G.R. No.
94723 August 21, 1997
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father
and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR.,
and EVELINA E. SALVACION, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING
CORPORATION and GREG BARTELLI y NORTHCOTT, respondents.
TORRES, JR., J.:
The petition is for declaratory relief. It prays for the following reliefs:
a.) Immediately upon the filing of this petition, an Order be issued
restraining the respondents from applying and enforcing Section 113 of Central
Bank Circular No. 960;
b.) After hearing, judgment be rendered:
1.) Declaring the respective rights and duties of petitioners and
respondents;
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to
the provisions of the Constitution, hence void; because its provision that
"Foreign currency deposits shall be exempt from attachment, garnishment, or
any other order or process of any court, legislative body, government agency
or any administrative body whatsoever
i.) has taken away the right of petitioners to have the bank deposit of
defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered
in petitioners' favor in violation of substantive due process guaranteed by the
Constitution;
ii.) has given foreign currency depositors an undue favor or a class
privilege in violation of the equal protection clause of the Constitution;
iii.) has provided a safe haven for criminals like the herein respondent
Greg Bartelli y Northcott since criminals could escape civil liability for their
wrongful acts by merely converting their money to a foreign currency and
depositing it in a foreign currency deposit account with an authorized bank.
The antecedent facts:
Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner
Karen Salvacion, then 12 years old to go with him to his apartment. Therein,
Greg Bartelli detained Karen Salvacion for four days, or up to February 7, 1989
and was able to rape the child once on February 4, and three times each day
on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and
people living nearby, rescued Karen, Greg Bartelli was arrested and detained
at the Makati Municipal Jail. The policemen recovered from Bartelli the
following items: 1.) Dollar Check No. 368, Control No. 021000678-
1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8
(Peso Acct.); 3.) Dollar Account China Banking Corp., US$/A#54105028-2;
4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6
pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant.
Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli,
Criminal Case for Serious Illegal Detention and four (4) counts of Rape. On
the same day, petitioners filed with the Regional Trial Court of Makati Civil
Case for damages with preliminary attachment against Greg Bartelli. On the
day there was a scheduled hearing for Bartelli's petition for bail the latter
escaped from jail.
The court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of
Warrant of Arrest and Hold Departure Order.
Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated
February 22, 1989 granting the application of herein petitioners, for the
issuance of the writ of preliminary attachment.
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of
Garnishment on China Banking Corporation. In a letter dated March 13, 1989
to the Deputy Sheriff of Makati, China Banking Corporation invoked Republic
Act No. 1405 as its answer to the notice of garnishment served on it. On March
15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply to China
Banking Corporation saying that the garnishment did not violate the secrecy
of bank deposits since the disclosure is merely incidental to a garnishment
properly and legally made by virtue of a court order which has placed the
subject deposits in custodia legis. In answer to this letter of the Deputy Sheriff
of Makati, China Banking Corporation, in a letter dated March 20, 1989,
invoked Section 113 of Central Bank Circular No. 960 to the effect that the
dollar deposits or defendant Greg Bartelli are exempt from attachment,
garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body, whatsoever.
MARIA GUILKA R. SENARLO || BANKING LAWS 1

Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for
leave to serve summons by publication in the Civil Case No. 89-3214 entitled
"Karen Salvacion, et al. vs. Greg Bartelli y Northcott." Summons with the
complaint was a published in the Manila Times once a week for three
consecutive weeks. Greg Bartelli failed to file his answer to the complaint and
was declared in default on August 7, 1989. After hearing the case ex-parte,
the court rendered judgment in favor of petitioners.
Pursuant to an Order granting leave to publish notice of decision, said notice
was published in the Manila Bulletin once a week for three consecutive weeks.
After the lapse of fifteen (15) days from the date of the last publication of the
notice of judgment and the decision of the trial court had become final,
petitioners tried to execute on Bartelli's dollar deposit with China Banking
Corporation. Likewise, the bank invoked Section 113 of Central Bank Circular
No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil down to
two:
May this Court entertain the instant petition despite the fact that original
jurisdiction in petitions for declaratory relief rests with the lower court? Should
Section 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, as
amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act
be made applicable to a foreign transient?
This Court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the court. But
this petition for declaratory relief can only be entertained and treated as a
petition for mandamus to require respondents to honor and comply with the
writ of execution in Civil Case No. 89-3214.
This Court has no original and exclusive jurisdiction over a petition for
declaratory relief. However, exceptions to this rule have been recognized.
Thus, where the petition has far-reaching implications and raises questions
that should be resolved, it may be treated as one for mandamus.
The reason for imposing exemplary or corrective damages is due to the
wanton and bestial manner defendant had committed the acts of rape during
a period of serious illegal detention of his hapless victim, the minor Karen
Salvacion whose only fault was in her being so naive and credulous to believe
easily that defendant, an American national, could not have such a bestial
desire on her nor capable of committing such a heinous crime. Being only 12
years old when that unfortunate incident happened, she has never heard of an
old Filipino adage that in every forest there is a snake, . . . .
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time
when the country's economy was in a shambles; when foreign investments
were minimal and presumably, this was the reason why said statute was
enacted. But the realities of the present times show that the country has
recovered economically; and even if not, the questioned law still denies those
entitled to due process of law for being unreasonable and oppressive. The
intention of the questioned law may be good when enacted. The law failed to
anticipate the iniquitous effects producing outright injustice and inequality such
as the case before us.
It has thus been said that
In his Comment, the Solicitor General correctly opined, thus:
The present petition has far-reaching implications on the right of a national to
obtain redress for a wrong committed by an alien who takes refuge under a
law and regulation promulgated for a purpose which does not contemplate the
application thereof envisaged by the alien. More specifically, the petition raises
the question whether the protection against attachment, garnishment or other
court process accorded to foreign currency deposits by PD No. 1246 and CB
Circular No. 960 applies when the deposit does not come from a lender or
investor but from a mere transient or tourist who is not expected to maintain
the deposit in the bank for long.
The resolution of this question is important for the protection of nationals who
are victimized in the forum by foreigners who are merely passing through.
. . . Respondents China Banking Corporation and Central Bank of the
Philippines refused to honor the writ of execution issued in Civil Case No. 89-
3214 on the strength of the following provision of Central Bank Circular No.
960:
Sec. 113. Exemption from attachment. Foreign currency deposits
shall be exempt from attachment, garnishment, or any other order or process
of any court, legislative body, government agency or any administrative body
whatsoever.
MARIA GUILKA R. SENARLO || BANKING LAWS 2
Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic
Act No. 6426:
Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall
promulgate such rules and regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the publication of such rules
and regulations in the Official Gazette and in a newspaper of national
circulation for at least once a week for three consecutive weeks. In case the
Central Bank promulgates new rules and regulations decreasing the rights of
depositors, the rules and regulations at the time the deposit was made shall
govern.
The aforecited Section 113 was copied from Section 8 of Republic Act NO.
6426, as amended by P.D. 1246, thus:
Sec. 8. Secrecy of Foreign Currency Deposits. All foreign currency
deposits authorized under this Act, as amended by Presidential Decree No.
1035, as well as foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of an absolutely
confidential nature and, except upon the written permission of the depositor,
in no instance shall such foreign currency deposits be examined, inquired or
looked into by any person, government official, bureau or office whether
judicial or administrative or legislative or any other entity whether public or
private: Provided, however, that said foreign currency deposits shall be exempt
from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever.
The purpose of PD 1246 in according protection against attachment,
garnishment and other court process to foreign currency deposits is stated in
its whereases, viz.:
WHEREAS, in order to assure the development and speedy growth of the
Foreign Currency Deposit System and the Offshore Banking System in the
Philippines, certain incentives were provided for under the two Systems such
as confidentiality of deposits subject to certain exceptions and tax exemptions
on the interest income of depositors who are nonresidents and are not
engaged in trade or business in the Philippines;
WHEREAS, making absolute the protective cloak of confidentiality over such
foreign currency deposits, exempting such deposits from tax, and
guaranteeing the vested rights of depositors would better encourage the inflow
of foreign currency deposits into the banking institutions authorized to accept
such deposits in the Philippines thereby placing such institutions more in a
position to properly channel the same to loans and investments in the
Philippines, thus directly contributing to the economic development of the
country;
Thus, one of the principal purposes of the protection accorded to foreign
currency deposits is "to assure the development and speedy growth of the
Foreign Currency Deposit system and the Offshore Banking in the Philippines"
(3rd Whereas).
It is evident from the above [Whereas clauses] that the Offshore Banking
System and the Foreign Currency Deposit System were designed to draw
deposits from foreign lenders and investors (Vide second Whereas of PD No.
1034; third Whereas of PD No. 1035). It is these deposits that are induced by
the two laws and given protection and incentives by them.
Obviously, the foreign currency deposit made by a transient or a tourist is not
the kind of deposit encouraged by PD Nos. 1034 and 1035 and given
incentives and protection by said laws because such depositor stays only for
a few days in the country and, therefore, will maintain his deposit in the bank
only for a short time.
Respondent Greg Bartelli, as stated, is just a tourist or a transient. He
deposited his dollars with respondent China Banking Corporation only for
safekeeping during his temporary stay in the Philippines.
For the reasons stated above, the Solicitor General thus submits that the dollar
deposit of respondent Greg Bartelli is not entitled to the protection of Section
113 of Central Bank Circular No. 960 and PD No. 1246 against attachment,
garnishment or other court processes.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and
PD No. 1246, insofar as it amends Section 8 of R.A. No. 6426 are hereby held
to be INAPPLICABLE to this case because of its peculiar circumstances.
Respondents are hereby REQUIRED to COMPLY with the writ of execution
issued in Civil Case No. 89-3214, "Karen Salvacion, et al. vs. Greg Bartelli y
Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the
dollar deposit of respondent Greg Bartelli y Northcott in such amount as would
satisfy the judgment.
SO ORDERED.
MARIA GUILKA R. SENARLO || BANKING LAWS 3
 G.R. No. L-34548 November 29, 1988
RIZAL COMMERCIAL BANKING CORPORATION, petitioner,
vs.
THE HONORABLE PACIFICO P. DE CASTRO and PHILIPPINE VIRGINIA
TOBACCO ADMINISTRATION, respondents
CORTES, J.:
The crux of the instant controversy dwells on the liability of a bank for releasing
its depositor's funds upon orders of the court, pursuant to a writ of garnishment.
If in compliance with the court order, the bank delivered the garnished amount
to the sheriff, who in turn delivered it to the judgment creditor, but
subsequently, the order of the court directing payment was set aside by the
same judge, should the bank be held solidarily liable with the judgment creditor
to its depositor for reimbursement of the garnished funds? The Court does not
think so.
In Civil Case No. Q-12785 of the Court of First Instance of Rizal, Quezon City
Branch IX entitled "Badoc Planters, Inc. versus Philippine Virginia Tobacco
Administration, et al.," which was an action for recovery of unpaid tobacco
