed by the UCPB that Ramdustrial Corporations credit line application for P2,000,000 had been approved.13[13] Subsequently, on October 22, 1993, the respondent, in his capacity as President and Chairman of the Board of Directors of Ramdustrial Corporation, and Rebecca F. Ramos executed a promissory note for the said amount payable to the UCPB in installments for a period of 180 days.14[14] Simultaneously, the respondent and his wife Rebecca F. Ramos acted as sureties to the loan of Ramdustrial Corporation.15[15] However, the respondent was concerned because when the proceeds of the loan were released, the bidding period for the San Miguel Corporation project had already elapsed. 16[16] As business did not go well, Ramdustrial Corporation found it difficult to pay the loan. It thus applied for an additional loan with the UCPB which was, however, denied. The corporation then applied for a loan with the Planters Development Bank (PDB), the proceeds of which would be used to pay its account to the UCPB. The respondent offered to use his property covered by TCT No. 275167 as collateral for its loan. PDB agreed to pay off the outstanding loan obligation of Ramdustrial Corporation with UCPB, on the condition that the mortgage with the latter would be released. UCPB agreed. Pending negotiations with UCPB, the respondent discovered that the notice of levy annotated on TCT No. 275167 (PR-13108) at the instance of the petitioner had not yet been cancelled.17[17] When apprised thereof, PDB withheld the release of the loan pending the cancellation of the notice of levy. The account of Ramdustrial Corporation with UCPB thus remained outstanding. The monthly amortization on its loan from UCPB became due and remained unpaid. When the respondent went to the petitioner for the cancellation of the notice of levy annotated on his title, the petitioners counsel suggested to the respondent that he file a motion to cancel the levy on execution to enable the court to resolve the issue. The petitioner assured the respondent that the motion would not be opposed. Rather than wait for the petitioner to act, the respondent, through counsel, filed the said motion on April 8, 1994. As promised, the petitioner did not oppose the motion. The court granted the motion and issued an order on April 12, 1994 ordering the Register of Deeds to cancel the levy. The Register of Deeds of Quezon City complied and cancelled the notice of levy.18[18] Despite the cancellation of the notice of levy, the respondent filed, on May 26, 1994, a complaint for damages against the petitioner and Sheriff Villapaa before the RTC of Makati City, raffled to Branch 148 and docketed as Civil Case No. 94-1822. Therein, the respondent (as plaintiff) alleged that he was the owner of a parcel of land covered by TCT No. 275167; that Teofilo Ramos, Sr., one of the judgment debtors of UCPB in Civil Case No. 16453, was only his namesake; that without any legal basis, the petitioner and Sheriff Villapaa caused the

annotation of a notice to levy on the TCT of his aforesaid property which caused the disapproval of his loan from UCPB and, thus made him lose an opportunity to participate in the bidding of a considerable project; that by reason of such wrongful annotation of notice of levy, he suffered sleepless nights, moral shock, mental anguish and almost a heart attack due to high blood pressure. He thus prayed:
WHEREFORE, premises considered, it is most respectfully prayed of the Honorable Regional Trial Court that after due hearing, judgment be rendered in his favor by ordering defendants jointly and severally, to pay as follows: 1. 2. 3. 4. 5. P3,000,000.00 as moral damages; 300,000.00 as exemplary damages; 200,000.00 as actual damages; 200,000.00 as attorneys fees; Cost of suit.19[19]

In its answer, the petitioner, while admitting that it made a mistake in causing the annotation of notice of levy on the TCT of the respondent, denied that it was motivated by malice and bad faith. The petitioner alleged that after ascertaining that it indeed made a mistake, it proposed that the respondent file a motion to cancel levy with a promise that it would not oppose the said motion. However, the respondent dilly-dallied and failed to file the said motion; forthwith, if any damages were sustained by the respondent, it was because it took him quite a long time to file the motion. The petitioner should not thus be made to suffer for the consequences of the respondents delay. The petitioner further asserted that it had no knowledge that there were two persons bearing the same name Teofilo Ramos; it was only when Sheriff Villapaa notified the petitioner that a certain Teofilo C. Ramos who appeared to be the registered owner of TCT No. 275167 that it learned for the first time the notice of levy on the respondents property; forthwith, the petitioner held in abeyance the sale of the levied property at public auction; barred by the failure of the respondent to file a third-party claim in Civil Case No. 16453, the petitioner could not cause the removal of the levy; in lieu thereof, it suggested to the respondent the filing of a motion to cancel levy and that the petitioner will not oppose such motion; surprisingly, it was only on April 12, 1994 that the respondent filed such motion; the petitioner was thus surprised that the respondent filed an action for damages against it for his failure to secure a timely loan from the UCPB and PDB. The petitioner thus prayed:
WHEREFORE, in view of the foregoing premises, it is respectfully prayed of this Honorable Court that judgment be rendered in favor of defendant UCPB, dismissing the complaint in toto and ordering the plaintiff to: 1. 2. pay moral damages in the amount of PESOS: THREE MILLION P3,000,000.00 and exemplary damages in the amount of PESOS: FIVE HUNDRED THOUSAND P500,000.00; pay attorneys fees and litigation expenses in an amount of not less than PESOS: TWO HUNDRED THOUSAND P200,000.00;

Other reliefs and remedies deemed just and equitable under the premises are also prayed for.20[20]

In the meantime, in 1995, PDB released the proceeds of the loan of Ramdustrial Corporation which the latter remitted to UCPB. On March 4, 1997, the RTC rendered a decision in favor of the respondent. The complaint against Sheriff Villapaa was dismissed on the ground that he was merely performing his duties. The decretal part of the decision is herein quoted:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant UCPB, and the latter is hereby ordered to pay the following: (1) P800,000.00 as moral damages;

(2) (3) (4)

P100,000.00 as exemplary damages; P100,000.00 as attorneys fees; Cost of suit.21[21]

The trial court found that contrary to the contention of the petitioner, it acted with caution in looking for leviable properties of the judgment debtors/defendants in Civil Case No. 16453, it proceeded with haste as it did not take into consideration that the defendant Teofilo Ramos was married to Amelita Ramos and had a Sr. in his name, while the respondent was married to Rebecca Ramos and had C for his middle initial. The investigation conducted by CAID appraiser Eduardo C. Reniva did not conclusively ascertain if the respondent and Teofilo Ramos, Sr. were one and the same person. The trial court further stated that while it was Ramdustrial Corporation which applied for a loan with UCPB and PDB, the respondent, as Chairman of Ramdustrial Corporation, with his wife Rebecca Ramos, signed in the promissory note and acted as sureties on the said obligations. Moreover, the property which was levied was the respondents only property where he and his family resided. Thus, the thought of losing it for reasons not of his own doing gave rise to his entitlement to moral damages. The trial court further ruled that the mere fact that the petitioner did not file an opposition to the respondents motion to cancel levy did not negate its negligence and bad faith. However, the court considered the cancellation of annotation of levy as a mitigating factor on the damages caused to the respondent. For failure to show that he suffered actual damages, the court a quo dismissed the respondents claim therefor. Dissatisfied, the petitioner interposed an appeal to the Court of Appeals (CA). On March 30, 2001, the CA rendered a decision affirming, in toto, the decision of the trial court, the decretal portion of which is herein quoted:
WHEREFORE, based on the foregoing premises, the assailed decision is hereby AFFIRMED.22[22]

The CA ruled that the petitioner was negligent in causing the annotation of notice of levy on the title of the petitioner for its failure to determine with certainty whether the defendant Teofilo Ramos, Sr. in Civil Case No. 16453 was the registered owner of the property covered by TCT No. 275167, and to inform the sheriff that the registered owners of the property were the respondent and his wife Rebecca Ramos, and thereafter request for the cancellation of the motion of levy on the property. Disappointed, the petitioner filed this instant petition assigning the following errors:
I IN AFFIRMING THE TRIAL COURTS ORDER, THE COURT OF APPEALS COMMITTED MANIFESTLY MISTAKEN INFERENCES AND EGREGIOUS MISAPPREHENSION OF FACTS AND GRAVE ERRORS OF LAW, CONSIDERING THAT: A. ON THE EVIDENCE, THE BORROWER OF THE LOAN, WHICH RESPONDENT RAMOS CLAIMED HE TRIED TO OBTAIN, WAS RAMDUSTRIAL CORPORATION. HENCE, ANY DAMAGE RESULTING FROM THE ANNOTATION WAS SUFFERED BY THE CORPORATION AND NOT BY RESPONDENT RAMOS. THE DELAY IN THE CANCELLATION OF THE ANNOTATION WAS OF RESPONDENT RAMOSS (SIC) OWN DOING. THE LOAN APPLICATIONS WITH UNITED COCONUT SAVINGS BANK AND PLANTERS DEVELOPMENT BANK WERE GRANTED PRIOR TO THE CANCELLATION OF THE ANNOTATION ON THE TITLE OF THE SUBJECT PROPERTY. II THE COURT OF APPEALS DECISION AFFIRMING THE TRIAL COURTS AWARD OF MORAL

B. C.

DAMAGES TO RESPONDENT RAMOS IN THE AMOUNT OF P800,000 ON A FINDING OF NEGLIGENCE IS CONTRARY TO LAW AND EVIDENCE. A. B. C. UCPB WAS NOT NEGLIGENT WHEN IT CAUSED THE LEVY ON THE SUBJECT PROPERTY. AS A MATTER OF LAW, MORAL DAMAGES CANNOT BE AWARDED ON A FINDING OF MERE NEGLIGENCE. IN ANY EVENT, THE AWARD OF MORAL DAMAGES TO RESPONDENT RAMOS WAS UNREASONABLE AND OPPRESSIVE. III THE AWARD OF EXEMPLARY DAMAGES AND ATTORNEYS FEES IS CONTRARY TO LAW SINCE THE AWARD OF MORAL DAMAGES WAS IMPROPER IN THE FIRST PLACE.23[23]

UCPB prayed that:

WHEREFORE, petitioner UNITED COCONUT PLANTERS BANK respectfully prays that this Honorable Court render judgment reversing and setting aside the Court of Appeals Decision dated 30 March 2001, and ordering the dismissal of respondent Ramos Complaint dated 05 May 1994.24[24]

In his comment, the respondent alleged that the CA did not err in affirming, in toto, the decision of the trial court. He prayed that the petition be denied due course. The issues posed for our resolution are the following: (a) whether or not the petitioner acted negligently in causing the annotation of levy on the title of the respondent; (b) if so, whether or not the respondent was the real party-in-interest as plaintiff to file an action for damages against the petitioner considering that the loan applicant with UCPB and PDB was RAMDUSTRIAL CORPORATION; (c) if so, whether or not the respondent is entitled to moral damages, exemplary damages and attorneys fees. On the first issue, we rule that the petitioner acted negligently when it caused the annotation of the notice of levy in TCT No. 275167. It bears stressing that the petitioner is a banking corporation, a financial institution with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall be used by the institution for its own benefit, for one or more of the purposes of making temporary loans and discounts, of dealing in notes, foreign and domestic bills of exchange, coin bullion, credits, and the remission of money; or with both these powers, and with the privileges, in addition to these basic powers, of receiving special deposits, and making collection for the holders of negotiable paper, if the institution sees fit to engage in such business.25[25] In funding these businesses, the bank invests the money that it holds in trust of its depositors. For this reason, we have held that the business of a bank is one affected with public interest, for which reason the bank should guard against loss due to negligence or bad faith.26[26] In approving the loan of an applicant, the bank concerns itself with proper informations regarding its debtors. The petitioner, as a bank and a financial institution engaged in the grant of loans, is expected to ascertain and verify the identities of the persons it transacts business with. 27[27] In this

case, the petitioner knew that the sureties to the loan granted to ZDC and the defendants in Civil Case No. 94-1822 were the Spouses Teofilo Ramos, Sr. and Amelita Ramos. The names of the Spouses Teofilo Ramos, Sr. and Amelita Ramos were specified in the writ of execution issued by the trial court. The petitioner, with Atty. Bordalba as the Chief of LED and handling lawyer of Civil Case No. 16453, in coordination with the sheriff, caused the annotation of notice of levy in the respondents title despite its knowledge that the property was owned by the respondent and his wife Rebecca Ramos, who were not privies to the loan availment of ZDC nor parties-defendants in Civil Case No. 16453. Even when the respondent informed the petitioner, through counsel, that the property levied by the sheriff was owned by the respondent, the petitioner failed to have the annotation cancelled by the Register of Deeds. In determining whether or not the petitioner acted negligently, the constant test is: Did the defendant in doing the negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.28[28] Considering the testimonial and documentary evidence on record, we are convinced that the petitioner failed to act with the reasonable care and caution which an ordinarily prudent person would have used in the same situation. The petitioner has access to more facilities in confirming the identity of their judgment debtors. It should have acted more cautiously, especially since some uncertainty had been reported by the appraiser whom the petitioner had tasked to make verifications. It appears that the petitioner treated the uncertainty raised by appraiser Eduardo C. Reniva as a flimsy matter. It placed more importance on the information regarding the marketability and market value of the property, utterly disregarding the identity of the registered owner thereof. It should not be amiss to note that the judgment debtors name was Teofilo Ramos, Sr. We note, as the Supreme Court of Washington in 1909 had, that a legal name consists of one given name and one surname or family name, and a mistake in a middle name is not regarded as of consequence. However, since the use of initials, instead of a given name, before a surname, has become a practice, the necessity that these initials be all given and correctly given in court proceedings has become of importance in every case, and in many, absolutely essential to a correct designation of the person intended.29[29] A middle name is very important or even decisive in a case in which the issue is as between two persons who have the same first name and surname, did the act complained of, or is injured or sued or the like.30[30] In this case, the name of the judgment debtor in Civil Case No. 16453 was Teofilo Ramos, Sr., as appearing in the judgment of the court and in the writ of execution issued by the trial court. The name of the owner of the property covered by TCT No. 275167 was Teofilo C. Ramos. It behooved the petitioner to ascertain whether the defendant Teofilo Ramos, Sr. in Civil Case No. 16453 was the same person who appeared as the owner of the property covered by the said title. If the petitioner had done so, it would have surely discovered that the respondent was not the surety and the judgment debtor in Civil Case No. 16453. The petitioner failed to do so, and merely assumed that the respondent and the judgment debtor Teofilo Ramos, Sr. were one and the same person. In sum, we find that the petitioner acted negligently in causing the annotation of notice of levy in the title of the herein respondent, and that its negligence was the proximate cause of the damages sustained by the respondent.

On the second issue, the petitioner insists that the respondent is not the real party-in-interest to file the action for damages, as he was not the one who applied for a loan from UCPB and PDB but Ramdustrial Corporation, of which he was merely the President and Chairman of the Board of Directors. We do not agree. The respondent very clearly stated in his complaint that as a result of the unlawful levy by the petitioner of his property, he suffered sleepless nights, moral shock, and almost a heart attack due to high blood pressure.31[31] It must be underscored that the registered owner of the property which was unlawfully levied by the petitioner is the respondent. As owner of the property, the respondent has the right to enjoy, encumber and dispose of his property without other limitations than those established by law. The owner also has a right of action against the holder and possessor of the thing in order to recover it. 32[32] Necessarily, upon the annotation of the notice of levy on the TCT, his right to use, encumber and dispose of his property was diminished, if not negated. He could no longer mortgage the same or use it as collateral for a loan. Arising from his right of ownership over the said property is a cause of action against persons or parties who have disturbed his rights as an owner. 33[33] As an owner, he is one who would be benefited or injured by the judgment, or who is entitled to the avails of the suit 34[34] for an action for damages against one who disturbed his right of ownership. Hence, regardless of the fact that the respondent was not the loan applicant with the UCPB and PDB, as the registered owner of the property whose ownership had been unlawfully disturbed and limited by the unlawful annotation of notice of levy on his TCT, the respondent had the legal standing to file the said action for damages. In both instances, the respondents property was used as collateral of the loans applied for by Ramdustrial Corporation. Moreover, the respondent, together with his wife, was a surety of the aforesaid loans. While it is true that the loss of business opportunities cannot be used as a reason for an action for damages arising from loss of business opportunities caused by the negligent act of the petitioner, the respondent, as a registered owner whose right of ownership had been disturbed and limited, clearly has the legal personality and cause of action to file an action for damages. Not even the respondents failure to have the annotation cancelled immediately after he came to know of the said wrongful levy negates his cause of action. On the third issue, for the award of moral damages to be granted, the following must exist: (1) there must be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 35[35] In the case at bar, although the respondent was not the loan applicant and the business opportunities lost were those of Ramdustrial Corporation, all four requisites were established. First,

the respondent sustained injuries in that his physical health and cardio-vascular ailment were aggravated; his fear that his one and only property would be foreclosed, hounded him endlessly; and his reputation as mortgagor had been tarnished. Second, the annotation of notice of levy on the TCT of the private respondent was wrongful, arising as it did from the petitioners negligent act of allowing the levy without verifying the identity of its judgment debtor. Third, such wrongful levy was the proximate cause of the respondents misery. Fourth, the award for damages is predicated on Article 2219 of the Civil Code, particularly, number 10 thereof.36[36] Although the respondent was able to establish the petitioners negligence, we cannot, however, allow the award for exemplary damages, absent the private respondents failure to show that the petitioner acted with malice and bad faith. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in a wanton, fraudulent or malevolent manner.37[37] Attorneys fees may be awarded when a party is compelled to litigate or to incur expenses to protect his interest by reason of an unjustified act of the other party. In this case, the respondent was compelled to engage the services of counsel and to incur expenses of litigation in order to protect his interest to the subject property against the petitioners unlawful levy. The award is reasonable in view of the time it has taken this case to be resolved.38[38] In sum, we rule that the petitioner acted negligently in levying the property of the respondent despite doubts as to the identity of the respondent vis--vis its judgment debtor. By reason of such negligent act, a wrongful levy was made, causing physical, mental and psychological injuries on the person of the respondent. Such injuries entitle the respondent to an award of moral damages in the amount of P800,000. No exemplary damages can be awarded because the petitioners negligent act was not tainted with malice and bad faith. By reason of such wrongful levy, the respondent had to hire the services of counsel to cause the cancellation of the annotation; hence, the award of attorneys fees. WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56737 is AFFIRMED WITH MODIFICATION. The award for exemplary damages is deleted. No costs. SO ORDERED.