deliveries, an Order (Partial Judgment) was issued by the Hon. Lourdes P.
San Diego, then Presiding Judge, ordering the defendants therein to pay jointly
and severally, the plaintiff Badoc Planters, Inc. (hereinafter referred to as
"BADOC") within 48 hours the aggregate amount of P206,916.76, with legal
interests thereon.
On January 26,1970, BADOC filed an Urgent Ex-Parte Motion for a Writ of
Execution of the said Partial Judgment which was granted on the same day by
the herein respondent judge who acted in place of the Hon. Judge San Diego
who had just been elevated as a Justice of the Court of Appeals. Accordingly,
the Branch Clerk of Court on the very same day, issued a Writ of Execution
addressed to Special Sheriff Faustino Rigor, who then issued a Notice of
Garnishment addressed to the General Manager and/or Cashier of Rizal
Commercial Banking Corporation (hereinafter referred to as RCBC), the
petitioner in this case, requesting a reply within five (5) days to said
garnishment as to any property which the Philippine Virginia Tobacco
Administration (hereinafter referred to as "PVTA") might have in the
possession or control of petitioner or of any debts owing by the petitioner to
said defendant.
Upon an Urgent Ex-Parte Motion dated January 27, 1970 filed by BADOC, the
respondent Judge issued an Order granting the Ex-Parte Motion and directing
the herein petitioner "to deliver in check the amount garnished to Sheriff
Faustino Rigor and Sheriff Rigor in turn is ordered to cash the check and
deliver the amount to the plaintiff's representative and/or counsel on record."
Respondent PVTA filed a Motion for Reconsideration dated February 26,1970
which was granted in an Order dated April 6,1970, setting aside the Orders of
Execution and of Payment and the Writ of Execution and ordering petitioner
and BADOC "to restore, jointly and severally, the account of PVTA with the
said bank in the same condition and state it was before the issuance of the
aforesaid Orders
This case was then certified by the Court of Appeals to this Honorable Court,
involving as it does purely questions of law.
The petitioner raises two principal queries in the instant case: 1) Whether or
not PVTA funds are public funds not subject to garnishment; and 2) Whether
or not the respondent Judge correctly ordered the herein petitioner to
reimburse the amount paid to the Special Sheriff by virtue of the execution
issued pursuant to the Order/Partial Judgment dated January 15, 1970.
PVTA however claims that the manner in which the bank complied with the
Sheriffs Notice of Garnishment indicated breach of trust and dereliction of duty
on the part of the bank as custodian of government funds. It insistently urges
that the premature delivery of the garnished amount by RCBC to the special
sheriff even in the absence of a demand to deliver made by the latter, before
the expiration of the five-day period given to reply to the Notice of Garnishment,
without any reply having been given thereto nor any prior authorization from
its depositor, PVTA and even if the court's order of January 27, 1970 did not
require the bank to immediately deliver the garnished amount constitutes such
lack of prudence as to make it answerable jointly and severally with the plaintiff
for the wrongful release of the money from the deposit of the PVTA.
Such allegations must be rejected for lack of merit. In the first place, it should
be pointed out that RCBC did not deliver the amount on the strength solely of
a Notice of Garnishment; rather, the release of the funds was made pursuant
to the aforesaid Order of January 27, 1970. While the Notice of Garnishment
dated January 26, 1970 contained no demand of payment as it was a mere
request for petitioner to withold any funds of the PVTA then in its possession,
the Order of January 27, 1970 categorically required the delivery in check of
the amount garnished to the special sheriff, Faustino Rigor. In the second
place, the bank had already filed a reply to the Notice of Garnishment stating
that it had in its custody funds belonging to the PVTA, which, in fact was the
basis of the plaintiff in filing a motion to secure delivery of the garnished
MARIA GUILKA R. SENARLO || BANKING LAWS 4
amount to the sheriff. Lastly, the bank, upon the receipt of the Notice of
Garnishment, duly informed PVTA thereof to enable the latter to take the
necessary steps for the protection of its own interest
It is important to stress, at this juncture, that there was nothing irregular in the
delivery of the funds of PVTA by check to the sheriff, whose custody is
equivalent to the custody of the court, he being a court officer. The order of the
court dated January 27, 1970 was composed of two parts, requiring: 1) RCBC
to deliver in check the amount garnished to the designated sheriff and 2) the
sheriff in turn to cash the check and deliver the amount to the plaintiffs
representative and/or counsel on record. It must be noted that in delivering the
garnished amount in check to the sheriff, the RCBC did not thereby make any
payment, for the law mandates that delivery of a check does not produce the
effect of payment until it has been cashed. [Article 1249, Civil Code.]
Moreover, by virtue of the order of garnishment, the same was placed in
custodia legis and therefore, from that time on, RCBC was holding the funds
subject to the orders of the court a quo. That the sheriff, upon delivery of the
check to him by RCBC encashed it and turned over the proceeds thereof to
the plaintiff was no longer the concern of RCBC as the responsibility over the
garnished funds passed to the court. Thus, no breach of trust or dereliction of
duty can be attributed to RCBC in delivering its depositor's funds pursuant to
a court order which was merely in the exercise of its power of control over such
funds.
... The garnishment of property to satisfy a writ of execution operates as an
attachment and fastens upon the property a lien by which the property is
brought under the jurisdiction of the court issuing the writ. It is brought into
custodia legis, under the sole control of such court.
As stated earlier, the order directing the bank to deliver the amount to the
sheriff was distinct and separate from the order directing the sheriff to encash
the said check. The bank had no choice but to comply with the order
demanding delivery of the garnished amount in check. The very tenor of the
order called for immediate compliance therewith. On the other hand, the bank
cannot be held liable for the subsequent encashment of the check as this was
upon order of the court in the exercise of its power of control over the funds
placed in custodia legis by virtue of the garnishment.
In a recent decision [Engineering Construction Inc., v. National Power
Corporation, G.R. No. L-34589, June 29, 1988] penned by the now Chief
Justice Marcelo Fernan, this Court absolved a garnishee from any liability for
prompt compliance with its order for the delivery of the garnished funds. The
rationale behind such ruling deserves emphasis in the present case:
But while partial restitution is warranted in favor of NPC, we find that the
Appellate Court erred in not absolving MERALCO, the garnishee, from its
obligations to NPC with respect to the payment of ECI of P 1,114,543.23, thus
in effect subjecting MERALCO to double liability. MERALCO should not have
been faulted for its prompt obedience to a writ of garnishment. Unless there
are compelling reasons such as: a defect on the face of the writ or actual
knowledge on the part of the garnishee of lack of entitlement on the part of the
garnisher, it is not incumbent upon the garnishee to inquire or to judge for itself
whether or not the order for the advance execution of a judgment is valid.
Garnishment is considered as a specie of attachment for reaching credits
belonging to the judgment debtor and owing to him from a stranger to the
litigation. Under the above-cited rule, the garnishee [the third person] is obliged
to deliver the credits, etc. to the proper officer issuing the writ and "the law
exempts from liability the person having in his possession or under his control
any credits or other personal property belonging to the defendant, ..., if such
property be delivered or transferred, ..., to the clerk, sheriff, or other officer of
the court in which the action is pending.
RCBC's stand that its immediate compliance with the lower court's order
should not have been met with the harsh penalty of joint and several liability.
Nor can its liability to reimburse PVTA of the amount delivered in check be
premised upon the subsequent declaration of nullity of the order of delivery.
As correctly pointed out by the petitioner: That the respondent Judge, after his
Order was enforced, saw fit to recall said Order and decree its nullity, should
not prejudice one who dutifully abided by it, the presumption being that judicial
orders are valid and issued in the regular performance of the duties of the
Court" [Section 5(m) Rule 131, Revised Rules of Court]. This should operate
with greater force in relation to the herein petitioner which, not being a party in
the case, was just called upon to perform an act in accordance with a judicial
flat.
From the foregoing, it may be concluded that the charge of breach of trust
and/or dereliction of duty as well as lack of prudence in effecting the immediate
payment of the garnished amount is totally unfounded. Upon receipt of the
Notice of Garnishment, RCBC duly informed PVTA thereof to enable the latter
to take the necessary steps for its protection. However, right on the very next
day after its receipt of such notice, RCBC was already served with the Order
requiring delivery of the garnished amount. Confronted as it was with a
MARIA GUILKA R. SENARLO || BANKING LAWS 5
mandatory directive, disobedience to which exposed it to a contempt order, it
had no choice but to comply.

Finally, it is contended that RCBC was bound to inquire into the legality and
propriety of the Writ of Execution and Notice of Garnishment issued against
the funds of the PVTA deposited with said bank. But the bank was in no
position to question the legality of the garnishment since it was not even a
party to the case. As correctly pointed out by the petitioner, it had neither the
personality nor the interest to assail or controvert the orders of respondent
Judge. It had no choice but to obey the same inasmuch as it had no standing
at all to impugn the validity of the partial judgment rendered in favor of the
plaintiff or of the processes issued in execution of such judgment.

RCBC cannot therefore be compelled to make restitution solidarily with the

plaintiff BADOC. Plaintiff BADOC alone was responsible for the issuance of
the Writ of Execution and Order of Payment and so, the plaintiff alone should
bear the consequences of a subsequent annulment of such court orders;
hence, only the plaintiff can be ordered to restore the account of the PVTA.

WHEREFORE, the petition is hereby granted and the petitioner is ABSOLVED

from any liability to respondent PVTA for reimbursement of the funds
garnished. The questioned Order of the respondent Judge ordering the
petitioner, jointly and severally with BADOC, to restore the account of PVTA
are modified accordingly.

SO ORDERED.

MARIA GUILKA R. SENARLO || BANKING LAWS 6

 G.R. No. 168644 February 16, 2010
BSB GROUP, INC., represented by its President, Mr. RICARDO
BANGAYAN, Petitioner,
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.
PERALTA, J.:
Petitioner, the BSB Group, Inc., is a duly organized domestic corporation
presided by its herein representative, Ricardo Bangayan (Bangayan).
Respondent Sally Go, alternatively referred to as Sally Sia Go and Sally Go-
Bangayan, is Bangayans wife, who was employed in the company as a
cashier, and was engaged, among others, to receive and account for the
payments made by the various customers of the company.
Bangayan filed with the Manila Prosecutors Office a complaint for estafa
and/or qualified theft5 against respondent, alleging that several checks6
representing the aggregate amount of 1,534,135.50 issued by the companys
customers in payment of their obligation were, indorsed by respondent who
deposited the same to her personal banking account maintained at Security
Bank and Trust Company (Security Bank) in Divisoria, Manila Branch.
Accordingly, respondent was charged before the Regional Trial Court of
Manila, Branch 36, in an Information
Respondent entered a negative plea when arraigned. The trial ensued. On the
premise that respondent had allegedly encashed the subject checks and
deposited the corresponding amounts thereof to her personal banking
account, the prosecution moved for the issuance of subpoena duces tecum
/ad testificandum against the respective managers or records custodians of
Security Banks Divisoria Branch, as well as of the Asian Savings Bank (now
Metropolitan Bank & Trust Co. [Metrobank]),
To this, respondent filed a supplemental motion to quash, invoking the
absolutely confidential nature of the Metrobank account under the provisions
of Republic Act (R.A.) No. 1405.15 The trial court did not sustain respondent;
hence, it denied the motion to quash for lack of merit.
Meanwhile, the prosecution was able to present in court the testimony of
Elenita Marasigan (Marasigan), the representative of Security Bank. But
before the testimony could be completed, respondent filed a Motion to
Suppress, seeking the exclusion of Marasigans testimony and accompanying
documents thus far received, bearing on the subject Security Bank account.
This time respondent invokes, in addition to irrelevancy, the privilege of
confidentiality under R.A. No. 1405.
The trial court, nevertheless, denied the motion in its Order.
Finding merit in the petition, the Court of Appeals reversed and set aside the
assailed orders of the trial court Decision.
With the denial of its motion for reconsideration, petitioner is now before the
Court pleading the same issues as those raised before the lower courts.
We derive from the conflicting advocacies of the parties that the issue for
resolution is whether the testimony of Marasigan and the accompanying
documents are irrelevant to the case, and whether they are also violative of
the absolutely confidential nature of bank deposits and, hence, excluded by
operation of R.A. No. 1405. The question of admissibility of the evidence thus
comes to the fore. And the Court, after deliberative estimation, finds the subject
evidence to be indeed inadmissible.
Theft is present when a person, with intent to gain but without violence against
or intimidation of persons or force upon things, takes the personal property of
another without the latters consent. It is qualified when, among others, and as
alleged in the instant case, it is committed with abuse of confidence.
Thus, whether these pieces of evidence sought to be suppressed in this case
to be addressed by considering whether they have such direct relation to the
fact in issue as to induce belief in its existence or non-existence; or whether
they relate collaterally to a fact from which, by process of logic, an inference
may be made as to the existence or non-existence of the fact in issue.35
The fact in issue appears to be that respondent has taken away cash in the
amount of 1,534,135.50 from the coffers of petitioner.
Moreover, that there is no difference between cash and check is true in other
instances. In estafa by conversion, for instance, whether the thing converted
is cash or check, is immaterial in relation to the formal allegation in an
information for that offense; a check, after all, while not regarded as legal
tender, is normally accepted under commercial usage as a substitute for cash,
and the credit it represents in stated monetary value is properly capable of
appropriation. And it is in this respect that what the offender does with the
check subsequent to the act of unlawfully taking it becomes material inasmuch
MARIA GUILKA R. SENARLO || BANKING LAWS 7
as this offense is a continuing one.37 In other words, in pursuing a case for
this offense, the prosecution may establish its cause by the presentation of the
checks involved. These checks would then constitute the best evidence to
establish their contents and to prove the elemental act of conversion in support
of the proposition that the offender has indeed indorsed the same in his own
name.38
Theft, however, is not of such character. Thus, for our purposes, as the
Information in this case accuses respondent of having stolen cash, proof
tending to establish that respondent has actualized her criminal intent by
indorsing the checks and depositing the proceeds thereof in her personal
account, becomes not only irrelevant but also immaterial and, on that score,
inadmissible in evidence.
We now address the issue of whether the admission of Marasigans testimony
on the particulars of respondents account with Security Bank, as well as of the
corresponding evidence of the checks allegedly deposited in said account,
constitutes an unallowable inquiry under R.A. 1405.
R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding
and at the same time encourage the people to deposit their money in banking
institutions, so that it may be utilized by way of authorized loans and thereby
assist in economic development. Owing to this piece of legislation, the
confidentiality of bank deposits remains to be a basic state policy in the
Philippines. Section 2 of the law institutionalized this policy by characterizing
as absolutely confidential in general all deposits of whatever nature with banks
and other financial institutions in the country.
The measure of protection afforded by the law has been explained in China
Banking Corporation v. Ortega.46 That case principally addressed the issue
of whether the prohibition against an examination of bank deposits precludes
garnishment in satisfaction of a judgment. Ruling on that issue in the negative,
the Court found guidance in the relevant portions of the legislative
deliberations on Senate Bill No. 351 and House Bill No. 3977, which later
became the Bank Secrecy Act, and it held that the absolute confidentiality rule
in R.A. No. 1405 actually aims at protection from unwarranted inquiry or
investigation if the purpose of such inquiry or investigation is merely to
determine the existence and nature, as well as the amount of the deposit in
any given bank account.
Mr. Ramos: The attachment will only apply after the court has pronounced
sentence declaring the liability of such person. But where the primary aim is to
determine whether he has a bank deposit in order to bring about a proper
assessment by the [BIR], such inquiry is not allowed by this proposed law.
Mr. Marcos: But under our rules of procedure and under the Civil Code, the
attachment or garnishment of money deposited is allowed. Let us assume for
instance that there is a preliminary attachment which is for garnishment or for
holding liable all moneys deposited belonging to a certain individual, but such
attachment or garnishment will bring out into the open the value of such
deposit. Is that prohibited by... the law?
Mr. Ramos: It is only prohibited to the extent that the inquiry... is made only for
the purpose of satisfying a tax liability already declared for the protection of the
right in favor of the government; but when the object is merely to inquire
whether he has a deposit or not for purposes of taxation, then this is fully
covered by the law. x x x
Mr. Marcos: The law prohibits a mere investigation into the existence and the
amount of the deposit.
Mr. Ramos: Into the very nature of such deposit.
In taking exclusion from the coverage of the confidentiality rule, petitioner in
the instant case posits that the account maintained by respondent with
Security Bank contains the proceeds of the checks that she has fraudulently
appropriated to herself and, thus, falls under one of the exceptions in Section
in litigation.
In other words, it can hardly be inferred from the indictment itself that the
Security Bank account is the ostensible subject of the prosecutions inquiry.
Without needlessly expanding the scope of what is plainly alleged in the
Information, the subject matter of the action in this case is the money
amounting to 1,534,135.50 alleged to have been stolen by respondent, and
not the money equivalent of the checks which are sought to be admitted in
evidence. Thus, it is that, which the prosecution is bound to prove with its
evidence, and no other.
It comes clear that the admission of testimonial and documentary evidence
relative to respondents Security Bank account serves no other purpose than
to establish the existence of such account, its nature and the amount kept in
it. It constitutes an attempt by the prosecution at an impermissible inquiry into
a bank deposit account the privacy and confidentiality of which is protected by
law. On this score alone, the objection posed by respondent in her motion to
MARIA GUILKA R. SENARLO || BANKING LAWS 8
suppress should have indeed put an end to the controversy at the very first
instance it was raised before the trial court.