FIRST DIVISION

[G.R. No. 138569. September 11, 2003]

THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT OF APPEALS and L.C. DIAZ and COMPANY, CPAs, respondents. DECISION

CARPIO, J.: The Case Before us is a petition for review of the Decision 39[1] of the Court of Appeals dated 27 October 1998 and its Resolution dated 11 May 1999. The assailed decision reversed the Decision 40[2] of the Regional Trial Court of Manila, Branch 8, absolving petitioner Consolidated Bank and Trust Corporation, now known as Solidbank Corporation (Solidbank), of any liability. The questioned resolution of the appellate court denied the motion for reconsideration of Solidbank but modified the decision by deleting the award of exemplary damages, attorneys fees, expenses of litigation and cost of suit. The Facts Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private respondent L.C. Diaz and Company, CPAs (L.C. Diaz), is a professional partnership engaged in the practice of accounting. Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank, designated as Savings Account No. S/A 200-16872-6. On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (Macaraya), filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre (Calapre), to deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank passbook. Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips with the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE. Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that somebody got the passbook.41[3] Calapre went back to L.C. Diaz and reported the incident to Macaraya. Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000. Macaraya, together with Calapre, went to Solidbank and presented to Teller No. 6 the deposit slip and check. The teller stamped the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the duplicate copy of the deposit slip. When Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone got the passbook but she could not remember to whom she gave the passbook. When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone shorter than Calapre got the passbook. Calapre was then standing beside Macaraya. Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the deposit of a check for P90,000 drawn on Philippine Banking Corporation (PBC). This PBC check of L.C. Diaz was a check that it had long closed.42[4] PBC subsequently dishonored the check because of insufficient funds and because the signature in the check differed from PBCs specimen signature. Failing to get back the passbook, Macaraya went back to her office and reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez. The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz (Diaz), called up Solidbank to stop any transaction using the same passbook until L.C. Diaz could open a new account.43[5] On the same day, Diaz formally wrote Solidbank to make the same request. It was also on the same day that L.C. Diaz learned of the unauthorized withdrawal the day before, 14 August 1991, of P300,000 from its savings account. The withdrawal slip for the P300,000 bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo
39[1]

Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias, Marina L. Buzon, Godardo A. Jacinto and Candido V. Rivera, concurring, Fourth Division (Special Division of Five Justices). Penned by Judge Felixberto T. Olalia, Jr. Rollo, p. 119. Ibid., p. 229. The account must have been long dormant. Records, p. 9.

40[2]

41[3]

42[4]

43[5]

received the P300,000. In an Information44[6] dated 5 September 1991, L.C. Diaz charged its messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa through Falsification of Commercial Document. The Regional Trial Court of Manila dismissed the criminal case after the City Prosecutor filed a Motion to Dismiss on 4 August 1992. On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the return of its money. Solidbank refused. On 25 August 1992, L.C. Diaz filed a Complaint45[7] for Recovery of a Sum of Money against Solidbank with the Regional Trial Court of Manila, Branch 8. After trial, the trial court rendered on 28 December 1994 a decision absolving Solidbank and dismissing the complaint. L.C. Diaz then appealed46[8] to the Court of Appeals. On 27 October 1998, the Court of Appeals issued its Decision reversing the decision of the trial court. On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for reconsideration of Solidbank. The appellate court, however, modified its decision by deleting the award of exemplary damages and attorneys fees. The Ruling of the Trial Court In absolving Solidbank, the trial court applied the rules on savings account written on the passbook. The rules state that possession of this book shall raise the presumption of ownership and any payment or payments made by the bank upon the production of the said book and entry therein of the withdrawal shall have the same effect as if made to the depositor personally.47[9] At the time of the withdrawal, a certain Noel Tamayo was not only in possession of the passbook, he also presented a withdrawal slip with the signatures of the authorized signatories of L.C. Diaz. The specimen signatures of these persons were in the signature cards. The teller stamped the withdrawal slip with the words Saving Teller No. 5. The teller then passed on the withdrawal slip to Genere Manuel (Manuel) for authentication. Manuel verified the signatures on the withdrawal slip. The withdrawal slip was then given to another officer who compared the signatures on the withdrawal slip with the specimen on the signature cards. The trial court concluded that Solidbank acted with care and observed the rules on savings account when it allowed the withdrawal of P300,000 from the savings account of L.C. Diaz. The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove that the signatures on the withdrawal slip were forged. The trial court admonished L.C. Diaz for not offering in evidence the National Bureau of Investigation (NBI) report on the authenticity of the signatures on the withdrawal slip for P300,000. The trial court believed that L.C. Diaz did not offer this evidence because it is derogatory to its action. Another provision of the rules on savings account states that the depositor must keep the passbook under lock and key.48[10] When another person presents the passbook for withdrawal prior to Solidbanks receipt of the notice of loss of the passbook, that person is considered as the owner of the passbook. The trial court ruled that the passbook presented during the questioned transaction was now out of the lock and key and presumptively ready for a business transaction.49[11] Solidbank did not have any participation in the custody and care of the passbook. The trial court believed that Solidbanks act of allowing the withdrawal of P300,000 was not the direct and proximate cause of the loss. The trial court held that L.C. Diazs negligence caused the unauthorized withdrawal. Three facts establish L.C. Diazs negligence: (1) the possession of the passbook by a person other than the depositor L.C. Diaz; (2) the presentation of a signed withdrawal receipt by an unauthorized person; and (3) the possession by an unauthorized person of a PBC check long closed by L.C. Diaz, which check was deposited on the day of the fraudulent withdrawal. The trial court debunked L.C. Diazs contention that Solidbank did not follow the precautionary procedures
44[6]

Ibid., p. 34. Docketed as Civil Case No. 92-62384. Docketed as CA-G.R. CV No. 49243. Rollo, p. 231. Ibid., p. 233. Ibid., p. 60.

45[7]

46[8]

47[9]

48[10]

49[11]

observed by the two parties whenever L.C. Diaz withdrew significant amounts from its account. L.C. Diaz claimed that a letter must accompany withdrawals of more than P20,000. The letter must request Solidbank to allow the withdrawal and convert the amount to a managers check. The bearer must also have a letter authorizing him to withdraw the same amount. Another person driving a car must accompany the bearer so that he would not walk from Solidbank to the office in making the withdrawal. The trial court pointed out that L.C. Diaz disregarded these precautions in its past withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554 without any separate letter of authorization or any communication with Solidbank that the money be converted into a managers check. The trial court further justified the dismissal of the complaint by holding that the case was a last ditch effort of L.C. Diaz to recover P300,000 after the dismissal of the criminal case against Ilagan. The dispositive portion of the decision of the trial court reads: IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the complaint. The Court further renders judgment in favor of defendant bank pursuant to its counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorneys fees. With costs against plaintiff. SO ORDERED.50[12] The Ruling of the Court of Appeals The Court of Appeals ruled that Solidbanks negligence was the proximate cause of the unauthorized withdrawal of P300,000 from the savings account of L.C. Diaz. The appellate court reached this conclusion after applying the provision of the Civil Code on quasi-delict, to wit: Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this chapter. The appellate court held that the three elements of a quasi-delict are present in this case, namely: (a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff. The Court of Appeals pointed out that the teller of Solidbank who received the withdrawal slip for P300,000 allowed the withdrawal without making the necessary inquiry. The appellate court stated that the teller, who was not presented by Solidbank during trial, should have called up the depositor because the money to be withdrawn was a significant amount. Had the teller called up L.C. Diaz, Solidbank would have known that the withdrawal was unauthorized. The teller did not even verify the identity of the impostor who made the withdrawal. Thus, the appellate court found Solidbank liable for its negligence in the selection and supervision of its employees. The appellate court ruled that while L.C. Diaz was also negligent in entrusting its deposits to its messenger and its messenger in leaving the passbook with the teller, Solidbank could not escape liability because of the doctrine of last clear chance. Solidbank could have averted the injury suffered by L.C. Diaz had it called up L.C. Diaz to verify the withdrawal. The appellate court ruled that the degree of diligence required from Solidbank is more than that of a good father of a family. The business and functions of banks are affected with public interest. Banks are obligated to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship with their clients. The Court of Appeals found Solidbank remiss in its duty, violating its fiduciary relationship with L.C. Diaz. The dispositive portion of the decision of the Court of Appeals reads: WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and a new one entered. 1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to pay plaintiffappellant the sum of Three Hundred Thousand Pesos (P300,000.00), with interest thereon at the rate of 12% per annum from the date of filing of the complaint until paid, the sum of P20,000.00 as exemplary damages, and P20,000.00 as attorneys fees and expenses of litigation

50[12]

Ibid., p. 66.

as well as the cost of suit; and 2. Ordering the dismissal of defendant-appellees counterclaim in the amount of P30,000.00 as attorneys fees.

SO ORDERED.51[13] Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its decision but modified the award of damages. The appellate court deleted the award of exemplary damages and attorneys fees. Invoking Article 223152[14] of the Civil Code, the appellate court ruled that exemplary damages could be granted if the defendant acted with gross negligence. Since Solidbank was guilty of simple negligence only, the award of exemplary damages was not justified. Consequently, the award of attorneys fees was also disallowed pursuant to Article 2208 of the Civil Code. The expenses of litigation and cost of suit were also not imposed on Solidbank. The dispositive portion of the Resolution reads as follows: WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed with modification by deleting the award of exemplary damages and attorneys fees, expenses of litigation and cost of suit. SO ORDERED.53[15] Hence, this petition. The Issues Solidbank seeks the review of the decision and resolution of the Court of Appeals on these grounds: I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANK SHOULD SUFFER THE LOSS BECAUSE ITS TELLER SHOULD HAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE BEFORE IT ALLOWED THE WITHDRAWAL OF P300,000.00 TO RESPONDENTS MESSENGER EMERANO ILAGAN, SINCE THERE IS NO AGREEMENT BETWEEN THE PARTIES IN THE OPERATION OF THE SAVINGS ACCOUNT, NOR IS THERE ANY BANKING LAW, WHICH MANDATES THAT A BANK TELLER SHOULD FIRST CALL UP THE DEPOSITOR BEFORE ALLOWING A WITHDRAWAL OF A BIG AMOUNT IN A SAVINGS ACCOUNT. THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF LAST CLEAR CHANCE AND IN HOLDING THAT PETITIONER BANKS TELLER HAD THE LAST OPPORTUNITY TO WITHHOLD THE WITHDRAWAL WHEN IT IS UNDISPUTED THAT THE TWO SIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP ARE GENUINE AND PRIVATE RESPONDENTS PASSBOOK WAS DULY PRESENTED, AND CONTRARIWISE RESPONDENT WAS NEGLIGENT IN THE SELECTION AND SUPERVISION OF ITS MESSENGER EMERANO ILAGAN, AND IN THE SAFEKEEPING OF ITS CHECKS AND OTHER FINANCIAL DOCUMENTS. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE INSTANT CASE IS A LAST DITCH EFFORT OF PRIVATE RESPONDENT TO RECOVER ITS P300,000.00 AFTER FAILING IN ITS EFFORTS TO RECOVER THE SAME FROM ITS EMPLOYEE EMERANO ILAGAN. THE COURT OF APPEALS ERRED IN NOT MITIGATING THE DAMAGES AWARDED AGAINST PETITIONER UNDER ARTICLE 2197 OF THE CIVIL CODE, NOTWITHSTANDING ITS FINDING THAT PETITIONER BANKS NEGLIGENCE WAS ONLY CONTRIBUTORY.54[16]

II.

III.

IV.

51[13]

Rollo, pp. 49-50. Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. Rollo, p. 43. Ibid., pp. 33-34.

52[14]

53[15]

54[16]

The Ruling of the Court The petition is partly meritorious.

Solidbanks Fiduciary Duty under the Law

The rulings of the trial court and the Court of Appeals conflict on the application of the law. The trial court pinned the liability on L.C. Diaz based on the provisions of the rules on savings account, a recognition of the contractual relationship between Solidbank and L.C. Diaz, the latter being a depositor of the former. On the other hand, the Court of Appeals applied the law on quasi-delict to determine who between the two parties was ultimately negligent. The law on quasi-delict or culpa aquiliana is generally applicable when there is no pre-existing contractual relationship between the parties. We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual. The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan.55[17] Article 1980 of the Civil Code expressly provides that x x x savings x x x deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties. The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 (RA 8791),56[18] which took effect on 13 June 2000, declares that the State recognizes the fiduciary nature of banking that requires high standards of integrity and performance. 57[19] This new provision in the general banking law, introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting with the 1990 case of Simex International v. Court of Appeals,58[20] holding that the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.59[21] This fiduciary relationship means that the banks obligation to observe high standards of integrity and performance is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family.60[22] Section 2 of RA 8791 prescribes the statutory diligence required from banks that banks must observe high standards of integrity and performance in servicing their depositors. Although RA 8791 took effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diazs savings account, jurisprudence61[23] at the time of the withdrawal already imposed on banks the same high standard of diligence required under RA No. 8791.
55[17]

Article 1953 of the Civil Code provides: A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay the creditor an equal amount of the same kind and quality. The General Banking Law of 2000. In the United States, the prevailing rule, as enunciated by the U.S. Supreme Court in Bank of Marin v. England, 385 U.S. 99 (1966), is that the bank-depositor relationship is governed by contract, and the bankruptcy of the depositor does not alter the relationship unless the bank receives notice of the bankruptcy. However, the Supreme Court of some states, like Arizona, have held that banks have more than a contractual duty to depositors, and that a special relationship may create a fiduciary obligation on banks outside of their contract with depositors. See Stewart v. Phoenix National Bank, 49 Ariz. 34, 64 P. 2d 101 (1937); Klein v. First Edina National Bank, 293 Minn. 418, 196 N.W. 2d 619 (1972). G.R. No. 88013, 19 March 1990, 183 SCRA 360. The ruling in Simex International was followed in the following cases: Bank of the Philippine Islands v. Intermediate Appellate Court, G.R. No. 69162, 21 February 1992, 206 SCRA 408; Citytrust Banking Corporation v. Intermediate Appellate Court, G.R. No. 84281, 27 May 1994, 232 SCRA 559; Tan v. Court of Appeals, G.R. No. 108555, 20 December 1994, 239 SCRA 310; Metropolitan Bank & Trust Co. v. Court of Appeals, G.R. No. 112576, 26 October 1994, 237 SCRA 761; Philippine Bank of Commerce v. Court of Appeals, 336 Phil. 667 (1997); Firestone v. Court of Appeals, G.R. No. 113236, 5 March 2001, 353 SCRA 601. The second paragraph of Article 1172 of the Civil Code provides: If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. See notes 20 and 21.

56[18]

57[19]

58[20]

59[21]

60[22]

61[23]

However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust.62[24] The law simply imposes on the bank a higher standard of integrity and performance in complying with its obligations under the contract of simple loan, beyond those required of non-bank debtors under a similar contract of simple loan. The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept deposits to enrich depositors but to earn money for themselves. The law allows banks to offer the lowest possible interest rate to depositors while charging the highest possible interest rate on their own borrowers. The interest spread or differential belongs to the bank and not to the depositors who are not cestui que trust of banks. If depositors are cestui que trust of banks, then the interest spread or income belongs to the depositors, a situation that Congress certainly did not intend in enacting Section 2 of RA 8791.

Solidbanks Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that responsibility arising from negligence in the performance of every kind of obligation is demandable. For breach of the savings deposit agreement due to negligence, or culpa contractual, the bank is liable to its depositor. Calapre left the passbook with Solidbank because the transaction took time and he had to go to Allied Bank for another transaction. The passbook was still in the hands of the employees of Solidbank for the processing of the deposit when Calapre left Solidbank. Solidbanks rules on savings account require that the deposit book should be carefully guarded by the depositor and kept under lock and key, if possible. When the passbook is in the possession of Solidbanks tellers during withdrawals, the law imposes on Solidbank and its tellers an even higher degree of diligence in safeguarding the passbook. Likewise, Solidbanks tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor or his authorized representative. The tellers know, or should know, that the rules on savings account provide that any person in possession of the passbook is presumptively its owner. If the tellers give the passbook to the wrong person, they would be clothing that person presumptive ownership of the passbook, facilitating unauthorized withdrawals by that person. For failing to return the passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high degree of diligence in safeguarding the passbook, and in insuring its return to the party authorized to receive the same. In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption that the defendant was at fault or negligent. The burden is on the defendant to prove that he was not at fault or negligent. In contrast, in culpa aquiliana the plaintiff has the burden of proving that the defendant was negligent. In the present case, L.C. Diaz has established that Solidbank breached its contractual obligation to return the passbook only to the authorized representative of L.C. Diaz. There is thus a presumption that Solidbank was at fault and its teller was negligent in not returning the passbook to Calapre. The burden was on Solidbank to prove that there was no negligence on its part or its employees. Solidbank failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6, the teller with whom Calapre left the passbook and who was supposed to return the passbook to him. The record does not indicate that Teller No. 6 verified the identity of the person who retrieved the passbook. Solidbank also failed to adduce in evidence its standard procedure in verifying the identity of the person retrieving the passbook, if there is such a procedure, and that Teller No. 6 implemented this procedure in the present case. Solidbank is bound by the negligence of its employees under the principle of respondeat superior or command responsibility. The defense of exercising the required diligence in the selection and supervision of employees is not a complete defense in culpa contractual, unlike in culpa aquiliana.63[25] The bank must not only exercise high standards of integrity and performance, it must also insure that its employees do likewise because this is the only way to insure that the bank will comply with its fiduciary duty. Solidbank failed to present the teller who had the duty to return to Calapre the passbook, and thus failed to prove that this teller exercised the high standards of integrity and performance required of Solidbanks employees.