In sum, we hold that the testimony of Marasigan on the particulars of

respondents supposed bank account with Security Bank and the documentary
evidence represented by the checks adduced in support thereof, are not only
incompetent for being excluded by operation of R.A. No. 1405. They are
likewise irrelevant to the case, inasmuch as they do not appear to have any
logical and reasonable connection to the prosecution of respondent for
qualified theft. We find full merit in and affirm respondents objection to the
evidence of the prosecution. The Court of Appeals was, therefore, correct in
reversing the assailed orders of the trial court.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals

in CA-G.R. SP No. 87600 dated April 20, 2005, reversing the September 13,
2004 and November 5, 2004 Orders of the Regional Trial Court of Manila,
Branch 36 in Criminal Case No. 02-202158, is AFFIRMED.

SO ORDERED.

MARIA GUILKA R. SENARLO || BANKING LAWS 9

 G.R. Nos. 157294-95 November 30, 2006
JOSEPH VICTOR G. EJERCITO, Petitioner,
vs.
SANDIGANBAYAN (Special Division) and PEOPLE OF THE
PHILIPPINES, Respondents.
CARPIO MORALES, J.:
In the case of People v. Estrada, et al., the Special Prosecution Panel filed
before the Sandiganbayan a Request for Issuance of Subpoena Duces Tecum
for the issuance of a subpoena directing the President of Export and Industry
Bank (EIB, formerly Urban Bank) or his/her authorized representative to
produce the following documents during the hearings scheduled on January
22 and 27, 2003: I. For Trust Account No. 858; II. For Savings Account No.
0116-17345-9
The Special Prosecution Panel also filed a Request for Issuance of Subpoena
Duces Tecum/Ad Testificandum directed to the authorized representative of
Equitable-PCI Bank to produce statements of account pertaining to certain
accounts in the name of "Jose Velarde" and to testify thereon.
The Sandiganbayan granted both requests by Resolution and subpoenas
were accordingly issued.
The Special Prosecution Panel filed still another Request for Issuance of
Subpoena Duces Tecum/Ad Testificandum for the President of EIB or his/her
authorized representative to produce the same documents subject of the
Subpoena Duces Tecum and to testify thereon on the hearings scheduled. The
request was likewise granted by the Sandiganbayan. A Subpoena Duces
Tecum/Ad Testificandum was accordingly issued.
Petitioner, claiming to have learned from the media that the Special
Prosecution Panel had requested for the issuance of subpoenas for the
examination of bank accounts belonging to him, attended the hearing of the
case on January 27, 2003 and filed before the Sandiganbayan a letter of even
date expressing his concerns confidentiality of information.
Petitioner, unassisted by counsel filed a Motion to Quash Subpoena Duces
Tecum/Ad Testificandum praying that the subpoenas previously issued to the
President of the EIB be quashed.
In his Motion to Quash, petitioner claimed that his bank accounts are covered
by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under
any of the exceptions stated therein.
The disclosure being illegal, petitioner concluded, the prosecution in the case
may not be allowed to make use of the information.
The Sandiganbayan issued a Resolution denying petitioners Motion to Quash
Subpoenae Duces Tecum/Ad Testificandum.
Raised as issues are:
1. Whether petitioners Trust Account No. 858 is covered by the term "deposit"
as used in R.A. 1405;
2. Whether petitioners Trust Account No. 858 and Savings Account No. 0116-
17345-9 are excepted from the protection of R.A. 1405; and
3. Whether the "extremely-detailed" information contained in the Special
Prosecution Panels requests for subpoena was obtained through a prior illegal
disclosure of petitioners bank accounts, in violation of the "fruit of the
poisonous tree" doctrine.
The contention that trust accounts are not covered by the term "deposits," as
used in R.A. 1405, by the mere fact that they do not entail a creditor-debtor
relationship between the trustor and the bank, does not lie. An examination of
the law shows that the term "deposits" used therein is to be understood broadly
and not limited only to accounts which give rise to a creditor-debtor relationship
between the depositor and the bank.
The policy behind the law is laid down in Section 1:
SECTION 1. It is hereby declared to be the policy of the Government to give
encouragement to the people to deposit their money in banking institutions and
to discourage private hoarding so that the same may be properly utilized by
banks in authorized loans to assist in the economic development of the
country. (Underscoring supplied)
If the money deposited under an account may be used by banks for authorized
loans to third persons, then such account, regardless of whether it creates a
creditor-debtor relationship between the depositor and the bank, falls under
the category of accounts which the law precisely seeks to protect for the
purpose of boosting the economic development of the country.
MARIA GUILKA R. SENARLO || BANKING LAWS 10
Trust Account No. 858 is, without doubt, one such account. The Trust
Agreement between petitioner and Urban Bank provides that the trust account
covers "deposit, placement or investment of funds" by Urban Bank for and in
behalf of petitioner.6 The money deposited under Trust Account No. 858, was,
therefore, intended not merely to remain with the bank but to be invested by it
elsewhere. To hold that this type of account is not protected by R.A. 1405
would encourage private hoarding of funds that could otherwise be invested
by banks in other ventures, contrary to the policy behind the law.
Section 2 of the same law in fact even more clearly shows that the term
"deposits" was intended to be understood broadly:
SECTION 2. All deposits of whatever nature with banks or banking institutions
in the Philippines including investments in bonds issued by the Government of
the Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office,
except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of
public officials, or in cases where the money deposited or invested is the
subject matter of the litigation.
The phrase "of whatever nature" proscribes any restrictive interpretation of
"deposits." Moreover, it is clear from the immediately quoted provision that,
generally, the law applies not only to money which is deposited but also to
those which are invested. This further shows that the law was not intended to
apply only to "deposits" in the strict sense of the word. Otherwise, there would
have been no need to add the phrase "or invested."
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.
The protection afforded by the law is, however, not absolute, there being
recognized exceptions thereto, as above-quoted Section 2 provides. In the
present case, two exceptions apply, to wit: (1) the examination of bank
accounts is upon order of a competent court in cases of bribery or dereliction
of duty of public officials, and (2) the money deposited or invested is the subject
matter of the litigation.
Petitioner contends that since plunder is neither bribery nor dereliction of duty,
his accounts are not excepted from the protection of R.A. 1405. Philippine
National Bank v. Gancayco holds otherwise:
Cases of unexplained wealth are similar to cases of bribery or dereliction of
duty and no reason is seen why these two classes of cases cannot be
excepted from the rule making bank deposits confidential. This policy
expresses the notion that a public office is a public trust and any person who
enters upon its discharge does so with the full knowledge that his life, so far
as relevant to his duty, is open to public scrutiny.
Undoubtedly, cases for plunder involve unexplained wealth.
The crime of bribery and the overt acts constitutive of plunder are crimes
committed by public officers, and in either case the noble idea that "a public
office is a public trust and any person who enters upon its discharge does so
with the full knowledge that his life, so far as relevant to his duty, is open to
public scrutiny" applies with equal force.
Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable
in cases of bribery must also apply to cases of plunder.
Respecting petitioners claim that the money in his bank accounts is not the
"subject matter of the litigation," the meaning of the phrase "subject matter of
the litigation" as used in R.A. 1405 is explained in Union Bank of the
Philippines v. Court of Appeals,9 thus:
Petitioner contends that the Court of Appeals confuses the "cause of action"
with the "subject of the action". In Yusingco v. Ong Hing Lian, petitioner points
out, this Court distinguished the two concepts.
"The cause of action is the legal wrong threatened or committed, while the
object of the action is to prevent or redress the wrong by obtaining some legal
relief; but the subject of the action is neither of these since it is not the wrong
or the relief demanded, the subject of the action is the matter or thing with
respect to which the controversy has arisen, concerning which the wrong has
been done, and this ordinarily is the property or the contract and its subject
matter, or the thing in dispute."
. where the money deposited was the subject matter of the litigation since
the money deposited was the very thing in dispute. x x x"
The plunder case now pending with the Sandiganbayan necessarily involves
an inquiry into the whereabouts of the amount purportedly acquired illegally by
former President Joseph Estrada.
MARIA GUILKA R. SENARLO || BANKING LAWS 11
In a further attempt to show that the subpoenas issued by the Sandiganbayan
are invalid and may not be enforced, petitioner contends, as earlier stated, that
the information found therein, given their "extremely detailed" character, could
only have been obtained by the Special Prosecution Panel through an illegal
disclosure by the bank officials concerned. Petitioner thus claims that,
following the "fruit of the poisonous tree" doctrine, the subpoenas must be
quashed.
As no plunder case against then President Estrada had yet been filed before
a court of competent jurisdiction at the time the Ombudsman conducted an
investigation, petitioner concludes that the information about his bank
accounts were acquired illegally, hence, it may not be lawfully used to facilitate
a subsequent inquiry into the same bank accounts.
Petitioners attempt to make the exclusionary rule applicable to the instant
case fails. R.A. 1405, it bears noting, nowhere provides that an unlawful
examination of bank accounts shall render the evidence obtained therefrom
inadmissible in evidence. Section 5 of R.A. 1405 only states that "[a]ny
violation of this law will subject the offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court."
Clearly, the "fruit of the poisonous tree" doctrine presupposes a violation of
law. If there was no violation of R.A. 1405 in the instant case, then there would
be no "poisonous tree" to begin with, and, thus, no reason to apply the doctrine.
In fine, the subpoenas issued by the Ombudsman in this case were legal,
hence, invocation of the "fruit of the poisonous tree" doctrine is misplaced.
At all events, even if the challenged subpoenas are quashed, the Ombudsman
is not barred from requiring the production of the same documents based
solely on information obtained by it from sources independent of its previous
inquiry.
In particular, the Ombudsman, even before its inquiry, had already possessed
information giving him grounds to believe that (1) there are bank accounts
bearing the number "858," (2) that such accounts are in the custody of Urban
Bank, and (3) that the same are linked with the bank accounts of former
President Joseph Estrada who was then under investigation for plunder.
The information on the existence of Bank Accounts bearing number "858" was,
according to respondent People of the Philippines, obtained from various
sources including the proceedings during the impeachment of President
Estrada, related reports, articles and investigative journals.23 In the absence
of proof to the contrary, this explanation proffered by respondent must be
upheld. To presume that the information was obtained in violation of R.A. 1405
would infringe the presumption of regularity in the performance of official
functions.
Thus, with the filing of the plunder case against former President Estrada
before the Sandiganbayan, the Ombudsman, using the above independent
information, may now proceed to conduct the same investigation it earlier
conducted, through which it can eventually obtain the same information
previously disclosed to it by the PDIC, for it is an inescapable fact that the bank
records of petitioner are no longer protected by R.A. 1405 for the reasons
already explained above.
IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse
of discretion in issuing the challenged subpoenas for documents pertaining to
petitioners Trust Account No. 858 and Savings Account No. 0116-17345-9 for
the following reasons:
1. These accounts are no longer protected by the Secrecy of Bank Deposits
Law, there being two exceptions to the said law applicable in this case, namely:
(1) the examination of bank accounts is upon order of a competent court in
cases of bribery or dereliction of duty of public officials, and (2) the money
deposited or invested is the subject matter of the litigation. Exception (1)
applies since the plunder case pending against former President Estrada is
analogous to bribery or dereliction of duty, while exception (2) applies because
the money deposited in petitioners bank accounts is said to form part of the
subject matter of the same plunder case.
2. The "fruit of the poisonous tree" principle, which states that once the primary
source (the "tree") is shown to have been unlawfully obtained, any secondary
or derivative evidence (the "fruit") derived from it is also inadmissible, does not
apply in this case. In the first place, R.A. 1405 does not provide for the
application of this rule. Moreover, there is no basis for applying the same in
this case since the primary source for the detailed information regarding
petitioners bank accounts the investigation previously conducted by the
Ombudsman was lawful.
3. At all events, even if the subpoenas issued by the Sandiganbayan were
quashed, the Ombudsman may conduct on its own the same inquiry into the
subject bank accounts that it earlier conducted last February-March 2001,
there being a plunder case already pending against former President Estrada.
To quash the challenged subpoenas would, therefore, be pointless since the
MARIA GUILKA R. SENARLO || BANKING LAWS 12
Ombudsman may obtain the same documents by another route. Upholding the
subpoenas avoids an unnecessary delay in the administration of justice.

WHEREFORE, the petition is DISMISSED. The Sandiganbayan Resolutions

dated February 7 and 12, 2003 and March 11, 2003 are upheld.

The Sandiganbayan is hereby directed, consistent with this Courts ruling in

Marquez v. Desierto, to notify petitioner as to the date the subject bank
documents shall be presented in court by the persons subpoenaed.

SO ORDERED.

MARIA GUILKA R. SENARLO || BANKING LAWS 13

 G.R. No. 135882 June 27, 2001
LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION
BANK OF THE PHILIPPINES, petitioner,
vs.
HONORABLE ANIANO A. DESIERTO, in his capacity as OMBUDSMAN,
ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC AND
JOSE T. DE JESUS, JR., in their capacity as Chairman and Members of
the Panel, respectively, respondents.
PARDO, J.:
Sometime in May 1998, petitioner Marquez received an Order from the
Ombudsman Aniano A. Desierto dated April 29, 1998, to produce several bank
documents for purposes of inspection in camera relative to various accounts
maintained at Union Bank of the Philippines, where petitioner is the branch
manager. The accounts to be inspected are Account Nos. 011-37270, 240-
020718, 245-30317-3 and 245-30318-1, involved in a case pending with the
Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado
Lagdameo, et al.
The basis of the Ombudsman in 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.
It would appear that Mr. George Trivinio, purchased fifty one (51) Managers
Checks (MCs) for a total amount of P272.1 Million at Traders Royal Bank,
United Nations Avenue branch, on May 2 and 3, 1995. Out of the 51 MCs,
eleven (11) MCs in the amount of P70.6 million, were deposited and credited
to an account maintained at the Union Bank, Julia Vargas Branch.3
After convincing themselves of the veracity of the checks, Atty. Macalino
advised Ms. Marquez to comply with the order of the Ombudsman. Petitioner
agreed to an in camera inspection set on June 3, 1998.
However, on June 4,1998, petitioner wrote the Ombudsman explaining to him
that the accounts in question cannot readily be identified and asked for time to
respond to the order. The reason forwarded by the petitioner was that "despite
diligent efforts and from the accounts numbers presented, we can not identify
these accounts since the checks are issued in cash or bearer. We surmised
that these accounts have long been dormant, hence are not covered by the
new account number generated by the Union Bank system. We therefore have
to verify from the Interbank records archives for the whereabouts of these
accounts.5
Even assuming that the accounts xxx were already classified as "dormant
accounts," the bank is still required to preserve the records pertaining to the
accounts within a certain period of time as required by existing banking rules
and regulations.
And finally, the in camera inspection was already extended twice from May 13,
1998 to June 3,1998 thereby giving the bank enough time within which to
sufficiently comply with the order."6
Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner
to produce the bank documents relative to accounts in issue.
On July 10,1998, 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. Petitioner prayed for a
temporary restraining order (TRO) because the Ombudsman and the other
persons acting under his authority were continuously harassing her to produce
the bank documents relatives to the accounts in question.
In the meantime,9 on July 14, 1998, the lower court denied petitioner's prayer
for a temporary restraining order and stated us:
"The questioned orders were issued with the investigation of the case of Fact-
Finding and Intelligence Bureau vs. Amado Lagdameo, et. al., OMB-0-97-
0411, for violation of RA. 3019. Since petitioner failed to show prima facie
evidence that the subject matter of the investigation is outside the jurisdiction
of the Office of the Ombudsman, no writ of injunction may be issued by this
Court to delay this investigation pursuant to section 14 of Ombudsman Act of
1989."
The issue is whether petitioner may be cited for indirect contempt for her failure
to produce the documents requested by the Ombudsman. And whether the
order of the Ombudsman to have an in camera inspection of the questioned
account is allowed as an exception to the law on secrecy of bank deposits
(R.A. No.1405).
An examination of the secrecy of bank deposits law (R.A. No.1405) would
reveal the following exceptions: 1. Where the depositor consents in writing; 2.
Impeachment case; 3. By court order in bribery or dereliction of duty cases
against public officials; 4. Deposit is subject of litigation; 5. Sec. 8, R.A.
MARIA GUILKA R. SENARLO || BANKING LAWS 14
No.3019, in cases of unexplained wealth as held in the case of PNB vs. anyone in her place to comply with the order dated October 14,1998, and
Gancayco.26 similar orders. No costs.

The order of the Ombudsman to produce for in camera inspection the subject SO ORDERED .
accounts with the Union Bank of the Philippines, Julia Vargas Branch, is based
on a pending investigation at the Office of the Ombudsman against Amado
Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to
the Joint Venture Agreement between the Public Estates Authority and
AMARI.

We rule that before an in camera inspection may be allowed, there must be a

pending case before a court of competent jurisdiction. Further, the account
must be clearly identified, the inspection limited to the subject matter of the
pending case before the court of competent jurisdiction. The bank personnel
and the account holder must be notified to be present during the inspection,
and such inspection may cover only the account identified in the pending case.

In Union Bank of the Philippines v. Court of Appeals, we held that "Section 2

of the Law on Secrecy of Bank Deposits, as amended, declares bank deposits
to be "absolutely confidential" except:

(1) In an examination made in the course of a special or general examination

of a bank that is specifically authorized by the Monetary Board after being
satisfied that there is reasonable ground to believe that a bank fraud or serious
irregularity has been or is being committed and that it is necessary to look into
the deposit to establish such fraud or irregularity, (2) In an examination made
by an independent auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only and the results thereof
shall be for the exclusive use of the bank, (3) Upon written permission of the
depositor, (4) In cases of impeachment, (5) Upon order of a competent court
in cases of bribery or dereliction of duty of public officials, or (6) In cases where
the money deposited or invested is the subject matter of the litigation".27

In the case at bar, there is yet no pending litigation before any court of
competent authority. What is existing is an investigation by the Office of the
Ombudsman. In short, what the office of the ombudsman would wish to do is
to fish for additional evidence to formally charge Amado Lagdameo, et. al.,
with the Sandiganbayan. Clearly, there was no pending case in court which
would warrant the opening of the bank account for inspection.

IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to

cease and desist from requiring Union Bank Manager Lourdes T. Marquez, or

MARIA GUILKA R. SENARLO || BANKING LAWS 15

 G.R. No. 140687 December 18, 2006
CHINA BANKING CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JOSE "JOSEPH"
GOTIANUY as substituted by ELIZABETH GOTIANUY LO, respondents.
CHICO-NAZARIO, J.:
A Complaint for recovery of sums of money and annulment of sales of real
properties and shares of stock docketed as CEB-21445 was filed by Jose
"Joseph" Gotianuy against his son-in-law, George Dee, and his daughter, Mary
Margaret Dee, before the Regional Trial Court (RTC) of Cebu City, Branch 58.
Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among
his other properties, US dollar deposits with Citibank N.A. amounting to not
less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received
these amounts from Citibank N.A. through checks which she allegedly
deposited at China Banking Corporation (China Bank). He likewise accused
his son-in-law, George Dee, husband of his daughter, Mary Margaret, of
transferring his real properties and shares of stock in George Dee's name
without any consideration. Jose Gotianuy, died during the pendency of the
case before the trial court.1 He was substituted by his daughter, Elizabeth
Gotianuy Lo. The latter presented the US Dollar checks withdrawn by Mary
Margaret Dee from his US dollar placement with Citibank.
Upon motion of Elizabeth Gotianuy Lo, the trial court issued a subpoena to
Cristota Labios and Isabel Yap, employees of China Bank, to testify on the
case.
China Bank moved for a reconsideration. Resolving the motion, the trial court
issued an Order dated 16 April 1999 and held:
The Court is of the view that as the foreign currency fund (Exhs. "AAA" to
"AAA-5") is deposited with the movant China Banking Corporation, Cebu Main
Branch, Cebu City, the disclosure only as to the name or in whose name the
said fund is deposited is not violative of the law. Justice will be better served if
the name or names of the depositor of said fund shall be disclosed because
such a disclosure is material and important to the issues between the parties
in the case at bar.
Premises considered, the motion for reconsideration is denied partly and
granted partly, in the sense that Isabel Yap and/or Cristuta Labios are directed
to appear before this Court and to testify at the trial of this case only for the
purpose of disclosing in whose name or names is the foreign currency fund
deposited with the movant Bank and not to other matters material and relevant
to the issues in the case at bar.
From this Order, China Bank filed a Petition for Certiorari6 with the Court of
Appeals. In a Decision7 dated 29 October 1999, the Court of Appeals denied
the petition of China Bank and affirmed the Order of the RTC.
CA said: The contention of petitioner that the [prescription] on absolute
confidentiality under the law in question covers even the name of the depositor
and is beyond the compulsive process of the courts is palpably untenable as
the law protects only the deposits itself but not the name of the depositor.
ISSUES. xxxx..
Under Sec. 8 of PD 1246, the law provides that all foreign currency deposits
authorized under Republic Act No. 6426, as amended by Sec. 8, Presidential
Decree No. 1246, Presidential Decree No. 1035, as well as foreign currency
deposits authorized under Presidential Decree No. 1034 are considered
absolutely confidential in nature and may not be inquired into. There is only
one exception to the secrecy of foreign currency deposits, that is, disclosure is
allowed upon the written permission of the depositor.
With the foregoing, we are now tasked to determine the single material issue
of whether or not petitioner China Bank is correct in its submission that the
Citibank dollar checks with both Jose Gotianuy and/or Mary Margaret Dee as
payees, deposited with China Bank, may not be looked into under the law on
secrecy of foreign currency deposits. As a corollary issue, sought to be
resolved is whether Jose Gotianuy may be considered a depositor who is
entitled to seek an inquiry over the said deposits.
The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-
depositor of Mary Margaret Dee. It reasoned that since Jose Gotianuy is the
named co-payee of the latter in the subject checks, which checks were
deposited in China Bank, then, Jose Gotianuy is likewise a depositor thereof.
On that basis, no written consent from Mary Margaret Dee is necessitated.
We agree in the conclusion arrived at by the Court of Appeals.
The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee
are co-payees of various Citibank checks;15 (2) Mary Margaret Dee withdrew
these checks from Citibank;16 (3) Mary Margaret Dee admitted in her Answer
MARIA GUILKA R. SENARLO || BANKING LAWS 16
to the Request for Admissions by the Adverse Party sent to her by Jose
Gotianuy17 that she withdrew the funds from Citibank upon the instruction of
her father Jose Gotianuy and that the funds belonged exclusively to the latter;
(4) these checks were endorsed by Mary Margaret Dee at the dorsal portion;
and (5) Jose Gotianuy discovered that these checks were deposited with
China Bank as shown by the stamp of China Bank at the dorsal side of the
checks.

Thus, with this, there is no issue as to the source of the funds. Mary Margaret
Dee declared the source to be Jose Gotianuy. There is likewise no dispute that
these funds in the form of Citibank US dollar Checks are now deposited with
China Bank.