Proximate Cause of the Unauthorized Withdrawal

62[24]

Serrano v. Central Bank, G.R. L-30511, 14 February 1980, 96 SCRA 96. Cangco v. Manila Railroad Co., 38 Phil. 769 (1918); De Guia v. Meralco, 40 Phil. 706 (1920).

63[25]

Another point of disagreement between the trial and appellate courts is the proximate cause of the unauthorized withdrawal. The trial court believed that L.C. Diazs negligence in not securing its passbook under lock and key was the proximate cause that allowed the impostor to withdraw the P300,000. For the appellate court, the proximate cause was the tellers negligence in processing the withdrawal without first verifying with L.C. Diaz. We do not agree with either court. Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred.64[26] Proximate cause is determined by the facts of each case upon mixed considerations of logic, common sense, policy and precedent.65[27] L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in possession of the passbook while it was processing the deposit. After completion of the transaction, Solidbank had the contractual obligation to return the passbook only to Calapre, the authorized representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook to another person. Solidbanks failure to return the passbook to Calapre made possible the withdrawal of the P300,000 by the impostor who took possession of the passbook. Under Solidbanks rules on savings account, mere possession of the passbook raises the presumption of ownership. It was the negligent act of Solidbanks Teller No. 6 that gave the impostor presumptive ownership of the passbook. Had the passbook not fallen into the hands of the impostor, the loss of P300,000 would not have happened. Thus, the proximate cause of the unauthorized withdrawal was Solidbanks negligence in not returning the passbook to Calapre. We do not subscribe to the appellate courts theory that the proximate cause of the unauthorized withdrawal was the tellers failure to call up L.C. Diaz to verify the withdrawal. Solidbank did not have the duty to call up L.C. Diaz to confirm the withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this effect. Even the agreement between Solidbank and L.C. Diaz pertaining to measures that the parties must observe whenever withdrawals of large amounts are made does not direct Solidbank to call up L.C. Diaz. There is no law mandating banks to call up their clients whenever their representatives withdraw significant amounts from their accounts. L.C. Diaz therefore had the burden to prove that it is the usual practice of Solidbank to call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz failed to do so. Teller No. 5 who processed the withdrawal could not have been put on guard to verify the withdrawal. Prior to the withdrawal of P300,000, the impostor deposited with Teller No. 6 the P90,000 PBC check, which later bounced. The impostor apparently deposited a large amount of money to deflect suspicion from the withdrawal of a much bigger amount of money. The appellate court thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to confirm the withdrawal when no law requires this from banks and when the teller had no reason to be suspicious of the transaction. Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank claims that since Ilagan was also a messenger of L.C. Diaz, he was familiar with its teller so that there was no more need for the teller to verify the withdrawal. Solidbank relies on the following statements in the Booking and Information Sheet of Emerano Ilagan: xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and indicated the amount of P90,000 which he deposited in favor of L.C. Diaz and Company. After successfully withdrawing this large sum of money, accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the amount of P1,000 to transport him (Ilagan) to his home province at Bauan, Batangas. Ilagan extravagantly and lavishly spent his money but a big part of his loot was wasted in cockfight and horse racing. Ilagan was apprehended and meekly admitted his guilt.66[28] (Emphasis supplied.) L.C. Diaz refutes Solidbanks contention by pointing out that the person who withdrew the P300,000 was a certain Noel Tamayo. Both the trial and appellate courts stated that this Noel Tamayo presented the passbook with the withdrawal slip. We uphold the finding of the trial and appellate courts that a certain Noel Tamayo withdrew the P300,000. The Court is not a trier of facts. We find no justifiable reason to reverse the factual finding of the trial court and the Court of Appeals. The tellers who processed the deposit of the P90,000 check and the withdrawal of the P300,000 were not presented during trial to substantiate Solidbanks claim that Ilagan deposited the check and made the questioned withdrawal. Moreover, the entry quoted by Solidbank does not categorically state that Ilagan
64[26]

Philippine Bank of Commerce v. Court of Appeals, supra note 21, citing Vda. de Bataclan v. Medina, 102 Phil. 181 (1957). Ibid. Rollo, p. 35.

65[27]

66[28]

presented the withdrawal slip and the passbook.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss.67[29] Stated differently, the antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence.68[30] We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of contract due to negligence in the performance of its contractual obligation to L.C. Diaz. This is a case of culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from liability.69[31] Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate the defendant from his breach of contract.70[32]

Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by the courts, according to the circumstances. This means that if the defendant exercised the proper diligence in the selection and supervision of its employee, or if the plaintiff was guilty of contributory negligence, then the courts may reduce the award of damages. In this case, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands of an impostor. Thus, the liability of Solidbank should be reduced. In Philippine Bank of Commerce v. Court of Appeals,71[33] where the Court held the depositor guilty of contributory negligence, we allocated the damages between the depositor and the bank on a 40-60 ratio. Applying the same ruling to this case, we hold that L.C. Diaz must shoulder 40% of the actual damages awarded by the appellate court. Solidbank must pay the other 60% of the actual damages. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay private respondent L.C. Diaz and Company, CPAs only 60% of the actual damages awarded by the Court of Appeals. The remaining 40% of the actual damages shall be borne by private respondent L.C. Diaz and Company, CPAs. Proportionate costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Vitug, and Ynares-Santiago, JJ., concur. Azcuna, J., on official leave.

G.R. No. 135882 June 27, 2001 MARQUEZ VS. DESIERTO FACTS: Petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto to produce several bank documents for purposes of inspection in camera relative to various accounts maintained at Union Bank of the
67[29]

Philippine Bank of Commerce v. Court of Appeals, supra note 21. Ibid. See note 23. Del Prado v. Manila Electric Co., 52 Phil. 900 (1928-1929). See note 21.

68[30]

69[31]

70[32]

71[33]

Philippines, Julia Vargas Branch, where she is the branch manager. The accounts to be inspected were involved in a case pending with the Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado Lagdameo, et al. The basis of the Ombudsman ordering an in camera inspection of the accounts is a trail managers checks purchased by one George Trivinio, a respondent in OMB-097-0411, pending with the office of the Ombudsman by virtue of its power to investigate and to require the production and inspection of records and documents granted to it by RA No.6770. The Ombudsman issued an order directing petitioner to produce the bank documents relative to accounts in issue in line of her persistent refusal to comply with Ombudsman's order which they sais as an unjustified, and is merely intended to delay the investigation of the case; constitutes disobedience of or resistance to a lawful order issued by this office punishable as Indirect under R.A. 6770. Petitioner together with Union Bank of the Philippines filed a petition for declaratory relief, prohibition and injunctions8 with the Regional Trial Court, Makati City, against the Ombudsman. The lower court denied petitioner's petition. 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). Petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the ground that compliance with the Ombudsmans orders would be in violation of RA. No. 1405. But petitioners motion for reconsideration was dismissed. Hence, the present petition. ISSUE: Whether or not an in camera inspection of the questioned account is allowed as an exception to the law on secrecy of bank deposits (R.A. No.1405) HELD: The order of the Ombudsman to produce for in camera inspection the subject accounts with the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates Authority and AMARI. We rule that before an in camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case. In the case at bar, there is yet no pending litigation before any court of competent authority. Whats 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. Zone of privacy are recognized and protected in our laws. 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. 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 cost

SECOND DIVISION

[G.R. No. 148582. January 16, 2002]

FAR EAST BANK AND TRUST COMPANY, petitioner, vs. ESTRELLA O. QUERIMIT, respondent. DECISION MENDOZA, J.: This is a petition for review on certiorari seeking review of the decision, dated March 6, 2001, and resolution, dated June 19, 2001, of the Court of Appealsi[1] in CA-G.R. CV No. 67147, entitled Estrella O. Querimit v. Far East Bank and Trust Company, which affirmed with modification the decision of the Regional Trial Court, Branch 38, Manila,ii[2] ordering petitioner Far East Bank and Trust Co. (FEBTC) to allow respondent Estrella O. Querimit to withdraw her time deposit with the FEBTC. The facts are as follows: Respondent Estrella O. Querimit worked as internal auditor of the Philippine Savings Bank (PSB) for 19 years, from 1963 to 1992.iii[3] On November 24, 1986, she opened a dollar savings account in petitioners Harrison Plaza branch,iv[4] for which she was issued four (4) Certificates of Deposit (Nos. 79028, 79029, 79030, and 79031), each certificate representing the amount of $15,000.00, or a total amount of $60,000.00. The certificates were to mature in 60 days, on January 23, 1987, and were payable to bearer at 4.5% interest per annum. The certificates bore the word accrued, which meant that if they were not presented for encashment or pre-terminated prior to maturity, the money deposited with accrued interest would be rolled over by the bank and annual interest would accumulate automatically.v[5] The petitioner banks manager assured respondent that her deposit would be renewed and earn interest upon maturity even without the surrender of the certificates if these were not indorsed and withdrawn.vi[6] Respondent kept her dollars in the bank so that they would earn interest and so that she could use the fund after she retired.vii[7] In 1989, respondent accompanied her husband Dominador Querimit to the United States for medical treatment. She used her savings in the Bank of the Philippine Islands (BPI) to pay for the trip and for her husbands medical expenses.viii[8] In January 1993, her husband died and Estrella returned to the Philippines. She went to petitioner FEBTC to withdraw her deposit but, to her dismay, she was told that her husband had withdrawn the money in deposit.ix[9] Through counsel, respondent sent a demand letter to petitioner FEBTC. In another letter, respondent reiterated her request for updating and payment of the certificates of deposit, including interest earned.x[10] As petitioner FEBTC refused respondents demands, the latter filed a complaint, joining in the action Edgardo F. Blanco, Branch Manager of FEBTC Harrison Plaza Branch, and Octavio Espiritu, FEBTC President.xi[11] Petitioner FEBTC alleged that it had given respondents late husband Dominador an accommodation to allow him to withdraw Estrellas deposit.xii[12] Petitioner presented certified true copies of documents showing that payment had been made, to wit: 1. Four FEBTC Harrison Plaza Branch Dollar Demand Drafts Nos. 886694903, 886694904, 886694905 and 886694906 for US$15,110.96 each, allegedly issued by petitioner to respondents husband Dominador after payment on the certificates of deposit;xiii[13] 2. A letter of Alicia de Bustos, branch cashier of FEBTC at Harrison Plaza, dated January 23, 1987, which was sent to Citibank, N.A., Citibank Center, Paseo de Roxas, Makati, Metro Manila, informing the latter that FEBTC had issued the four drafts and requesting Citibank New York to debit from petitioners account $60,443.84, the aggregate value of the four drafts;xiv[14] 3. Citicorp Remittance Service: Daily Summary and Payment Report dated January 23, 1987;xv[15] 4. Debit Ticket dated January 23, 1987, showing the debit of US$60,443.84 or its equivalent at the time of P1,240,912.04 from the FEBTC Harrison Plaza Branch;xvi[16] and 5. An Interbranch Transaction Ticket Register or Credit Ticket dated January 23, 1987 showing that US$60,443.84 or P1,240,912.04 was credited to petitioners International Operation Division (IOD).xvii[17] On May 6, 2000, the trial court rendered judgment for respondent. The dispositive portion of the decision stated: WHEREFORE, judgment is hereby rendered in favor of plaintiff [Estrella O. Querimit] and against defendants [FEBTC et al.]: 1. ORDERING defendants to allow plaintiff to withdraw her U.S.$ Time Deposit of $60,000.00 plus

accrued interests; 2. 3. 4. 5. ORDERING defendants to pay moral damages in the amount of P50,000.00; ORDERING defendants to pay exemplary damages in the amount of P50,000.00; ORDERING defendants to pay attorneys fees in the amount of P100,000.00 plus P10,000.00 per appearance of counsel; and ORDERING defendants to pay the costs of the suit. SO ORDERED.xviii[18] On May 15, 2000, petitioner appealed to the Court of Appeals which, on March 6, 2001, affirmed through its Fourteenth Division the decision of the trial court, with the modification that FEBTC was declared solely liable for the amounts adjudged in the decision of the trial court. The appeals court stated that petitioner FEBTC failed to prove that the certificates of deposit had been paid out of its funds, since the evidence by the [respondent] stands unrebutted that the subject certificates of deposit until now remain unindorsed, undelivered and unwithdrawn by [her].xix[19] But the Court of Appeals held that the individual defendants, Edgardo F. Blanco, FEBTC-Harrison Plaza Branch Manager, and Octavio Espiritu, FEBTC President, could not be held solidarily liable with the FEBTC because the latter has a personality separate from its officers and stockholders. xx[20] Hence this appeal. As stated by the Court of Appeals, the main issue in this case is whether the subject certificates of deposit have already been paid by petitioner.xxi[21] Petitioner contends thatI. Petitioner is not liable to respondent for the value of the four (4) Certificates of Deposit, including the interest thereon as well as moral and exemplary damages, attorneys and appearance fees. II. The aggregate value - both principal and interest earned at maturity - of the four (4) certificates of deposit was already paid to or withdrawn at maturity by the late Dominador Querimit who was the respondents deceased husband. III. Respondent is guilty of laches since the four (4) certificates of deposit were all issued on 24 November 1986 but she attempted to withdraw their aggregate value on 29 July 1996 only on or after the lapse of more than nine (9) years and eight (8) months. IV. Respondent is not liable to petitioner for attorneys fees.xxii[22] After reviewing the records, we find the petition to be without merit. First. Petitioner bank failed to prove that it had already paid Estrella Querimit, the bearer and lawful holder of the subject certificates of deposit. The finding of the trial court on this point, as affirmed by the Court of Appeals, is that petitioner did not pay either respondent Estrella or her husband the amounts evidenced by the subject certificates of deposit. This Court is not a trier of facts and generally does not weigh anew the evidence already passed upon by the Court of Appeals.xxiii[23] The finding of respondent court which shows that the subject certificates of deposit are still in the possession of Estrella Querimit and have not been indorsed or delivered to petitioner FEBTC is substantiated by the record and should therefore stand. xxiv[24] A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a sum of money on deposit which the bank or banker promises to pay to the depositor, to the order of the depositor, or to some other person or his order, whereby the relation of debtor and creditor between the bank and the depositor is created. The principles governing other types of bank deposits are applicable to certificates of deposit,xxv[25] as are the rules governing promissory notes when they contain an unconditional promise to pay a sum certain of money absolutely.xxvi[26] The principle that payment, in order to discharge a debt, must be made to someone authorized to receive it is applicable to the payment of certificates of deposit. Thus, a bank will be protected in making payment to the holder of a certificate indorsed by the payee, unless it has notice of the invalidity of the indorsement or the holders want of title.xxvii[27] A bank acts at its peril when it pays deposits evidenced by a certificate of deposit, without its production and surrender after proper indorsement. xxviii[28] As a rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.xxix[29] In this case, the certificates of deposit were clearly marked payable to bearer, which means, to [t]he person in possession of an instrument, document of title or security payable to bearer or indorsed in blank.xxx[30] Petitioner should not have paid respondents husband or any third party without requiring the surrender of the certificates of deposit.

Petitioner claims that it did not demand the surrender of the subject certificates of deposit since respondents husband, Dominador Querimit, was one of the banks senior managers. But even long after respondents husband had allegedly been paid respondents deposit and before his retirement from service, the FEBTC never required him to deliver the certificates of deposit in question.xxxi[31] Moreover, the accommodation given to respondents husband was made in violation of the banks policies and procedures.xxxii[32] Petitioner FEBTC thus failed to exercise that degree of diligence required by the nature of its business.xxxiii[33] Because the business of banks is impressed with public interest, the degree of diligence required of banks is more than that of a good father of the family or of an ordinary business firm. The fiduciary nature of their relationship with their depositors requires them to treat the accounts of their clients with the highest degree of care.xxxiv[34] A bank is under obligation to treat the accounts of its depositors with meticulous care whether such accounts consist only of a few hundred pesos or of millions of pesos. Responsibility arising from negligence in the performance of every kind of obligation is demandable.xxxv[35] Petitioner failed to prove payment of the subject certificates of deposit issued to the respondent and, therefore, remains liable for the value of the dollar deposits indicated thereon with accrued interest. Second. The equitable principle of laches is not sufficient to defeat the rights of respondent over the subject certificates of deposit. Laches is the failure or neglect, for an unreasonable length of time, to do that which, by exercising due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.xxxvi[36] There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances. The question of laches is addressed to the sound discretion of the court and, being an equitable doctrine, its application is controlled by equitable considerations. It cannot be used to defeat justice or perpetrate fraud and injustice. Courts will not be guided or bound strictly by the statute of limitations or the doctrine of laches when to do so, manifest wrong or injustice would result.xxxvii[37] In this case, it would be unjust to allow the doctrine of laches to defeat the right of respondent to recover her savings which she deposited with the petitioner. She did not withdraw her deposit even after the maturity date of the certificates of deposit precisely because she wanted to set it aside for her retirement. She relied on the banks assurance, as reflected on the face of the instruments themselves, that interest would accrue or accumulate annually even after their maturity.xxxviii[38] Third. Respondent is entitled to moral damages because of the mental anguish and humiliation she suffered as a result of the wrongful refusal of the FEBTC to pay her even after she had delivered the certificates of deposit.xxxix[39] In addition, petitioner FEBTC should pay respondent exemplary damages, which the trial court imposed by way of example or correction for the public good.xl[40] Finally, respondent is entitled to attorneys fees since petitioners act or omission compelled her to incur expenses to protect her interest, making such award just and equitable.xli[41] However, we find the award of attorneys fees to be excessive and accordingly reduce it to P20,000.00.xlii[42] WHEREFORE, premises considered, the present petition is hereby DENIED and the Decision in CA-G.R. CV No. 67147 AFFIRMED, with the modification that the award of attorneys fees is reduced to P20,000.00. SO ORDERED. Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

SECOND DIVISION

[G.R. No. 125359. September 4, 2001]

ROBERTO S. BENEDICTO and HECTOR T. RIVERA, petitioners, vs. THE COURT OF APPEALS, HON. GUILLERMO L. LOJA, SR., PRESIDING JUDGE, REGIONAL TRIAL COURT OF MANILA, BRANCH 26, and PEOPLE OF THE PHILIPPINES, respondents. DECISION

QUISUMBING, J.: Assailed in this petition is the consolidated decision rendered on May 23, 1996, by the Court of Appeals in CAG.R. SP No. 35928 and CA-G.R. SP No. 35719. CA-G.R. SP No. 35928 had affirmed the order dated September 6, 1994, of the Regional Trial Court, Manila, Branch 26, insofar as it denied petitioners respective Motions to Quash the Informations in twenty-five (25) criminal cases for violation of Central Bank Circular No. 960. Therein included were informations involving: (a) consolidated Criminal Cases Nos. 91-101879 to 91-101883 filed against Mrs. Imelda R. Marcos, Roberto S. Benedicto, and Hector T. Rivera; (b) consolidated Criminal Cases Nos. 91101884 to 91-101892 filed against Mrs. Marcos and Benedicto; and (c) Criminal Cases Nos. 92-101959 to 92-101969 also against Mrs. Marcos and Benedicto. Note, however, that the Court of Appeals already dismissed Criminal Case No. 91-101884. The factual antecedents of the instant petition are as follows: On December 27, 1991, Mrs. Imelda Marcos and Messrs. Benedicto and Rivera were indicted for violation of Section 10 of Circular No. 960xliii[1] in relation to Section 34xliv[2] of the Central Bank Act (Republic Act No. 265, as amended) in five Informations filed with the Regional Trial Court of Manila. Docketed as Criminal Cases Nos. 91101879 to 91-101883, the charge sheets alleged that the trio failed to submit reports of their foreign exchange earnings from abroad and/or failed to register with the Foreign Exchange Department of the Central Bank within the period mandated by Circular No. 960. Said Circular prohibited natural and juridical persons from maintaining foreign exchange accounts abroad without prior authorization from the Central Bank.xlv[3] It also required all residents of the Philippines who habitually earned or received foreign currencies from invisibles, either locally or abroad, to report such earnings or receipts to the Central Bank. Violations of the Circular were punishable as a criminal offense under Section 34 of the Central Bank Act. That same day, nine additional Informations charging Mrs. Marcos and Benedicto with the same offense, but involving different accounts, were filed with the Manila RTC, which docketed these as Criminal Cases Nos. 91101884 to 91-101892. The accusatory portion of the charge sheet in Criminal Case No. 91-101888 reads: That from September 1, 1983 up to 1987, both dates inclusive, and for sometime thereafter, both accused, conspiring and confederating with each other and with the late President Ferdinand E. Marcos, all residents of Manila, Philippines, and within the jurisdiction of this Honorable Court, did then and there wilfully, unlawfully and feloniously fail to submit reports in the prescribed form and/or register with the Foreign Exchange Department of the Central Bank within 90 days from October 21, 1983 as required of them being residents habitually/customarily earning, acquiring or receiving foreign exchange from whatever source or from invisibles locally or from abroad, despite the fact they actually earned interests regularly every six (6 ) months for the first two years and then quarterly thereafter for their investment of $50-million, later reduced to $25-million in December 1985, in Philippine-issued dollar denominated treasury notes with floating rates and in bearer form, in the name of Bank Hofmann, AG, Zurich, Switzerland, for the benefit of Avertina Foundation, their front organization established for economic advancement purposes with secret foreign exchange account Category (Rubric) C.A.R. No. 211 92502 211 925-02 in Swiss Credit Bank (also known as SKA) in Zurich, Switzerland, which earned, acquired or received for the accused Imelda Romualdez Marcos and her late husband an interest of $2,267,892 as of December 16, 1985 which was remitted to Bank Hofmann, AG, through Citibank, New York, United States of America, for the credit of said Avertina account on December 19, 1985, aside from the redemption of $25 million (one-half of the original $50-M) as of December 16, 1985 and outwardly remitted from the Philippines in the amounts of $7,495,297.49 and $17,489,062.50 on December 18, 1985 for further investment outside the Philippines without first complying with the Central Bank reporting/registering requirements. CONTRARY TO LAW.xlvi[4] The other charge sheets were similarly worded except the days of the commission of the offenses, the name(s) of the alleged dummy or dummies, the amounts in the foreign exchange accounts maintained, and the names of the foreign banks where such accounts were held by the accused. On January 3, 1992, eleven more Informations accusing Mrs. Marcos and Benedicto of the same offense, again in relation to different accounts, were filed with the same court, docketed as Criminal Cases Nos. 92-101959 to 92101969. The Informations were similarly worded as the earlier indictments, save for the details as to the dates of the violations of Circular No. 960, the identities of the dummies used, the balances and sources of the earnings, and the names of the foreign banks where these accounts were maintained. All of the aforementioned criminal cases were consolidated before Branch 26 of the said trial court. On the same day that Criminal Cases Nos. 92-101959 to 92-101969 were filed, the Central Bank issued Circular No. 1318xlvii[5] which revised the rules governing non-trade foreign exchange transactions. It took effect on January 20, 1992.

On August 24, 1992, the Central Bank, pursuant to the governments policy of further liberalizing foreign exchange transactions, came out with Circular No. 1353,xlviii[6] which amended Circular No. 1318. Circular No. 1353 deleted the requirement of prior Central Bank approval for foreign exchange-funded expenditures obtained from the banking system. Both of the aforementioned circulars, however, contained a saving clause, excepting from their coverage pending criminal actions involving violations of Circular No. 960 and, in the case of Circular No. 1353, violations of both Circular No. 960 and Circular No. 1318. On September 19, 1993, the government allowed petitioners Benedicto and Rivera to return to the Philippines, on condition that they face the various criminal charges instituted against them, including the dollar-salting cases. Petitioners posted bail in the latter cases. On February 28, 1994, petitioners Benedicto and Rivera were arraigned. Both pleaded not guilty to the charges of violating Central Bank Circular No. 960. Mrs. Marcos had earlier entered a similar plea during her arraignment for the same offense on February 12, 1992. On August 11, 1994, petitioners moved to quash all the Informations filed against them in Criminal Cases Nos. 91-101879 to 91-101883; 91-101884 to 91-101892, and 91-101959 to 91-101969. Their motion was grounded on lack of jurisdiction, forum shopping, extinction of criminal liability with the repeal of Circular No. 960, prescription, exemption from the Central Banks reporting requirement, and the grant of absolute immunity as a result of a compromise agreement entered into with the government. On September 6, 1994, the trial court denied petitioners motion. A similar motion filed on May 23, 1994 by Mrs. Marcos seeking to dismiss the dollar-salting cases against her due to the repeal of Circular No. 960 had earlier been denied by the trial court in its order dated June 9, 1994. Petitioners then filed a motion for reconsideration, but the trial court likewise denied this motion on October 18, 1994. On November 21, 1994, petitioners moved for leave to file a second motion for reconsideration. The trial court, in its order of November 23, 1994, denied petitioners motion and set the consolidated cases for trial on January 5, 1995. Two separate petitions for certiorari and prohibition, with similar prayers for temporary restraining orders and/or writs of preliminary injunction, docketed as CA-G.R. SP No. 35719 and CA-G.R. SP No. 35928, were respectively filed by Mrs. Marcos and petitioners with the Court of Appeals. Finding that both cases involved violations of Central Bank Circular No. 960, the appellate court consolidated the two cases. On May 23, 1996, the Court of Appeals disposed of the consolidated cases as follows: WHEREFORE, finding no grave abuse of discretion on the part of respondent Judge in denying petitioners respective Motions to Quash, except that with respect to Criminal Case No. 91-101884, the instant petitions are hereby DISMISSED for lack of merit. The assailed September 6, 1994 Order, in so far as it denied the Motion to Quash Criminal Case No. 91-101884 is hereby nullified and set aside, and said case is hereby dismissed. Costs against petitioners. SO ORDERED.xlix[7] Dissatisfied with the said decision of the court a quo, except with respect to the portion ordering the dismissal of Criminal Case No. 91-101884, petitioners filed the instant petition, attributing the following errors to the appellate court: THAT THE COURT ERRED IN NOT FINDING THAT THE INFORMATIONS/CASES FILED AGAINST PETITIONERS-APPELLANTS ARE QUASHABLE BASED ON THE FOLLOWING GROUNDS: (A) LACK OF INVESTIGATION (B) JURISDICTION/FORUM SHOPPING/NO VALID PRELIMINARY

EXTINCTION OF CRIMINAL LIABILITY 1) REPEAL OF CB CIRCULAR NO. 960 BY CB CIRCULAR NO. 1353; 2) REPEAL OF R.A. 265 BY R.A. 7653l[8]

(C) (D) (E)

PRESCRIPTION EXEMPTION FROM CB REPORTING REQUIREMENT GRANT OF ABSOLUTE IMMUNITY.li[9]

Simply stated, the issues for our resolution are:

(1) Did the Court of Appeals err in denying the Motion to Quash for lack of jurisdiction on the part of the trial court, forum shopping by the prosecution, and absence of a valid preliminary investigation? (2) Did the repeal of Central Bank Circular No. 960 and Republic Act No. 265 by Circular No. 1353 and Republic Act No. 7653 respectively, extinguish the criminal liability of petitioners? (3) Had the criminal cases in violation of Circular No. 960 already prescribed? (4) Were petitioners exempted from the application and coverage of Circular No. 960? (5) Were petitioners' alleged violations of Circular No. 960 covered by the absolute immunity granted in the Compromise Agreement of November 3, 1990? On the first issue, petitioners assail the jurisdiction of the Regional Trial Court. They aver that the dollar-salting charges filed against them were violations of the Anti-Graft Law or Republic Act No. 3019, and the Sandiganbayan has original and exclusive jurisdiction over their cases. Settled is the rule that the jurisdiction of a court to try a criminal case is determined by the law in force at the time the action is instituted.lii[10] The 25 cases were filed in 1991-92. The applicable law on jurisdiction then was Presidential Decree 1606.liii[11] Under P.D. No. 1606, offenses punishable by imprisonment of not more than six years fall within the jurisdiction of the regular trial courts, not the Sandiganbayan.liv[12] In the instant case, all the Informations are for violations of Circular No. 960 in relation to Section 34 of the Central Bank Act and not, as petitioners insist, for transgressions of Republic Act No. 3019. Pursuant to Section 34 of Republic Act No. 265, violations of Circular No. 960 are punishable by imprisonment of not more than five years and a fine of not more than P20,000.00. Since under P.D. No. 1606 the Sandiganbayan has no jurisdiction to try criminal cases where the imposable penalty is less than six years of imprisonment, the cases against petitioners for violations of Circular No. 960 are, therefore, cognizable by the trial court. No error may thus be charged to the Court of Appeals when it held that the RTC of Manila had jurisdiction to hear and try the dollar-salting cases. Still on the first issue, petitioners next contend that the filing of the cases for violations of Circular No. 960 before the RTC of Manila constitutes forum shopping. Petitioners argue that the prosecution, in an attempt to seek a favorable verdict from more than one tribunal, filed separate cases involving virtually the same offenses before the regular trial courts and the Sandiganbayan. They fault the prosecution with splitting the cases. Petitioners maintain that while the RTC cases refer only to the failure to report interest earnings on Treasury Notes, the Sandiganbayan cases seek to penalize the act of receiving the same interest earnings on Treasury Notes in violation of the AntiGraft Laws provisions on prohibited transactions. Petitioners aver that the violation of Circular No. 960 is but an element of the offense of prohibited transactions punished under Republic Act No. 3019 and should, thus, be deemed absorbed by the prohibited transactions cases pending before the Sandiganbayan. For a charge of forum shopping to prosper, there must exist between an action pending in one court and another action before another court: (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.lv[13] Here, we find that the single act of receiving unreported interest earnings on Treasury Notes held abroad constitutes an offense against two or more distinct and unrelated laws, Circular No. 960 and R.A. 3019. Said laws define distinct offenses, penalize different acts, and can be applied independently.lvi[14] Hence, no fault lies at the prosecutions door for having instituted separate cases before separate tribunals involving the same subject matter. With respect to the RTC cases, the receipt of the interest earnings violate Circular No. 960 in relation to Republic Act No. 265 because the same was unreported to the Central Bank. The act to be penalized here is the failure to report the interest earnings from the foreign exchange accounts to the proper authority. As to the antigraft cases before the Sandiganbayan involving the same interest earnings from the same foreign exchange accounts, the receipt of the interest earnings transgresses Republic Act No. 3019 because the act of receiving such interest is a prohibited transaction prejudicial to the government. What the State seeks to punish in these anti-graft cases is the prohibited receipt of the interest earnings. In sum, there is no identity of offenses charged, and prosecution under one law is not an obstacle to a prosecution under the other law. There is no forum shopping. Finally, on the first issue, petitioners contend that the preliminary investigation by the Department of Justice was invalid and in violation of their rights to due process. Petitioners argue that governments ban on their travel effectively prevented them from returning home and personally appearing at the preliminary investigation. Benedicto and Rivera further point out that the joint preliminary investigation by the Department of Justice, resulted to the charges in one set of cases before the Sandiganbayan for violations of Republic Act No. 3019 and another set before the RTC for violation of Circular No. 960. Preliminary investigation is not part of the due process guaranteed by the Constitution. lvii[15] It is an inquiry to

determine whether there is sufficient ground to engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof.lviii[16] Instead, the right to a preliminary investigation is personal. It is afforded to the accused by statute, and can be waived, either expressly or by implication.lix[17] The waiver extends to any irregularity in the preliminary investigation, where one was conducted. The petition in the present case contains the following admissions: 1. Allowed to return to the Philippines on September 19, 1993on the condition that he face the criminal charges pending in courts, petitioner-appellant Benedicto, joined by his co-petitioner Rivera, lost no time in attending to the pending criminal charges by posting bail in the above-mentioned cases. 2. Not having been afforded a real opportunity of attending the preliminary investigation because of their forced absence from the Philippines then, petitioners-appellants invoked their right to due process thru motions for preliminary investigationUpon denial of their demands for preliminary investigation, the petitioners intended to elevate the matter to the Honorable Court of Appeals and actually caused the filing of a petition for certiorari/prohibition sometime before their arraignment but immediately caused the withdrawal thereofin view of the prosecutions willingness to go to pre-trial wherein petitioners would be allowed access to the records of preliminary investigation which they could use for purposes of filing a motion to quash if warranted. 3. Thus, instead of remanding the Informations to the Department of Justicerespondent Judge set the case for pre-trial in order to afford all the accused access to the records of the prosecution xxx 5. On the basis of disclosures at the pre-trial, the petitioners-appellants Benedicto and Rivera moved for the quashing of the informations/caseslx[18] The foregoing admissions lead us to conclude that petitioners have expressly waived their right to question any supposed irregularity in the preliminary investigation or to ask for a new preliminary investigation. Petitioners, in the above excerpts from this petition, admit posting bail immediately following their return to the country, entered their respective pleas to the charges, and filed various motions and pleadings. By so doing, without simultaneously demanding a proper preliminary investigation, they have waived any and all irregularities in the conduct of a preliminary investigation.lxi[19] The trial court did not err in denying the motion to quash the informations on the ground of want of or improperly conducted preliminary investigation. The absence of a preliminary investigation is not a ground to quash the information.lxii[20] On the second issue, petitioners contend that they are being prosecuted for acts punishable under laws that have already been repealed. They point to the express repeal of Central Bank Circular No. 960 by Circular Nos. 1318 and 1353 as well as the express repeal of Republic Act No. 265 by Republic Act No. 7653. Petitioners, relying on Article 22 of the Revised Penal Code,lxiii[21] contend that repeal has the effect of extinguishing the right to prosecute or punish the offense committed under the old laws.lxiv[22] As a rule, an absolute repeal of a penal law has the effect of depriving a court of its authority to punish a person charged with violation of the old law prior to its repeal.lxv[23] This is because an unqualified repeal of a penal law constitutes a legislative act of rendering legal what had been previously declared as illegal, such that the offense no longer exists and it is as if the person who committed it never did so. There are, however, exceptions to the rule. One is the inclusion of a saving clause in the repealing statute that provides that the repeal shall have no effect on pending actions.lxvi[24] Another exception is where the repealing act reenacts the former statute and punishes the act previously penalized under the old law. In such instance, the act committed before the reenactment continues to be an offense in the statute books and pending cases are not affected, regardless of whether the new penalty to be imposed is more favorable to the accused.lxvii[25] In the instant case, it must be noted that despite the repeal of Circular No. 960, Circular No. 1353 retained the same reportorial requirement for residents receiving earnings or profits from non-trade foreign exchange transactions.lxviii[26] Second, even the most cursory glance at the repealing circulars, Circular Nos. 1318 and 1353 shows that both contain a saving clause, expressly providing that the repeal of Circular No. 960 shall have no effect on pending actions for violation of the latter Circular.lxix[27] A saving clause operates to except from the effect of the repealing law what would otherwise be lost under the new law.lxx[28] In the present case, the respective saving clauses of Circular Nos. 1318 and 1353 clearly manifest the intent to reserve the right of the State to prosecute and punish offenses for violations of the repealed Circular No. 960, where the cases are either pending or under investigation. Petitioners, however, insist that the repeal of Republic Act No. 265, particularly Section 34,lxxi[29] by Republic Act No. 7653, removed the applicability of any penal sanction for violations of any non-trade foreign exchange transactions previously penalized by Circular No. 960. Petitioners posit that a comparison of the two provisions shows that Section 36lxxii[30] of Republic Act No. 7653 neither retained nor reinstated Section 34 of Republic Act No. 265. Since, in creating the Bangko Sentral ng Pilipinas, Congress did not include in its charter a clause providing for the application of Section 34 of Republic Act No. 265 to pending cases, petitioners pending dollar-salting cases are