As the owner of the funds unlawfully taken and which are undisputably now
deposited with China Bank, Jose Gotianuy has the right to inquire into the said
deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank
in the usual course of business, to be placed to his credit and subject to his
check or the beneficiary of the funds held by the bank as trustee.18

On this score, the observations of the Court of Appeals are worth reiterating:

Furthermore, it is indubitable that the Citibank checks were drawn against the
foreign currency account with Citibank, NA. The monies subject of said checks
originally came from the late Jose Gotianuy, the owner of the account. Thus,
he also has legal rights and interests in the CBC account where said monies
were deposited. More importantly, the Citibank checks (Exhibits "AAA" to
"AAA-5") readily demonstrate (sic) that the late Jose Gotianuy is one of the
payees of said checks. Being a co-payee thereof, then he or his estate can be
considered as a co-depositor of said checks. Ergo, since the late Jose
Gotianuy is a co-depositor of the CBC account, then his request for the
assailed subpoena is tantamount to an express permission of a depositor for
the disclosure of the name of the account holder.

WHEREFORE, premises considered, the Petition is DENIED. The Decision of

the Court of Appeals dated 29 October 1999 affirming the Order of the RTC,
Branch 58, Cebu City dated 16 April 1999 is AFFIRMED and this case is
ordered REMANDED to the trial court for continuation of hearing with utmost
dispatch consistent with the above disquisition. No costs.

SO ORDERED.

MARIA GUILKA R. SENARLO || BANKING LAWS 17

 G.R. No. L-34964 January 31, 1973
CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-
appellants,
vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First
Instance of Manila, Branch VIII, and VICENTE G. ACABAN, respondents-
appellees.
MAKALINTAL, J.:
The only issue is whether or not a banking institution may validly refuse to
comply with a court process garnishing the bank deposit of a judgment debtor,
by invoking the provisions of Republic Act No. 1405. *
Vicente Acaban filed a complaint in the court a quo against Bautista Logging
Co., Inc., B & B Forest Development Corporation and Marino Bautista for the
collection of a sum of money. Judgment by default was rendered against the
defendants.
To satisfy the judgment, the plaintiff sought the garnishment of the bank
deposit of the defendant B & B Forest Development Corporation with the China
Banking Corporation. Accordingly, a notice of garnishment was issued by the
Deputy Sheriff of the trial court and served on said bank through its cashier,
Tan Kim Liong. In reply, the bank' cashier invited the attention of the Deputy
Sheriff to the provisions of Republic Act No. 1405 which, it was alleged, prohibit
the disclosure of any information relative to bank deposits. Thereupon the
plaintiff filed a motion to cite Tan Kim Liong for contempt of court.
The pertinent provisions of Republic Act No. 1405 relied upon by the
petitioners reads:
Sec. 2. All deposits of whatever nature with banks or banking institutions in
the Philippines including investments in bonds issued by the Government of
the Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office,
except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of
public officials, or in cases where the money deposited or invested is the
subject matter of the litigation.
Sec 3. It shall be unlawful for any official or employee of a banking institution
to disclose to any person other than those mentioned in Section two hereof
any information concerning said deposits.
Sec. 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court.
The petitioners argue that the disclosure of the information required by the
court does not fall within any of the four (4) exceptions enumerated in Section
2, and that if the questioned orders are complied with Tan Kim Liong may be
criminally liable under Section 5 and the bank exposed to a possible damage
suit by B & B Forest Development Corporation. Specifically referring to this
case, the position of the petitioners is that the bank deposit of judgment debtor
B & B Forest Development Corporation cannot be subject to garnishment to
satisfy a final judgment against it in view of the aforequoted provisions of law.
We do not view the situation in that light. The lower court did not order an
examination of or inquiry into the deposit of B & B Forest Development
Corporation, as contemplated in the law. It merely required Tan Kim Liong to
inform the court whether or not the defendant B & B Forest Development
Corporation had a deposit in the China Banking Corporation only for purposes
of the garnishment issued by it, so that the bank would hold the same intact
and not allow any withdrawal until further order.
It is sufficiently clear from the foregoing discussion of the conference
committee report of the two houses of Congress that the prohibition against
examination of or inquiry into a bank deposit under Republic Act 1405 does
not preclude its being garnished to insure satisfaction of a judgment. Indeed
there is no real inquiry in such a case, and if the existence of the deposit is
disclosed the disclosure is purely incidental to the execution process. It is hard
to conceive that it was ever within the intention of Congress to enable debtors
to evade payment of their just debts, even if ordered by the Court, through the
expedient of converting their assets into cash and depositing the same in a
bank.
WHEREFORE, the orders of the lower court dated March 4 and 27, 1972,
respectively, are hereby affirmed, with costs against the petitioners-appellants.
MARIA GUILKA R. SENARLO || BANKING LAWS 18
 G.R. No. 138967 April 24, 2007
LEIDEN E. FERNANDEZ, GLORIA B. ADRIANO, EMELDA A.
NEGAPATAN, JESUS P. TOMONGHA, ELEONOR A. QUIANOLA,
ASTEMA C. CAMPO, FLORIDA VILLACERAN, FLORIDA B. TALLEDO
AND BRENDA GADIANO, Petitioners,
vs.
NICASIO C. ANION, the Labor Arbiter of the Regional Arbitration
Branch VII-Cebu City; MARGUERITE LHUILLIER; and ALVAREZ
CAETE LOPEZ PANGANDOYON AHAT & PAREDES LAW OFFICES,
represented by ATTY. WILFREDO S. PANGANDOYON, JR.,
Respondents.
GARCIA, J.:
In 1990, petitioners filed their respective complaints against respondent
Marguerite Lhuillier and/or Agencia Cebuana with the Regional Arbitration
Branch VII, Cebu City, for illegal dismissal, service incentive pay,
reinstatement with full back wages, and damages. Their complaints were
consolidated and assigned to then Labor Arbiter Gavino Velasquez, Jr. who
decided in favor of the petitioners herein.
In a decision of the NLRC, it vacated the decision of Labor Arbiter Velasquez,
Jr. and remanded the case to the Regional Arbitration Branch VII, Cebu City,
for further proceedings.
Following the NLRCs denial of their motion for reconsideration, petitioners
went to this Court on a petition for certiorari in G.R. 105892.
In a Decision3 promulgated on January 28, 1998, the Court granted the
certiorari petition, reversed and set aside the assailed decision and resolution
of the NLRC and reinstated with modifications the decision of Labor Arbiter
Velasquez, Jr.,
On April 28, 1998, the Decision became final and executory and an Entry of
Judgment was made thereon in the Book of Entries of Judgment.
On April 8, 1999, herein public respondent Labor Arbiter Nicasio C. Anion, by
way enforcing this Courts Decision in G.R. No. 105892, issued a writ of
execution commanding the Deputy Sheriff to: REINSTATE the petitioners.
Should you fail to collect said sum in cash, you are hereby authorized to cause
the satisfaction of the same on the movable or immovable properties of the
respondent not exempt from execution.
On April 15 and 16, 1999, the Deputy Sheriff, garnished the Citibank and
Metrobank accounts of respondent Marguerite Lhuillier and levied on a parcel
of land belonging to her located in Mandaue City.
Then, on May 14, 1999, respondents Alvarez Caete Lopez Pangandoyon
Ahat & Paredes Law Offices, through respondent Atty. Wilfredo S.
Pangandoyon, Jr., filed with Labor Arbiter Nicasio C. Anion, on behalf of
Marguerite Lhuillier, a motion5 to lift or set aside the writ of garnishment
alleging that the garnished accounts were not in the name of Marguerite
Lhuillier alone but were joint accounts with Christopher Darza and Claudine
Darza. The motion further claims that the writ of execution was directed only
against Agencia Cebuana, hence, not even Marguerite Lhuillier can be made
personally liable thereunder.
In a resolution dated June 10, 1999, respondent Labor Arbiter Nicasio C.
Anion granted the motion to lift or set aside the writ of garnishment and
directed the Deputy Sheriff to enforce this Courts Decision in G.R. No. 105892
only on the properties of Agencia Cebuana.
Marguerite Lhuillier is personally liable under the same Decision. Garnishment
and levy over her property are proper in the dispensation of justice.
Be that as it may, we do not find, however, any contumacious act to have been
committed by both the public and private respondents, either individually or
collectively. As it were, there was never an attempt on their part to subvert or
hold at bay the final implementation of the executory Decision of the Court in
the main case. Quite the contrary, recognizing the executory character of this
Courts Decision in question, respondent Labor Arbiter Nicasio Anion issued
a writ of execution for its implementation. For their part, the private
respondents did not actually or maliciously resist the writ thus issued. What
they opposed was the garnishment of the bank accounts allegedly jointly
owned by respondent Marguerite Lhuillier and two others, not the writ of
execution itself. We hold, however, that such accounts, even if joint as claimed
by the private respondents, are subject to garnishment. It is in the nature of
joint accounts that anyone of the depositors has access to the entire funds
therein. If, afterwards, there should be squabbling amongst the supposed joint
depositors as to the share of each, they can sort it out amongst themselves.
We reiterate for the purpose of clarity that private respondent Marguerite
Lhuillier is personally liable under this Courts Decision in dispute. Her co-
respondent Agencia Cebuana is a sole proprietorship without a juridical
personality of its own. But while the position taken by the public and private
respondents that the judgment in question is not enforceable against
MARIA GUILKA R. SENARLO || BANKING LAWS 19
respondent Marguerite Lhuillier, but solely against Agencia Cebuana is wrong,
they are not liable for contempt.