now bereft of statutory penalty, the saving clause in Circular No. 1353 notwithstanding. In other words, absent a provision in Republic Act No. 7653 expressly reviving the applicability of any penal sanction for the repealed mandatory foreign exchange reporting regulations formerly required under Circular No. 960, violations of aforesaid repealed Circular can no longer be prosecuted criminally. A comparison of the old Central Bank Act and the new Bangko Sentrals charter repealing the former show that in consonance with the general objective of the old law and the new law to maintain internal and external monetary stability in the Philippines and preserve the international value of the peso, lxxiii[31] both the repealed law and the repealing statute contain a penal clause which sought to penalize in general, violations of the law as well as orders, instructions, rules, or regulations issued by the Monetary Board. In the case of the Bangko Sentral, the scope of the penal clause was expanded to include violations of other pertinent banking laws enforced or implemented by the Bangko Sentral. In the instant case, the acts of petitioners sought to be penalized are violations of rules and regulations issued by the Monetary Board. These acts are proscribed and penalized in the penal clause of the repealed law and this proviso for proscription and penalty was reenacted in the repealing law. We find, therefore, that while Section 34 of Republic Act No. 265 was repealed, it was nonetheless, simultaneously reenacted in Section 36 of Republic Act No. 7653. Where a clause or provision or a statute for that matter is simultaneously repealed and reenacted, there is no effect, upon the rights and liabilities which have accrued under the original statute, since the reenactment, in effect neutralizes the repeal and continues the law in force without interruption. lxxiv[32] The rule applies to penal laws and statutes with penal provisions. Thus, the repeal of a penal law or provision, under which a person is charged with violation thereof and its simultaneous reenactment penalizing the same act done by him under the old law, will neither preclude the accuseds prosecution nor deprive the court of its jurisdiction to hear and try his case.lxxv[33] As pointed out earlier, the act penalized before the reenactment continues to remain an offense and pending cases are unaffected. Therefore, the repeal of Republic Act No. 265 by Republic Act No. 7653 did not extinguish the criminal liability of petitioners for transgressions of Circular No. 960 and cannot, under the circumstances of this case, be made a basis for quashing the indictments against petitioners. Petitioners, however, point out that Section 36 of Republic Act No. 7653, in reenacting Section 34 of the old Central Act, increased the penalty for violations of rules and regulations issued by the Monetary Board. They claim that such increase in the penalty would give Republic Act No. 7653 an ex post facto application, violating the Bill of Rights.lxxvi[34] Is Section 36 of Republic Act No. 7653 an ex post facto legislation? An ex post facto law is one which: (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.lxxvii[35] The test whether a penal law runs afoul of the ex post facto clause of the Constitution is: Does the law sought to be applied retroactively take from an accused any right that was regarded at the time of the adoption of the constitution as vital for the protection of life and liberty and which he enjoyed at the time of the commission of the offense charged against him?lxxviii[36] The crucial words in the test are vital for the protection of life and liberty. lxxix[37] We find, however, the test inapplicable to the penal clause of Republic Act No. 7653. Penal laws and laws which, while not penal in nature, nonetheless have provisions defining offenses and prescribing penalties for their violation operate prospectively.lxxx[38] Penal laws cannot be given retroactive effect, except when they are favorable to the accused.lxxxi[39] Nowhere in Republic Act No. 7653, and in particular Section 36, is there any indication that the increased penalties provided therein were intended to operate retroactively. There is, therefore, no ex post facto law in this case. On the third issue, petitioners ask us to note that the dollar interest earnings subject of the criminal cases instituted against them were remitted to foreign banks on various dates between 1983 to 1987. They maintain that given the considerable lapse of time from the dates of the commission of the offenses to the institution of the criminal actions in 1991 and 1992, the States right to prosecute them for said offenses has already prescribed. Petitioners assert that the Court of Appeals erred in computing the prescriptive period from February 1986. Petitioners theorize that since the remittances were made through the Central Bank as a regulatory authority, the dates of the alleged violations are known, and prescription should thus be counted from these dates. In ruling that the dollar-salting cases against petitioners have not yet prescribed, the court a quo quoted with approval the trial courts finding that:

[T]he alleged violations of law were discovered only after the EDSA Revolution in 1986 when the dictatorship was toppled down. The date of the discovery of the offense, therefore, should be the basis in computing the prescriptive period. Since (the) offenses charged are punishable by imprisonment of not more than five (5) years, they prescribe in eight (8) years. Thus, only a little more than four (4) years had elapsed from the date of discovery in 1986 when the cases were filed in 1991.lxxxii[40] The offenses for which petitioners are charged are penalized by Section 34 of Republic Act No. 265 by a fine of not more than Twenty Thousand Pesos (P20,000.00) and by imprisonment of not more than five years. Pursuant to Act No. 3326, which mandates the periods of prescription for violations of special laws, the prescriptive period for violations of Circular No. 960 is eight (8) years.lxxxiii[41] The period shall commence to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and institution of judicial proceedings for its investigation and punishment.lxxxiv[42] In the instant case, the indictments against petitioners charged them with having conspired with the late President Ferdinand E. Marcos in transgressing Circular No. 960. Petitioners contention that the dates of the commission of the alleged violations were known and prescription should be counted from these dates must be viewed in the context of the political realities then prevailing. Petitioners, as close associates of Mrs. Marcos, were not only protected from investigation by their influence and connections, but also by the power and authority of a Chief Executive exercising strong-arm rule. This Court has taken judicial notice of the fact that Mr. Marcos, his family, relations, and close associates resorted to all sorts of clever schemes and manipulations to disguise and hide their illicit acquisitions.lxxxv[43] In the instant case, prescription cannot, therefore, be made to run from the dates of the commission of the offenses charged, for the obvious reason that the commission of those offenses were not known as of those dates. It was only after the EDSA Revolution of February, 1986, that the recovery of ill-gotten wealth became a highly prioritized state policy,lxxxvi[44] pursuant to the explicit command of the Provisional Constitution.lxxxvii[45] To ascertain the relevant facts to recover ill-gotten properties amassed by the leaders and supporters of the (Marcos) regime lxxxviii[46] various government agencies were tasked by the Aquino administration to investigate, and as the evidence on hand may reveal, file and prosecute the proper cases. Applying the presumption that official duty has been regularly performed,lxxxix[47] we are more inclined to believe that the violations for which petitioners are charged were discovered only during the post-February 1986 investigations and the tolling of the prescriptive period should be counted from the dates of discovery of their commission. The criminal actions against petitioners, which gave rise to the instant case, were filed in 1991 and 1992, or well within the eight-year prescriptive period counted from February 1986. The fourth issue involves petitioners claim that they incurred no criminal liability for violations of Circular No. 960 since they were exempted from its coverage. Petitioners postulate that since the purchases of treasury notes were done through the Central Banks Securities Servicing Department and payments of the interest were coursed through its Securities Servicing Department/Foreign Exchange Department, their filing of reports would be surplusage, since the requisite information were already with the Central Bank. Furthermore, they contend that the foreign currency investment accounts in the Swiss banks were subject to absolute confidentiality as provided for by Republic Act No. 6426, xc[48] as amended by Presidential Decree Nos. 1035, 1246, and 1453, and fell outside the ambit of the reporting requirements imposed by Circular No. 960. Petitioners further rely on the exemption from reporting provided for in Section 10(q), xci[49] Circular No. 960, and the confidentiality granted to Swiss bank accounts by the laws of Switzerland. Petitioners correctly point out that Section 10(q) of Circular No. 960 exempts from the reporting requirement foreign currency eligible for deposit under the Philippine Foreign Exchange Currency Deposit System, pursuant to Republic Act No. 6426, as amended. But, in order to avail of the aforesaid exemption, petitioners must show that they fall within its scope. Petitioners must satisfy the requirements for eligibility imposed by Section 2, Republic Act No. 6426.xcii[50] Not only do we find the record bare of any proof to support petitioners claim of falling within the coverage of Republic Act No. 6426, we likewise find from a reading of Section 2 of the Foreign Currency Deposit Act that said law is inapplicable to the foreign currency accounts in question. Section 2, Republic Act No. 6426 speaks of deposit with such Philippine banks in good standing, as maybe designated by the Central Bank for the purpose.xciii[51] The criminal cases filed against petitioners for violation of Circular No. 960 involve foreign currency accounts maintained in foreign banks, not Philippine banks. By invoking the confidentiality guarantees provided for by Swiss banking laws, petitioners admit such reports made. The rule is that exceptions are strictly construed and apply only so far as their language fairly warrants, with all doubts being resolved in favor of the general proviso rather than the exception.xciv[52] Hence, petitioners may not claim exemption under Section 10(q). With respect to the banking laws of Switzerland cited by petitioners, the rule is that Philippine courts cannot take judicial notice of foreign laws.xcv[53] Laws of foreign jurisdictions must be alleged and proved.xcvi[54] Petitioners failed to prove the Swiss law relied upon, either by: (1) an official publication thereof; or (2) a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied by a certification from the secretary of the Philippine embassy or legation in such country or by the Philippine consul general, consul, vice-

consul, or consular agent stationed in such country, or by any other authorized officer in the Philippine foreign service assigned to said country that such officer has custody.xcvii[55] Absent such evidence, this Court cannot take judicial cognizance of the foreign law invoked by Benedicto and Rivera. Anent the fifth issue, petitioners insist that the government granted them absolute immunity under the Compromise Agreement they entered into with the government on November 3, 1990. Petitioners cite our decision in Republic v. Sandiganbayan, 226 SCRA 314 (1993), upholding the validity of the said Agreement and directing the various government agencies to be consistent with it. Benedicto and Rivera now insist that the absolute immunity from criminal investigation or prosecution granted to petitioner Benedicto, his family, as well as to officers and employees of firms owned or controlled by Benedicto under the aforesaid Agreement covers the suits filed for violations of Circular No. 960, which gave rise to the present case. The pertinent provisions of the Compromise Agreement read: WHEREAS, this Compromise Agreement covers the remaining claims and the cases of the Philippine Government against Roberto S. Benedicto including his associates and nominees, namely, Julita C. Benedicto, Hector T. Rivera, x x x WHEREAS, specifically these claims are the subject matter of the following cases (stress supplied): 1. Sandiganbayan Civil Case No. 9 2. Sandiganbayan Civil Case No. 24 3. Sandiganbayan Civil Case No. 34 4. Tanodbayan (Phil-Asia) 5. PCGG I.S. No. 1 xxx WHEREAS, following the termination of the United States and Swiss cases, and also without admitting the merits of their respective claims and counterclaims presently involved in uncertain, protracted and expensive litigation, the Republic of the Philippines, solely motivated by the desire for the immediate accomplishment of its recovery mission and Mr. Benedicto being interested to lead a peaceful and normal pursuit of his endeavors, the parties have decided to withdraw and/or dismiss their mutual claims and counterclaims under the cases pending in the Philippines, earlier referred to (underscoring supplied); xxx II. Lifting of Sequestrations, Extension of Absolute Immunity and Recognition of the Freedom to Travel a) The Government hereby lifts the sequestrations over the assets listed in Annex C hereof, the same being within the capacity of Mr. Benedicto to acquire from the exercise of his profession and conduct of business, as well as all the haciendas listed in his name in Negros Occidental, all of which were inherited by him or acquired with income from his inheritanceand all the other sequestered assets that belong to Benedicto and his corporation/nominees which are not listed in Annex A as ceded or to be ceded to the Government. Provided, however, (that) any asset(s) not otherwise settled or covered by this Compromise Agreement, hereinafter found and clearly established with finality by proper competent court as being held by Mr. Roberto S. Benedicto in trust for the family of the late Ferdinand E. Marcos, shall be returned or surrendered to the Government for appropriate custody and disposition. b) The Government hereby extends absolute immunity, as authorized under the pertinent provisions of Executive Orders Nos. 1, 2, 14 and 14-A, to Benedicto, the members of his family, officers and employees of his corporations above mentioned, who are included in past, present and future cases and investigations of the Philippine Government, such that there shall be no criminal investigation or prosecution against said persons for acts (or) omissions committed prior to February 25, 1986, that may be alleged to have violated any laws, including but not limited to Republic Act No. 3019, in relation to the acquisition of any asset treated, mentioned or included in this Agreement. x x xxcviii[56] In construing contracts, it is important to ascertain the intent of the parties by looking at the words employed to project their intention. In the instant case, the parties clearly listed and limited the applicability of the Compromise Agreement to the cases listed or identified therein. We have ruled in another case involving the same Compromise Agreement that: [T]he subject matters of the disputed compromise agreement are Sandiganbayan Civil Case No. 0009, Civil

Case No. 00234, Civil Case No. 0034, the Phil-Asia case before the Tanodbayan and PCGG I.S. No. 1. The cases arose from complaints for reconveyance, reversion, accounting, restitution, and damages against former President Ferdinand E. Marcos, members of his family, and alleged cronies, one of whom was respondent Roberto S. Benedicto.xcix[57] Nowhere is there a mention of the criminal cases filed against petitioners for violations of Circular No. 960. Conformably with Article 1370 of the Civil Code,c[58] the Agreement relied upon by petitioners should include only cases specifically mentioned therein. Applying the parol evidence rule,ci[59] where the parties have reduced their agreement into writing, the contents of the writing constitute the sole repository of the terms of the agreement between the parties.cii[60] Whatever is not found in the text of the Agreement should thus be construed as waived and abandoned.ciii[61] Scrutiny of the Compromise Agreement will reveal that it does not include all cases filed by the government against Benedicto, his family, and associates. Additionally, the immunity covers only criminal investigation or prosecution against said persons for acts (or) omissions committed prior to February 25, 1986 that may be alleged to have violated any penal laws, including but not limited to Republic Act No. 3019, in relation to the acquisition of any asset treated, mentioned, or included in this Agreement.civ[62] It is only when the criminal investigation or case involves the acquisition of any ill-gotten wealth treated, mentioned, or included in this Agreementcv[63] that petitioners may invoke immunity. The record is bereft of any showing that the interest earnings from foreign exchange deposits in banks abroad, which is the subject matter of the present case, are treated, mentioned, or included in the Compromise Agreement. The phraseology of the grant of absolute immunity in the Agreement precludes us from applying the same to the criminal charges faced by petitioners for violations of Circular No. 960. A contract cannot be construed to include matters distinct from those with respect to which the parties intended to contract.cvi[64] In sum, we find that no reversible error of law may be attributed to the Court of Appeals in upholding the orders of the trial court denying petitioners Motion to Quash the Informations in Criminal Case Nos. 91-101879 to 91-101883, 91-101884 to 91-101892, and 92-101959 to 92-101969. In our view, none of the grounds provided for in the Rules of Courtcvii[65] upon which petitioners rely, finds application in this case. One final matter. During the pendency of this petition, counsel for petitioner Roberto S. Benedicto gave formal notice to the Court that said petitioner died on May 15, 2000. The death of an accused prior to final judgment terminates his criminal liability as well as the civil liability based solely thereon.cviii[66] WHEREFORE, the instant petition is DISMISSED. The assailed consolidated Decision of the Court of Appeals dated May 23, 1996, in CA-G.R. SP No. 35928 and CA-G.R. SP No. 35719, is AFFIRMED WITH MODIFICATION that the charges against deceased petitioner, Roberto S. Benedicto, particularly in Criminal Cases Nos. 91-101879 to 91-101883, 91-101884 to 101892, and 92-101959 to 92-101969, pending before the Regional Trial Court of Manila, Branch 26, are ordered dropped and that any criminal as well as civil liability ex delicto that might be attributable to him in the aforesaid cases are declared extinguished by reason of his death on May 15, 2000. No pronouncement as to costs. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

i[1]

Per Associate Justice Martin S. Villanueva, Jr. and concurred in by Associate Justices Conrado M. Vasquez, Jr. and Perlita J. Tria Tirona. Per Judge Leocadio H. Ramos, Jr. TSN (Estrella Querimit), pp. 4-5, Oct. 3, 1997. Id., pp. 5-6; TSN (Estrella Querimit), pp. 6-17, Nov. 4, 1998. TSN (Estrella Querimit), pp. 6-11, Oct. 3, 1997; TSN (Estrella Querimit), p. 11, Nov. 4, 1998; Exhs. A, B, C, D (Certificates of Deposit). TSN (Estrella Querimit), p. 17, Oct. 3, 1997. TSN (Estrella Querimit), p. 18, Oct. 3, 1997; TSN (Estrella Querimit), p. 15, Nov. 4, 1997. TSN (Estrella Querimit), pp. 18-20, Nov. 4, 1997. TSN (Estrella Querimit), p. 11, Oct. 3, 1997; TSN (Estrella Querimit), pp. 9-22, Nov. 4, 1998. TSN (Estrella Querimit), pp. 11-16, Oct. 3, 1997; Records, pp. 8-9 (Letters of Demand dated July 29, 1996 and Aug. 2, 1996). Records, pp. 1-5. Petition, p. 15; Rollo, p. 17; TSN (Tomas Silva), pp. 14-20, Dec. 4, 1997. Exhs. 1, 2, 3, 4, 10, 11, 12, and 13. Exh. 6. Exh. 5. Exh. 7; TSN (Raoul Reniedo), pp. 38-40, April 30, 1998. Exhs. 8, 9; id., pp. 40-50. Records, pp. 305-311. CA Decision, pp. 4-5; Rollo, pp. 43-44. Id., p. 6; id., p. 45. Id., p. 4; id., p. 43. Petition, pp. 11-12; id., pp. 13-14. Prudential Bank and Trust Company v. Reyes, G.R. No. 141093, Feb. 20, 2001; Langkaan Realty Development, Inc. v. United Coconut Planters Bank, G.R. No. 139437, Dec. 8, 2000; PAL Employees Savings and Loan Association, Inc. v. NLRC, 260 SCRA 758 (1996). Wong v. Court of Appeals, G.R. No. 117857, Feb. 2, 2001. 10 Am Jur 2d 455. 10 Am Jur 457. 10 Am Jur 2d 461. Clark v. Young, 21 So.2d 331 (1944); Cohn-Goodman Co. v. Peoples Saving Bank of Grand Haven, 168 N.W. 1042 (1918).

ii[2]

iii[3]

iv[4]

v[5]

vi[6]

vii[7]

viii[8]

ix[9]

x[10]

xi[11]

xii[12]

xiii[13]

xiv[14]

xv[15]

xvi[16]

xvii[17]

xviii[18]

xix[19]

xx[20]

xxi[21]

xxii[22]

xxiii[23]

xxiv[24]

xxv[25]

xxvi[26]

xxvii[27]

xxviii[28]

xxix[29]

Sevillana v. I.T. (International) Corp., G.R. No. 99047, April 16, 2001; Villar v. NLRC, 331 SCRA 686 (2000); Audion Electric Co., Inc.. vs. NLRC, 308 SCRA 340 (1999); Ropali Trading Corporation v. NLRC, 296 SCRA 309 (1998); Pacific Maritime Services Inc. v. Ranay, 275 SCRA 717 (1997). Blacks Law Dictionary (5th ed., 1979), p. 140. TSN (Alicia de Bustos), pp. 11-15, July 23, 1999. TSN (Tomas de Silva), pp. 33-34, Dec. 4, 1997. Civil Code, Art. 1173. Canlas v. Court of Appeals, 326 SCRA 415 (2000); Ibaan Rural Bank v. Court of Appeals, 321 SCRA 88 (1999); Philippine Bank of Commerce v. Court of Appeals, 269 SCRA 695 (1997); Metropolitan Bank and Trust Company v. Court of Appeals, 237 SCRA 761 (1994); Bank of the Philippine Islands v. Court of Appeals, 216 SCRA 51 (1992). Prudential Bank v. Court of Appeals, 328 SCRA 264 (2000); Philippine National Bank v. Court of Appeals, 315 SCRA 309 (1999); Metropolitan Bank and Trust Company v. Court of Appeals, 237 SCRA 761 (1994); Araneta v. Bank of America, 40 SCRA 144 (1971). Felizardo v. Fernandez, G.R. No. 137509, Aug. 15, 2001; Gabionza v. Court of Appeals, G.R. No. 140311, March 30, 2001; Avisado v. Rumbana, G.R. No. 137306, March 12, 2001; Republic v. Court of Appeals, 301 SCRA 366 (1999); PAL Employees Savings and Loan Association, Inc. v. NLRC, 260 SCRA 758 (1996). Rosales v. Court of Appeals, G.R. No. 137566, Feb. 28, 2001; Cometa v. Court of Appeals, G.R. No. 141855, Feb. 6, 2001; De Vera v. Court of Appeals, 305 SCRA 624 (1999). TSN (Estrella Querimit), pp. 6-11, Oct. 3, 1997; TSN (Estrella Querimit), p. 11, Nov. 4, 1998; Exhs. A, B, C, D (Certificates of Deposit). Civil Code, Arts. 2217, 2219.

xxx[30]

xxxi[31]

xxxii[32]

xxxiii[33]

xxxiv[34]

xxxv[35]

xxxvi[36]

xxxvii[37]

xxxviii[38]

xxxix[39]

xl[40]

Art. 2229. Civil Code, Art. 2208. Catungal v. Hao, G.R. No. 134972, March 22, 2001; Batingal v. Court of Appeals, G.R. No. 128636, Feb. 1, 2001.

xli[41]

xlii[42]

SEC. 10. Reports of foreign exchange earners. All resident persons who habitually/customarily earn, acquire, or receive foreign exchange from invisibles locally or from abroad, shall submit reports in the prescribed form of such earnings, acquisition or receipts with the appropriate CB department. Those required to submit reports under this section shall include, but need not necessarily be limited to the following:
xliii[1]

xxx Residents, firms, or establishments habitually/customarily earning, acquiring, receiving foreign exchange from sales of merchandise, services or from whatever source shall register with the Foreign Exchange Department of the Central Bank within ninety (90) days from the date of this Circular.
xliv[2]

SEC. 34. Proceedings upon violation of laws and regulations. Whenever any person or entity willfully violates this Act or any order, instruction, rule or regulation legally issued by the Monetary Board, the person or persons responsible for such violation shall be punished by a fine of not more than twenty thousand pesos (P20,000.00) and by imprisonment of not more than five (5) years. x x x

xlv[3]

SEC. 4. Foreign exchange retention abroad. No person shall promote, finance,

enter into or participate in any foreign exchange transactions where the foreign exchange involved is paid, retained, delivered or transferred abroad while the corresponding pesos are paid for or are received in the Philippines, except when specifically authorized by the Central bank or otherwise allowed under Central Bank regulations.
SEC. 10. Reports of foreign exchange earners. All resident persons who habitually/customarily earn, acquire, or receive foreign exchange from invisibles locally or from abroad, shall submit reports in the prescribed form of such earnings, acquisition or receipts with the appropriate CB department. Those required to submit reports under this section shall include, but need not necessarily be limited to the following: xxx Residents, firms, associations, or corporations unless otherwise permitted under CB regulations are prohibited from maintaining foreign exchange accounts abroad.
xlvi[4]

Rollo, pp. 140-141.

xlvii[5]

CB CIRCULAR NO. 1318

SEC. 111. Repealing Clause. All existing provisions of Circulars 363, 960, 1028 including amendments thereto, with the exception of the second paragraph of Section 68 of Circular 1028, as well as all other existing Central Bank rules and regulations parts thereof, which are inconsistent with or contrary to the provisions of this Circular, are hereby repealed or modified accordingly: Provided, however, that regulations, violations of which are the subject of pending actions or investigations, shall not be considered repealed insofar as such pending actions or investigations are concerned, it being understood that as to such pending actions or investigations, the regulations existing at the time the cause of action accrued shall govern.
xlviii[6]

CB CIRCULAR NO. 1353

SEC. 16. Final Provisions of CB Circular No. 1318. All the provisions in Chapter X of CB Circular No. 1318 insofar as they are not inconsistent with, or contrary to the provisions of this Circular, shall remain in full force and effect: Provided, however, that any regulation on non-trade foreign exchange transactions which has been repealed, amended or modified by this Circular, violations of which are the subject of pending actions or investigations, shall not be considered repealed insofar as such pending actions or investigations are concerned, it being understood that as to such pending actions or investigations, the regulations existing at the time of the cause of actions accrued shall govern. (Underline supplied)
xlix[7]

Rollo, p. 79.

l[8]

Also known as The New Central Bank Act. Rollo, pp. 8-9. Azarcon v. Sandiganbayan, 268 SCRA 747, 757 (1997) citing People v. Magallanes, 249 SCRA 212, 227 (1995). The P.D. 1606 defined the jurisdiction of the Sandiganbayan at the time these twenty-five (25) dollarsalting cases were filed. Republic Act No. 7975, which amended the Sandiganbayan Law, took effect only on May 16, 1995, (Binay vs. Sandiganbayan, et al., G.R. Nos. 120681-83, October 1, 1999) after petitioners had been arraigned. Republic Act No. 8249, which further amended the jurisdiction of the Sandiganbayan, in turn, took effect on February 23, 1997 (Binay vs. Sandiganbayn, et al., supra).

li[9]

lii[10]

liii[11]

liv[12]

SEC. 4. Jurisdiction. The Sandiganbayan shall exercise:

(a) Exclusive original jurisdiction in all cases involving: (1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code; (2) Other offenses or felonies committed by public officers and employees in relation to their office, including those employed in government-owned or controlled corporations, whether simple or complexed with other crimes, where the penalty prescribed by law is higher than prision correcional or imprisonment for six (6) years, or a fine of P6,000.00: PROVIDED, HOWEVER, that offenses or felonies mentioned in this paragraph where the penalty prescribed by law does not exceed prision correcional or imprisonment for six (6) years or a fine of P6,000.00 shall be tried by the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court. xxx In case private individuals are charged as co-principals, accomplices, or accessories with the public officers or employees, including those employed in government-owned or controlled corporations, they shall be tried jointly with said public officers and employees. xxx
lv[13]

Saura v. Saura, Jr., et al., 313 SCRA 465, 475 (1999). People v. Alvarez, 45 Phil. 472, 475 (1923). Lozada v. Hernandez, etc., et al., 92 Phil. 1051, 1053 (1953) Torralba v. Sandiganbayan, 230 SCRA 33, 41 (1994) citing Paderanga v. Drilon, 196 SCRA 86 (1991). In Re: Letter of Freddie P. Manuel, 235 SCRA 4, 7 (1994) citing People v. Ramilo, 57 O.G. 7431, Nombres v. People, 105 Phil. 1259 (1959) and People v. Casiano, 111 Phil. 73 (1961); People v. Lazo, 198 SCRA 274 (1991). Rollo, pp. 11-13. People v. Court of Appeals, 242 SCRA 645, 653 (1995); People v. Hubilo, 220 SCRA 389, 397-398 (1993); citing People v. La Caste, 37 SCRA 767 (1971); Palanca v. Querubin, 30 SCRA 728 (1969); Zacarias v. Cruz, 30 SCRA 728 (1969); People v. Selfaison, 110 Phil. 839 (1967); People v. De la Cerna, 21 SCRA 569 (1967); People v. Casiano, 1 SCRA 478 (1961); Lozada v. Hernandez, 92 Phil. 1051 (1953); People v. Olandag, 92 Phil. 486 (1952). Socrates v. Sandiganbayan, 253 SCRA 773, 792 (1996). SEC. 22. Retroactive effect of penal laws. Penal laws shall have a retroactive effect insofar as they favor the person guilty of a felony who is not a habitual criminal, as this term is defined in Rule 5 of Article 62 of this Code, although at the time of the publication of such laws a final sentence has been pronounced and the convict is serving the same. Petitioners specifically cite People v. Pastor, 77 Phil. 1000, 1008 (1947), People v. Tamayo, 61 Phil. 225 (1935); People v. Francisco, 56 Phil. 572 (1932) and People v. Alcaraz, 56 Phil. 520 (1932). People v. Almuete, 69 SCRA 410, (1976). Buscayno v. Military Commission Nos. 1, 2, 6, and 25,109 SCRA 273, 287 (1981).

lvi[14]

lvii[15]

lviii[16]

lix[17]

lx[18]

lxi[19]

lxii[20]

lxiii[21]

lxiv[22]

lxv[23]

lxvi[24]

lxvii[25]

People v. Concepcion, 44 Phil. 126, 132 (1922) citing US v. Cuna, 12 Phil. 241 (1908), Ong Chang Wing and Kwong Fok v. United States, 40 Phil. 1046 (1910), 218 US 272 (1910), and People v. Concepcion, 43 Phil. 653 (1922).

lxviii[26]

Sec. 6 (b) of the Circular No. 1353 states:

b) all residents falling under any of the following categories of non-trade foreign exchange earners shall submit to the Central Bank a monthly report of their foreign receipts and disbursements, if any, under a report form which shall be prescribed by the Central Bank. xxx 15. Receipts of profits, dividends, earnings, divestment proceeds with foreign exchange purchased from AAB.
lxix[27]

The saving clause of Circular No. 1318 reads:

SEC. 111. Repealing Clause. All existing provisions of Circulars 363, 960 and 1028, including amendments thereto, with the exception of the second paragraph of Section 6B of Circular 1028, as well as all other existing Central Bank rules and regulations or parts thereof, which are inconsistent with or contrary to the provisions of this Circular, are hereby repealed or modified accordingly: Provided, however, that regulations, violations of which are the subject of pending actions or investigations shall not be considered repealed insofar as such pending actions or investigations are concerned, it being understood that as to such pending actions or investigations, the regulations existing at the time of the cause of action shall govern. (Stress supplied) The saving clause of Circular No. 1353, in turn, provides: SEC. 16. Final Provisions of CB Circular No. 1318. All the provisions in Chapter X of CB Circular No. 1318 insofar as they are not inconsistent with, or contrary to the provisions of this Circular, shall remain in full force and effect: Provided, however, that any regulation on non-trade foreign exchange transactions which has been repealed, amended or modified by this Circular, violations of which are the subject of pending actions or investigations, shall not be considered repealed insofar as such pending actions are concerned, it being understood that as to such pending actions or investigations the regulations existing at the time of the cause of action accrued shall govern. (Stress supplied).
lxx[28]

Ibaez de Aldecoa v. Hongkong & Shanghai Bank, 30 Phil. 228, 246 (1915). Supra, note 2.

lxxi[29]

SEC. 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules and Regulations, Orders or Instructions. Whenever a bank or quasi-bank, or whenever any person or entity willfully violates this Act or other pertinent banking laws being enforced or implemented by the Bangko Sentral or any order, instruction, rule or regulation issued by the Monetary Board, the person or persons responsible for such violation shall unless otherwise provided in this Act be punished by a fine of not less than Fifty thousand pesos (P50,000.00) nor more than Two hundred thousand pesos (P200,000.00) or by imprisonment of not less than two (2) years nor more than ten (10) years; or both, at the discretion of the court.
lxxii[30]

xxx
lxxiii[31]

Sec. 2 (a), Republic Act No. 265. Section 3 of Republic Act No. 7653 restated this objective as follows: The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced and sustainable growth of the economy. It shall also promote and maintain monetary stability and the convertibility of the peso. (Stress supplied).

lxxiv[32]

American Bible Society v. City of Manila, 101 Phil. 386, 397 (1957). Ong Chang Wing and Kwong Fok v. US, 40 Phil. 1046, 1050 (1910); US v. Cuna, supra. Const., Art. III, Sec. 22. No ex post facto law or bill of attainder shall be enacted. In Re: Kay Villegas Kami Inc., 35 SCRA 429, 431(1970) citing Calder v. Bull (1798), 3 Dall. 386, Makin v. Wolfe, 2 Phil. 74 (1903). Nuez v. Sandiganbayan, 111 SCRA 433, 450 (1982) citing Thompson v. Utah, 170 US 343 (1898). Nuez v. Sandiganbayan, supra. People v. Moran, 44 Phil. 387, 398 (1923). Laceste v. Santos, 56 Phil. 472, 475 (1932). See also Rev. Pen. Code, Art. 22. Rollo, p. 77.

lxxv[33]

lxxvi[34]

lxxvii[35]

lxxviii[36]

lxxix[37]

lxxx[38]

lxxxi[39]

lxxxii[40]

SEC. 1. Violations penalized by special acts shall, unless otherwise provided in such acts, prescribe in accordance with the following rules:
lxxxiii[41]

xxx c) after eight (8) years for those punished by imprisonment for two (2) years or more, but less than six (6) years. xxx
lxxxiv[42]

Act No. 3326, Sec. 2. Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on Good Government, 150 SCRA 181, 208 (1987). Republic v. Sandiganbayan (First Division), 240 SCRA 376, 391 (1995).

lxxxv[43]

lxxxvi[44]

lxxxvii[45]

Ordained by Proclamation No. 3, promulgated on March 25, 1986, it also was more popularly known as the Freedom Constitution. Const. (March 25, 1986), Art. II, Sec. 1(d). Rules of Court, Rule 131, Sec. 3(m).

lxxxviii[46]

lxxxix[47]

Also known as The Foreign Currency Deposit Act. The secrecy clause relied upon by petitioners is Section 8 thereof which provides:
xc[48]

SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034 are hereby declared as and considered of an absolutely confidential nature and except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by Section 2, Presidential Decree No. 1246).
xci[49]

The provision reads:

q. Firms issuing/servicing international credit cards. Authorized foreign exchange dealers and registered foreign exchange earners shall submit separate monthly reports to the Foreign Exchange Department copy furnished the Supervision and Examination Section, Dept. IV, CB supported by proof/evidences of receipts, sales of foreign exchange to the

banking system, provided that foreign exchange eligible for deposit under the Philippine Foreign Exchange Currency Deposit System as provided in Rep. Act 6426, as amended, need not be covered by the report. x x x

xcii[50]

SEC. 2. Authority to deposit foreign currencies. Any person, natural or juridical may, in accordance with the provisions of this Act, deposit with such Philippine banks in good standing, as may, upon application be designated by the Central Bank for the purpose; foreign currencies which are acceptable as part of the international reserve, except those which are required by the Central Bank to be surrendered in accordance with the provisions of Republic Act Numbered Two hundred sixty-five. Ibid. Salaysay v. Castro, et al., 98 Phil. 364, 380 (1956). Vda. de Perez v. Tolete, 232 SCRA 722, 735 (1994) citing Philippine Commercial and Industrial Bank v. Escolin, 58 SCRA 266 (1974). Zalamea v. Court of Appeals, 228 SCRA 23, 30 (1993) citing Collector of Internal Revenue v. Douglas Fisher, et al., and Douglas Fisher, et al. v. Collection of Internal Revenue, 110 Phil. 686 (1961). Rules of Court, Rule 132, Sec. 24. Rollo, pp. 339-341. Republic v. Sandiganbayan, 226 SCRA 314, 318 (1993).

xciii[51]

xciv[52]

xcv[53]

xcvi[54]

xcvii[55]

xcviii[56]

xcix[57]

ART. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control.
c[58]

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

Rules of Court, Rule 130, Sec. 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.
ci[59]

xxx
cii[60]

Philippine National Railways v. Court of First Instance of Albay, Branch 1, 83 SCRA 569, 575 (1978). Heirs of Amparo del Rosario v. Santos, 108 SCRA 43, 58 (1981). Rollo, p. 341. Id. IV Tolentino, Civil Code 562 (1991 ed.).

ciii[61]

civ[62]

cv[63]

cvi[64]

Rule 117, Sec. 3. Grounds. The accused may move to quash the complaint or information on any of the following grounds:
cvii[65]

(a) (b) (c) (d)

That the facts charged do not constitute an offense; That the court trying the case has no jurisdiction over the offense charged or the person of the accused; That the officer who filed the information had no authority to do so; That it does not conform substantially to the prescribed form;

(e) (f) (g)

That more than one offense is charged except in those cases in which existing laws prescribe a single punishment for various offenses; That the criminal action or liability has been extinguished; That it contains averments which, if true, would constitute a legal excuse or justification; and

(h) That the accused has been previously convicted or in jeopardy of being convicted, or acquitted of the offense charged.
cviii[66]

People v. Bayotas, 236 SCRA 239, 255 (1994); Rev. Pen. Code, Art. 89.

SECOND DIVISION

[G.R. No. 128996. February 15, 2002]

CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P. BRAWNER, petitioners, vs. COURT OF APPEALS, DEPARTMENT OF JUSTICE, AZIZ RAJKOTWALA, WILLIAM FERGUSON, JOVEN REYES, and VIC LIM, respondents. DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari, seeking the reversal of the Decisioncviii[1] dated July 8, 1996 of the former Fifteenth Division cviii[2] of the Court of Appeals in CA-G.R. SP No. 37577 as well as its Resolutioncviii[3] dated April 16, 1997 denying petitioners motion for reconsideration. The appellate court, in its Decision, sustained a resolution of the Department of Justice ordering the withdrawal of informations for violation of Republic Act No. 1405 against private respondents. The facts are: On September 21, 1993, Citibank filed a complaint for violation of section 31, cviii[4] in relation to section 144cviii[5] of the Corporation Code against two (2) of its officers, Dante L. Santos and Marilou Genuino. Attached to the complaint was an affidavit cviii[6] executed by private respondent Vic Lim, a vice-president of Citibank. Pertinent portions of his affidavit are quoted hereunder:
2.1 Sometime this year, the higher management of Citibank, N.A. assigned me to assist in the investigation of certain anomalous/highly irregular activities of the Treasurer of the Global Consumer Group of the bank, namely, Dante L. Santos and the Asst. Vice President in the office of Mr. Dante L. Santos, namely Ms. Marilou (also called Malou) Genuino. Ms. Marilou Genuino apart from being an Assistant Vice President in the office of Mr. Dante L. Santos also performed the duties of an Account

Officer. An Account Officer in the office of Mr. Dante L. Santos personally attends to clients of the bank in the effort to persuade clients to place and keep their monies in the products of Citibank, NA., such as peso and dollar deposits, mortgage backed securities and money placements, among others. xxx xxx xxx

4.1 The investigation in which I was asked to participate was undertaken because the bank had found records/evidence showing that Mr. Dante L. Santos and Ms. Malou Genuino, contrary to their disclosures and the aforementioned bank policy, appeared to have been actively engaged in business endeavors that were in conflict with the business of the bank. It was found that with the use of two (2) companies in which they have personal financial interest, namely Torrance Development Corporation and Global Pacific Corporation, they managed or caused existing bank clients/depositors to divert their money from Citibank, N.A., such as those placed in peso and dollar deposits and money placements, to products offered by other companies that were commanding higher rate of yields. This was done by first transferring bank clients monies to Torrance and Global which in turn placed the monies of the bank clients in securities, shares of stock and other certificates of third parties. It also appeared that out of these transactions, Mr. Dante L. Santos and Ms. Marilou Genuino derived substantial financial gains. 5.1 In the course of the investigation, I was able to determine that the bank clients which Mr. Santos and Ms. Genuino helped/caused to divert their deposits/money placements with Citibank, NA. to Torrance and Global (their family corporations) for subsequent investment in securities, shares of stocks and debt papers in other companies were as follows: xxx b) xxx d) xxx i) Rita Brawner Rosario Neri Carmen Intengan

All the above persons/parties have long standing accounts with Citibank, N.A. in savings/dollar deposits and/or in trust accounts and/or money placements.

As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and Genuino. Some of the documents pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and Rita P. Brawner, as follows:
a) Annex A-6cviii[7] - an Application for Money Transfer in the amount of US $140,000.00, executed by Intengan in favor of Citibank $ S/A No. 24367796, to be debited from her Account No. 22543341; b) Annex A-7cviii[8] - a Money Transfer Slip in the amount of US $45,996.30, executed by Brawner in favor of Citibank $ S/A No. 24367796, to be debited from her Account No. 22543236; and

c) Annex A-9cviii[9] - an Application for Money Transfer in the amount of US $100,000.00, executed by Neri in favor of Citibank $ S/A No. 24367796, to be debited from her Account No. 24501018.

In turn, private respondent Joven Reyes, vice-president/business manager of the Global Consumer Banking Group of Citibank, admits to having authorized Lim to state the names of the clients involved and to attach the pertinent bank records, including those of petitioners.cviii[10] He states that private respondents Aziz Rajkotwala and William Ferguson, Citibank, N.A. Global Consumer Banking Country Business Manager and Country Corporate Officer, respectively, had no hand in the disclosure, and that he did so upon the advice of counsel. In his memorandum, the Solicitor General described the scheme as having been conducted in this manner:
First step: Santos and/or Genuino would tell the bank client that they knew of financial products of other companies that were yielding higher rates of interests in which the bank client can place his money. Acting on this information, the bank client would then authorize the transfer of his funds from his Citibank account to the Citibank account of either Torrance or Global. The transfer of the Citibank clients deposits was done through the accomplishment of either an Application For Managers Checks or a Term Investment Application in favor of Global or Torrance that was prepared/filed by Genuino herself. Upon approval of the Application for Managers Checks or Term Investment Application, the funds of the bank client covered thereof were then deposited in the Citibank accounts of Torrance and/or Global. Second step: Once the said fund transfers had been effected, Global and/or Torrance would then issue its/ their checks drawn against its/their Citibank accounts in favor of the other companies whose financial products, such as securities, shares of stocks and other certificates, were offering higher yields. Third step: On maturity date(s) of the placements made by Torrance and/or Global in the other companies, using the monies of the Citibank client, the other companies would then. return the placements to Global and/or Torrance with the corresponding interests earned. Fourth step: Upon receipt by Global and/or Torrance of the remittances from the other companies, Global and/or Torrance would then issue its/their own checks drawn against their Citibank accounts in favor of Santos and Genuino. The amounts covered by the checks represent the shares of Santos and Genuino in the margins Global and/or Torrance had realized out of the placements [using the diverted monies of the Citibank clients] made with the other companies. Fifth step: At the same time, Global and/or Torrance would also issue its/their check(s) drawn against its/their Citibank accounts in favor of the bank client. The check(s) cover the principal amount (or parts thereof) which the Citibank client had previously transferred, with the help of Santos and/or Genuino, from his Citibank account to the Citibank account(s) of Global and/or Torrance for placement in the other companies, plus the interests or earnings his placements in other companies had

made less the spreads made by Global, Torrance, Santos and Genuino.

The complaints which were docketed as I.S. Nos. 93-9969, 93-10058 and 94-1215 were subsequently amended to include a charge of estafa under Article 315, paragraph 1(b)cviii[11] of the Revised Penal Code. As an incident to the foregoing, petitioners filed respective motions for the exclusion and physical withdrawal of their bank records that were attached to Lims affidavit. In due time, Lim and Reyes filed their respective counter-affidavits.cviii[12] In separate Memoranda dated March 8, 1994 and March 15, 1994 2nd Assistant Provincial Prosecutor Hermino T. Ubana, Sr. recommended the dismissal of petitioners complaints. The recommendation was overruled by Provincial Prosecutor Mauro M. Castro who, in a Resolution dated August 18, 1994,cviii[13] directed the filing of informations against private respondents for alleged violation of Republic Act No. 1405, otherwise known as the Bank Secrecy Law. Private respondents counsel then filed an appeal before the Department of Justice (DOJ). On November 17, 1994, then DOJ Secretary Franklin M. Drilon issued a Resolutioncviii[14] ordering, inter alia, the withdrawal of the aforesaid informations against private respondents. Petitioners motion for reconsiderationcviii[15] was denied by DOJ Acting Secretary Demetrio G. Demetria in a Resolution dated March 6, 1995.cviii[16] Initially, petitioners sought the reversal of the DOJ resolutions via a petition for certiorari and mandamus filed with this Court, docketed as G.R. No. 119999-120001. However, the former First Division of this Court, in a Resolution dated June 5, 1995, cviii[17] referred the matter to the Court of the Appeals, on the basis of the latter tribunals concurrent jurisdiction to issue the extraordinary writs therein prayed for. The petition was docketed as CA-G.R. SP No. 37577 in the Court of Appeals. On July 8, 1996, the Court of Appeals rendered judgment dismissing the petition in CA-G.R. SP No. 37577 and declared therein, as follows:
Clearly, the disclosure of petitioners deposits was necessary to establish the allegation that Santos and Genuino had violated Section 31 of the Corporation Code in acquiring any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence. To substantiate the alleged scheme of Santos and Genuino, private respondents had to present the records of the monies which were manipulated by the two officers which included the bank records of herein petitioners. Although petitioners were not the parties involved in IS. No. 93-8469, their accounts were relevant to the complete prosecution of the case against Santos and Genuino and the respondent DOJ properly ruled that the disclosure of the same falls under the last exception of R.A. No. 1405. That ruling is consistent with the principle laid down in the case of Mellon Bank, N.A. vs. Magsino (190 SCRA 633) where the Supreme Court allowed the testimonies on the bank deposits of someone not a party to the case as it found that said bank deposits were material or relevant to the allegations in the complaint. Significantly, therefore, as long as the bank deposits are material to the case, although not necessarily the direct subject matter thereof, a disclosure of the same is proper and falls within the scope of the exceptions provided for by R.A. No. 1405.

xxx

xxx

xxx

Moreover, the language of the law itself is clear and cannot be subject to different interpretations. A reading of the provision itself would readily reveal that the exception or in cases where the money deposited or invested is the subject matter of the litigation is not qualified by the phrase upon order of competent Court which refers only to cases of bribery or dereliction of duty of public officials.

Petitioners motion for reconsideration was similarly denied in a Resolution dated April 16, 1997. Appeal was made in due time to this Court. The instant petition was actually denied by the former Third Division of this Court in a Resolutioncviii[18] dated July 16, 1997

PDIC Bulletin No. 2004 - 04

TO : MEMBER BANKS AND DEPOSITORS SUBJECT : TREATMENT OF JOINT DEPOSIT ACCOUNTS FOR PURPOSES OF DEPOSIT INSURANCE AND THE DETERMINATION OF INSURED DEPOSITS IN CASES WHERE DEPOSITORS HAVE OBLIGATIONS WITH THE CLOSED BANK Pursuant to the provisions of Republic Act No. 9302 amending the Charter of the Philippine Deposit Insurance Corporation (RA 3591, as amended), which took effect on 12 August 2004, please be properly guided by the following interpretations with respect to the treatment of joint deposit accounts for deposit insurance purposes and the determination of insured deposits in cases where the depositors have obligations with the closed bank: 1) A joint account regardless of whether the conjunction and, or or and/or is used, shall be insured separately from an individually-owned deposit account. 2) If the account is held jointly by two or more natural persons, or by two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical persons or entities, unless a different sharing is stipulated in the document of deposit. Document of deposit referred to in the preceding paragraph pertains to joint account agreements, account ledgers, certificate of time deposits, passbooks or other evidence of deposits, specimen signature cards, corporate resolutions, contracts or similar instruments, copies of which must be in the custody or possession of the bank upon takeover by PDIC. 3) If the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured deposit shall be presumed to belong entirely to the juridical person or entity. 4) The aggregate of the interests or total share of each co-owner over several joint accounts, whether owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit of P250,000.00. 5) The amount of insurance due to any depositor for deposits in an insured bank shall be net of any matured or unmatured obligation of the depositor to the insured bank as of date of closure. In case of joint deposit accounts where only one of the co-depositors has an obligation to the closed bank, the following shall apply:

(a) Where the deposit is a joint and/or or or account which is covered by a hold-out agreement, the obligation secured by the hold-out agreement shall be deducted from the balance of the joint account, regardless of the fact that only one of the co-depositors in the joint account is indebted to the closed bank. (b) When the deposit is a joint and account which is covered by a hold-out agreement, the obligation secured by the hold-out agreement shall be deducted only from the share in the joint account of the depositor who is indebted to the closed bank, unless his co-depositor is himself a co-signatory to the hold-out agreement. (c) Where the deposit is either a joint and, or or and/or account which is not covered by a hold-out agreement, the obligation of the depositor who is indebted to the closed bank shall be deducted only from his share in the balance of the joint deposit account.

Placement involves physically placing illegally obtained money into the financial system or the retail economy. "Dirty" money is most vulnerable to detection and seizure during placement. Layering means separating the illegally obtained money from its source through a series of financial transactions that makes it difficult to trace the origin. During the layering phase of money laundering, criminals often take advantage of legitimate financial mechanisms in attempts to hide the source of their funds. A few of the many mechanisms that may be misused during layering are currency exchanges, wire transmitting services, prepaid cards that offer global access to cash via automated teller machines and goods at point of sale, casino services and domestic shell corporations lacking real assets and business activity that are set up to hold and move illicit funds. Integration means converting the illicit funds into a seemingly legitimate form. Integration may include the purchase of businesses, automobiles, real estate and other assets.

AN ACT INCREASING THE MAXIMUM DEPOSIT INSURANCE COVERAGE, AND IN CONNECTION THEREWITH, TO STRENGTHEN THE REGULATORY AND ADMINISTRATIVE AUTHORITY, AND FINANCIAL CAPABILITY OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), AMENDING FOR THIS PURPOSE REPUBLIC ACT NUMBERED THREE THOUSAND FIVE HUNDRED NINETY-ONE, AS AMENDED, OTHERWISE KNOWN AS THE PDIC CHARTER, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Statement of State Policy and Objectives. It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the countrys banking system, and protect it from illegal schemes and machinations. Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at all times. SEC. 2. Section 4(f) of Republic Act No. 3591, as amended, is hereby amended by adding an additional paragraph, to read as follows:

(f) The term deposit means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account, or issued in accordance with Bangko Sentral rules and regulations and other applicable laws, together with such other obligations of a bank, which, consistent with banking usage and practices, the Board of Directors shall determine and prescribe by regulations to be deposit liabilities of the bank: Provided, That any obligation of a bank which is payable at the office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of this Act or included as part of the total deposits or of insured deposit: Provided, further, That, subject to the approval of the Board of Directors, any insured bank which is incorporated under the laws of the Philippines which maintains a branch outside the Philippines may elect to include for insurance its deposit obligations payable only at such branch. The Corporation shall not pay deposit insurance for the following accounts or transactions, whether denominated, documented, recorded or booked as deposit by the bank: (1) Investment products such as bonds and securities, trust accounts, and other similar instruments; (2) Deposit accounts or transactions which are unfunded, or that are fictitious or fraudulent; (3) Deposit accounts or transactions constituting, and/or emanating from, unsafe and unsound banking practice/s, as determined by the Corporation, in consultation with the BSP, after due notice and hearing, and publication of a cease and desist order issued by the Corporation against such deposit accounts or transactions; and (4) Deposits that are determined to be the proceeds of an unlawful activity as defined under Republic Act No. 9160, as amended. The actions of the Corporation taken under this section shall be final and executory, and may not be restrained or set aside by the court, except on appropriate petition for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from notice of denial of claim for deposit insurance. SEC. 3. Section 4 (g) of the same Act is hereby amended to read as follows:

(g) The term insured deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank net of any obligation of the depositor to the insured bank as of date of closure, but not to exceed Five hundred thousand pesos (P500,000.00). Such net amount shall be determined according to such regulations as the Board of Directors may prescribe. In determining such amount due to any depositor, there shall be added together all deposits in the bank maintained in the same right and capacity for his benefit either in his own name or in the name of others. A joint account regardless of whether the conjunction and, or, and/or is used, shall be insured separately from any individually-owned deposit account: Provided, That (1) If the account is held jointly by two or more natural persons, or by two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical persons or entities, unless a different sharing is stipulated in the document of deposit, and (2) If the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity: Provided, further, That the aggregate of the interests of each co-owner over several joint accounts, whether owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit of Five hundred thousand pesos (P500,000.00): Provided, furthermore, That the provisions of any law to the contrary notwithstanding, no owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided in this Act unless his name is registered as owner/holder thereof in the books of the issuing bank: Provided, finally, That, in case of a condition that threatens the monetary and financial stability of the banking system that may have systemic consequences, as defined in Section 17 hereof, as determined by the Monetary Board, the maximum deposit insurance cover may be adjusted in such amount, for such a period, and/or for such deposit products, as may be determined by a unanimous vote of the Board of Directors in a meeting called for the purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines. SEC. 4. The maximum deposit insurance coverage of Five hundred thousand pesos (P500,000.00) provided in Section 4(g) of Republic Act 3591, as amended herein, shall be paid by the Corporation: Provided, That, for the first three (3) years from the effectivity of this Act, the first Two hundred fifty thousand pesos (P250,000.00) of the deposit insurance coverage shall be for the account of the Corporation, and those in excess of Two hundred fifty thousand pesos (P250,000.00) but not more than Five hundred thousand pesos (P500,000.00) shall be for the account of the National Government. The Congress shall annually appropriate the necessary funding to reimburse the Corporation for any payment to insured depositors paid in excess of Two hundred fifty thousand pesos (P250,000.00). SEC. 5. Section 8, paragraph Eighth of the same Act is hereby amended to read as follows: Eighth To conduct examination of banks with prior approval of the Monetary Board: Provided, That no examination can be conducted within twelve (12) months from the last examination date: Provided, however, That the Corporation may, in coordination with the Bangko Sentral, conduct a special examination as the Board of Directors, by an affirmative vote of a majority of all of its members, if there is a threatened or impending closure of a bank: Provided, further, That, notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may inquire into or examine deposit accounts and all information related thereto in case there is a finding of unsafe or unsound banking practice: Provided, finally, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports, information, and findings of the Bangko Sentral, which it shall make available to the Corporation.

SEC. 6. A new Section 9 (h) of the same Act is hereby added to read as follows: (h) Unless the actions of the Corporation or any of its officers and employees are found to be in willful violation of this Act, performed in bad faith, with malice and/or gross negligence, the Corporation, its directors, officers, employees and agents are held free and harmless to the fullest extent permitted by law from any liability, and they shall be indemnified for any and all liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever kind and nature that may arise in connection with the performance of their functions, without prejudice to any criminal liability under existing laws. SEC. 7. Section 9 (h) of the same Act is accordingly renumbered as Section 9 (i). SEC. 8. An additional paragraph to Section 17 of the same Act is hereby added after subparagraph (b) to read as follows: (c) It is hereby declared to be the policy of the State that the Deposit Insurance Fund of the Corporation shall be preserved and maintained at all times. Accordingly, all tax obligations of the Corporation for a period of five (5) years reckoned from the date of effectivity of this Act shall be chargeable to the Tax Expenditure Fund (TEF) in the annual General Appropriations Act pursuant to the provisions of Executive Order No. 93, series of 1986; Provided, That, on the 6th year and thereafter, the Corporation shall be exempt from income tax, final withholding tax, value-added tax on assessments collected from member banks, and local taxes. SEC. 9. Section 17 (c) of the same Act shall be accordingly renumbered as Section 17 (d). SEC. 10. Section 19 is hereby amended to read as follows: SEC. 19. With the approval of the President of the Philippines, the Corporation is authorized to issue bonds, debentures, and other obligations, both local or foreign, as may be necessary for purposes of providing liquidity for settlement of insured deposits in closed banks as well as for financial assistance as provided herein: Provided, That the Board of Directors shall determine the interest rates, maturity and other requirements of said obligations: Provided, further, That the Corporation shall provide for appropriate reserves for the redemption or retirement of said obligation. All notes, debentures, bonds, or such obligations issued by the Corporation shall be exempt from taxation both as to principal and interest, and shall be fully guaranteed by the Government of the Republic of the Philippines. Such guarantee, which in no case shall exceed two times the Deposit Insurance Fund as of date of the debt issuance, shall be expressed on the face thereof. The Board of Directors shall have the power to prescribe rules and regulations for the issuance, reissuance, servicing, placement and redemption of the bonds herein authorized to be issued as well as the registration of such bonds at the request of the holders thereof. SEC. 11. Section 21, paragraph (f)(5) is hereby amended to read as follows:

5) splitting of deposits or creation of fictitious loans or deposit accounts. Splitting of deposits occurs whenever a deposit account with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of natural or juridical persons is broken down and transferred into two (2) or more accounts in the name/s of natural or juridical persons or entities who have no beneficial ownership on transferred deposits in their names within one hundred twenty (120) days immediately preceding or during a bank-declared bank holiday, or immediately preceding a closure order issued by the Monetary Board of the Bangko Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance coverage; SEC. 12. An additional paragraph shall be inserted under Section 2, to read as follows: SEC. 2. xxx The Board of Directors shall have the authority: x x x 7. To review the organizational set-up of the Corporation and adopt a new or revised organizational structure as it may deem necessary for the Corporation to undertake its mandate and functions. SEC. 13. Joint Congressional Oversight Committee. - There is hereby created a joint congressional oversight committee to oversee the implementation of this Act. The committee shall be composed of the chairpersons of the Senate Committee on Banks, Financial Institutions and Currencies and the Committee on Finance and five (5) senators to be appointed by the President of the Senate, and the chairpersons of the House Committee on Banks and Financial Intermediaries and the Committee on Appropriations and five (5) members to be appointed by the Speaker of the House of Representatives. SEC. 14. Separability Clause. - If any provision or section of this Act or the application thereof to any person or circumstances is held invalid, the other provisions or sections of this Act, in the application of such provision or section to other persons or circumstances, shall not be affected thereby. SEC. 15. Repealing Clause. - All acts or parts of acts and executive orders, administrative orders, or parts thereof, which are inconsistent with the provisions of this Act, are hereby repealed. SEC. 16. Effectivity Clause. - This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) newspapers of general circulation. Approved,

REPUBLIC ACT No. 1405 AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR. 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.

Section 2. 1 All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. Section 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. Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations which are inconsistent with the provisions of this Act are hereby repealed. Section 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. Section 6. This Act shall take effect upon its approval. Approved: September 9, 1955

REPUBLIC ACT No. 6426 AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE PHILIPPINES, AND FOR OTHER PURPOSES. Section 1. Title. This act shall be known as the "Foreign Currency Deposit Act of the Philippines." Section 2. Authority to deposit foreign currencies. Any person, natural or juridical, may, in accordance with the provisions of this Act, deposit with such Philippine banks in good standing, as may, upon application, be designated by the Central Bank for the purpose, foreign currencies which are acceptable as part of the international reserve, except those which are required by the Central Bank to be surrendered in accordance with the provisions of Republic Act Numbered two hundred sixty-five (Now Rep. Act No. 7653). Section 3. Authority of banks to accept foreign currency deposits. The banks designated by the Central Bank under Section two hereof shall have the authority: (1) To accept deposits and to accept foreign currencies in trust Provided, That numbered accounts for recording and servicing of said deposits shall be allowed; (2) To issue certificates to evidence such deposits; (3) To discount said certificates;

(4) To accept said deposits as collateral for loans subject to such rules and regulations as may be promulgated by the Central Bank from time to time; and (5) To pay interest in foreign currency on such deposits. Section 4. Foreign currency cover requirements. Except as the Monetary Board may otherwise prescribe or allow, the depository banks shall maintain at all times a one hundred percent foreign currency cover for their liabilities, of which cover at least fifteen percent shall be in the form of foreign currency deposit with the Central Bank, and the balance in the form of foreign currency loans or securities, which loans or securities shall be of short term maturities and readily marketable. Such foreign currency loans may include loans to domestic enterprises which are export-oriented or registered with the Board of Investments, subject to the limitations to be prescribed by the Monetary Board on such loans. Except as the Monetary Board may otherwise prescribe or allow, the foreign currency cover shall be in the same currency as that of the corresponding foreign currency deposit liability. The Central Bank may pay interest on the foreign currency deposit, and if requested shall exchange the foreign currency notes and coins into foreign currency instruments drawn on its depository banks. (As amended by PD No. 1453, June 11, 1978.) Depository banks which, on account of networth, resources, past performance, or other pertinent criteria, have been qualified by the Monetary Board to function under an expanded foreign currency deposit system, shall be exempt from the requirements in the preceding paragraph of maintaining fifteen percent (15%) of the cover in the form of foreign currency deposit with the Central Bank. Subject to prior Central Bank approval when required by Central Bank regulations,
said depository banks may extend foreign currency loans to any domestic enterprise, without the limitations prescribed in the preceding paragraph regarding maturity and marketability, and such loans shall be eligible for purposes of the 100% foreign currency cover prescribed in the preceding paragraph. (As added by PD No. 1035.)

Section 5. Withdrawability and transferability of deposits. There shall be no restriction on the withdrawal by the depositor of his deposit or on the transferability of the same abroad except those arising from the contract between the depositor and the bank. Section 6. Tax exemption. All foreign currency deposits made under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of nonresidents, irrespective of whether or not they are engaged in trade or business in the Philippines. (As amended by PD No. 1246, prom. Nov. 21, 1977.) Section 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 publications 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, rules and regulations at the time the deposit was made shall govern.

Section 8. Secrecy of foreign currency deposits. All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private; Provided, however, That said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.) Section 9. Deposit insurance coverage. The deposits under this Act shall be insured under the provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance Corporation), as well as its implementing rules and regulations: Provided, That insurance payment shall be in the same currency in which the insured deposits are denominated. Section 10. Penal provisions. Any willful violation of this Act or any regulation duly promulgated by the Monetary Board pursuant hereto shall subject the offender upon conviction to an imprisonment of not less than one year nor more than five years or a fine of not less than five thousand pesos nor more than twenty-five thousand pesos, or both such fine and imprisonment at the discretion of the court. Section 11. Separability clause. The provisions of this Act are hereby declared to be separable and in the event one or more of such provisions are held unconstitutional, the validity of other provisions shall not be affected thereby. Section 12. Repealing clause. All acts, executive orders, rules and regulations, or parts thereof, which are inconsistent with any provisions of this Act are hereby repealed, amended or modified accordingly, without prejudice, however, to deposits made thereunder. Section 12-A. Amendatory enactments and regulations. In the event a new enactment or regulation is issued decreasing the rights hereunder granted, such new enactment or regulation shall not apply to foreign currency deposits already made or existing at the time of issuance of such new enactment or regulation, but such new enactment or regulation shall apply only to foreign currency deposits made after its issuance. (As added by PD No. 1246, prom. Nov. 21, 1977.) Section 13. Effectivity. This Act shall take effect upon its approval. Approved, April 4, 1974

Does the bank secrecy law really protect ALL of Corona's dollars?

February 16, 2012 395 Comments

A commentary By Rassa Robles

Everyone assumes that all the US dollars that Chief Justice Renato Corona stashed in banks are covered by the bank secrecy law. Let me offer the theory that they might not be ALL covered and the Senate impeachment court can legally look into them. Yes, I know I am a mere reporter with no formal training in law. But Ive had the experience of watching senators up close while they crafted our nations laws. And as a business reporter, Ive covered retail banking. Anyway, this week I ran these ideas past two high-level bank officials. None of them wanted to be identified (I wonder why?), so lets just call them Banker A and Banker B. However, what they told me are all verifiable.

Now to go back to the Bank Secrecy Law

The mother law is Republic Act No. 6426 or An Act instituting a foreign currency deposit system in the Philippines, and for other purposes. RA 6426 has no section defining what constitutes foreign currency.

However, it has three sections that suggest the definition by stating how banks are supposed to treat foreign currency. First, Section 4 states that banks taking in such deposits shall maintain at all times a one hundred percent foreign currency cover for their liabilities Section 4 recognizes that the act of depositing by a client establishes a kind of relationship and obligation between the bank and the customer. As Banker B explained to me Once you give money to the bank, the bank is indebted to you as a depositor. This is the relationship the bank is borrowing from you in the form of a deposit. For that debt they will now pay you a certain amount of interest. The next section in RA 6426 that further suggests a definition of foreign currency is Section 6: Section 6. Tax exemption. All foreign currency deposits made under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible or allowed under aforementioned laws In other words, Section 6 gives all foreign currency deposits a 100 percent tax break. The third section that suggests a definition of foreign currency is Section 9 which states: Section 9. Deposit insurance coverage. The deposits under this Act shall be insured under the provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance Corporation), as well as its implementing rules and regulations: Provided, That insurance payment shall be in the same currency in which the insured deposits are denominated. In other words, foreign currency deposits are insured by PDIC.

Now let me go to my theory that not all foreign currency deposits are guaranteed confidentiality by RA 6246 or the bank secrecy law. Section 8 of this law states in particular: Section 8. Secrecy of foreign currency deposits. All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential nature Please note the phrase here all foreign currency deposits authorized under this Act. It is part of my theory that bank secrecy only covers those foreign currency deposits defined by RA 6426. In other words, only those foreign currency deposits that contain the following elements enumerated by RA 6426:

Those for which banks have to maintain a 100% foreign currency cover Those with interest earnings that are not taxed by the government And those that are insured by PDIC.

Why do I bring up these fine distinctions?

Because since RA 6426 came into law in 1974, banks have dramatically expanded the array of foreign currency products they offer their clients. These are aside from the traditional savings, current and time deposits that were envisioned to be covered by RA 6426. Today, clients can park their dollars in sovereign bonds, in commercial papers, unit investment trust funds (UITFs), mutual funds all denominated in dollars and which are not tax-free and are not insured by the PDIC. Why would a depositor want to move away from plain vanilla dollar accounts? One reason would be: Because the interest rate on dollar savings and time deposits are terrible.

According to Banker A, a US dollar time deposit now earns 0.25% per year. A US Treasury Bond earns 2% per annum. While a US dollar-denominated ROP (Republic of the Philippines) five-year bond can earn from 2% to 2.5%. In such transactions, we merely act as a broker, Banker B told me. From this, we can see that if the client wanted to put his or her dollars to work earning something more than the miserable interest on time and savings deposit accounts, then investing in these products would make sense. In fact, as Banker B explained to me, with a UITF or mutual fund, there is no such promise by the bank that it will pay a certain amount. It is not a bank obligation. This is a separate vehicle from the bank. In that sense, UITFs are not considered as bank deposits. Banker B also explained that while even mutual funds can now be bought through banks, these money market instruments are actually regulated by the Securities and Exchange Commission. In this case, the banks merely serve as brokers for these products. In the case of such products, the bank has no customer liability, Banker B said. The bank doesnt pay interest to the customer. Rather, it is the customer that pays the bank a transaction fee for arranging the buy and doing the paperwork. In such arrangements, the bank usually asks the customer to designate a particular bank account (either savings or current) as the settlement account. When the customer wants to liquidate the UITF or when a commercial paper or bond reaches maturity, proceeds including the interest earned from such products are deposited in this settlement account. In addition, Banker A also explained to me further why a dollar bond or a UITF denominated in dollars, for instance, is not considered a foreign currency deposit as defined by RA 6426: Iba nga talaga. Kasi hindi siya deposit. Hindi siya covered ng PDIC. Pag bumili ka ng bond, wala naman sa amin ang bond. You house it at a third party. We only facilitated. We act as a broker.

Halimbawa kung ikaw kliente, magpabili ka ng stocks, I give you confirmation of sale that you bought 10,000 shares. I deliver the receipt. Babayaran mo ko. Kukunin ko commission ko. That money goes to the central depository (PCD). Pag nagpabenta ka. Ibibigay mo ang instruction, pupunta (yung instruction) sa broker. Kukuhanin namin shares sa PCD, ito ang pang-settle. Parang nagkaliwaan lang kayo. From covering retail banking, Ive also noted that while banks like PSB do not offer certain investment products, as its president Pascual Garcia III testified today, they do routinely refer their customers to the head office of the mother bank, in this case Metrobank. Such referrals are coursed through the retail bank like PSB which then transacts with the head office or mother bank and charges a transaction fee for this service. Because of this, it may be necessary for the Senate impeachment court to ask Metrobank and Bank of the Philippine Islands head offices whether CJ Corona has foreign currency investments with them. And not just dollars because some banks now have expanded their foreign currency-related transactions to euros and even yen.

Senator-judge Serge Osmea seems to be on the same line of thinking

An hour ago, Osmea asked PSB president and CEO Garcia whether dollar bonds could be classified as deposits under RA 6426. And so I would like to ask the following questions of the Supreme Court and the senatorjudges: Is my theory valid or plain hogwash? If valid, can the Senate impeachment court now ask the banks to disclose any and all dollar transactions of CJ Corona revolving around such products? I believe that the moment an amount of foreign currency deposit from CJ Corona left the safe haven of savings and/or

time deposit it loses the umbrella of confidentiality during that period. And these become legitimate subjects of inquiry by the Senate impeachment court. For this piece, I had tried to interview a well-known lawyer who teaches banking law. But he declined to speak to me. Likewise, I tried to obtain an interview with officials of the Bangko Sentral ng Pilipinas but no one would talk to me. Because of this, I have decided to throw my questions to the public and see that maybe, just maybe, some lawyers and banking experts will respond and share what they know