IN VIEW WHEREOF, and finding no contumacious act on the part of the herein
respondents, the instant petition is DISMISSED but the respondent Labor
Arbiter Nicasio C. Ainon is DIRECTED to IMMEDIATELY IMPLEMENT this
Courts Decision in G.R. No. 105892.

No Costs.

SO ORDERED.

MARIA GUILKA R. SENARLO || BANKING LAWS 20

 G.R. No. 170290 April 11, 2012
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner,
vs.
CITIBANK, N.A. and BANK OF AMERICA, S.T. & N.A., Respondents.
MENDOZA, J.:
Petitioner Philippine Deposit Insurance Corporation (PDIC) is a government
instrumentality created by virtue of Republic Act (R.A.) No. 3591, as amended
by R.A. No. 9302.2
Respondent Citibank, N.A. (Citibank) is a banking corporation while
respondent Bank of America, S.T. & N.A. (BA) is a national banking
association, both of which are duly organized and existing under the laws of
the United States of America and duly licensed to do business in the
Philippines, with offices in Makati City.
In 1977, PDIC conducted an examination of the books of account of Citibank.
It discovered that Citibank, in the course of its banking business, from
September 30, 1974 to June 30, 1977, received from its head office and other
foreign branches a total of 11,923,163,908.00 in dollars, covered by
Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates. These funds, which were lodged in the books of
Citibank under the account "Their Account-Head Office/Branches-Foreign
Currency," were not reported to PDIC as deposit liabilities that were subject to
assessment for insurance.5 As such, in a letter dated March 16, 1978, PDIC
assessed Citibank for deficiency in the sum of 1,595,081.96.6
Similarly, sometime in 1979, PDIC examined the books of accounts of BA
which revealed that from September 30, 1976 to June 30, 1978, BA received
from its head office and its other foreign branches a total of 629,311,869.10
in dollars, covered by Certificates of Dollar Time Deposit that were interest-
bearing with corresponding maturity dates and lodged in their books under the
account "Due to Head Office/Branches."7 Because BA also excluded these
from its deposit liabilities, PDIC wrote to BA on October 9, 1979, seeking the
remittance of 109,264.83 representing deficiency premium assessments for
dollar deposits.8
In their petitions, Citibank and BA sought a declaratory judgment stating that
the money placements they received from their head office and other foreign
branches were not deposits and did not give rise to insurable deposit liabilities
under Sections 3 and 4 of R.A. No. 3591 (the PDIC Charter) and, as a
consequence, the deficiency assessments made by PDIC were improper and
erroneous.10 The cases were then consolidated.
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig City (RTC)
promulgated its Decision12 in favor of Citibank and BA.
Aggrieved, PDIC appealed to the CA which affirmed the ruling of the RTC in
its October 27, 2005 Decision. In so ruling, the CA found that the money
placements were received as part of the banks internal dealings by Citibank
and BA as agents of their respective head offices. This showed that the head
office and the Philippine branch were considered as the same entity. Thus, no
bank deposit could have arisen from the transactions between the Philippine
branch and the head office because there did not exist two separate
contracting parties to act as depositor and depositary.14 Secondly, the CA
called attention to the purpose for the creation of PDIC which was to protect
the deposits of depositors in the Philippines and not the deposits of the same
bank through its head office or foreign branches.15 Thirdly, because there was
no law or jurisprudence on the treatment of inter-branch deposits between the
Philippine branch of a foreign bank and its head office and other branches for
purposes of insurance, the CA was guided by the procedure observed by the
FDIC which considered inter-branch deposits as non-assessable.16 Finally,
the CA cited Section 3(f) of R.A. No. 3591, which specifically excludes
obligations payable at the office of the bank located outside the Philippines
from the definition of a deposit or an insured deposit. Since the subject money
placements were made in the respective head offices of Citibank and BA
located outside the Philippines, then such placements could not be subject to
assessment under the PDIC Charter.
Hence, this petition.
The sole question to be resolved in this case is whether the funds placed in
the Philippine branch by the head office and foreign branches of Citibank and
BA are insurable deposits under the PDIC Charter and, as such, are subject
to assessment for insurance premiums.
The Courts Ruling
The Court rules in the negative.
A branch has no separate legal personality;
Purpose of the PDIC
MARIA GUILKA R. SENARLO || BANKING LAWS 21
This Court is of the opinion that the key to the resolution of this controversy is
the relationship of the Philippine branches of Citibank and BA to their
respective head offices and their other foreign branches.
In the case of Citibank and BA, it is apparent that they both did not incorporate
a separate domestic corporation to represent its business interests in the
Philippines. Their Philippine branches are, as the name implies, merely
branches, without a separate legal personality from their parent company,
Citibank and BA. Thus, being one and the same entity, the funds placed by the
respondents in their respective branches in the Philippines should not be
treated as deposits made by third parties subject to deposit insurance under
the PDIC Charter.
In the leading case of Sokoloff v. The National City Bank of New York,25 where
the Supreme Court of New York held:
Where a bank maintains branches, each branch becomes a separate business
entity with separate books of account. A depositor in one branch cannot issue
checks or drafts upon another branch or demand payment from such other
branch, and in many other respects the branches are considered separate
corporate entities and as distinct from one another as any other bank.
Nevertheless, when considered with relation to the parent bank they are not
independent agencies; they are, what their name imports, merely branches,
and are subject to the supervision and control of the parent bank, and are
instrumentalities whereby the parent bank carries on its business, and are
established for its own particular purposes, and their business conduct and
policies are controlled by the parent bank and their property and assets belong
to the parent bank, although nominally held in the names of the particular
branches.
This ruling was later reiterated in the more recent case of United States v.
BCCI Holdings Luxembourg26 where the United States Court of Appeals,
District of Columbia Circuit, emphasized that "while individual bank branches
may be treated as independent of one another, each branch, unless separately
incorporated, must be viewed as a part of the parent bank rather than as an
independent entity."
In addition, Philippine banking laws also support the conclusion that the head
office of a foreign bank and its branches are considered as one legal entity.
Section 75 of R.A. No. 8791 (The General Banking Law of 2000) and Section
5 of R.A. No. 7221 (An Act Liberalizing the Entry of Foreign Banks) both require
the head office of a foreign bank to guarantee the prompt payment of all the
liabilities of its Philippine branch.
The purpose of the PDIC is to protect the depositing public in the event of a
bank closure. It has already been sufficiently established by US jurisprudence
and Philippine statutes that the head office shall answer for the liabilities of its
branch. Now, suppose the Philippine branch of Citibank suddenly closes for
some reason. Citibank N.A. would then be required to answer for the deposit
liabilities of Citibank Philippines. If the Court were to adopt the posture of PDIC
that the head office and the branch are two separate entities and that the funds
placed by the head office and its foreign branches with the Philippine branch
are considered deposits within the meaning of the PDIC Charter, it would result
to the incongruous situation where Citibank, as the head office, would be
placed in the ridiculous position of having to reimburse itself, as depositor, for
the losses it may incur occasioned by the closure of Citibank Philippines.
Surely our law makers could not have envisioned such a preposterous
circumstance when they created PDIC.
Finally, the Court agrees with the CA ruling that there is nothing in the definition
of a "bank" and a "banking institution" in Section 3(b) of the PDIC Charter
which explicitly states that the head office of a foreign bank and its other
branches are separate and distinct from their Philippine branches.
There is no need to complicate the matter when it can be solved by simple
logic bolstered by law and jurisprudence. Based on the foregoing, it is clear
that the head office of a bank and its branches are considered as one under
the eyes of the law. While branches are treated as separate business units for
commercial and financial reporting purposes, in the end, the head office
remains responsible and answerable for the liabilities of its branches which are
under its supervision and control. As such, it is unreasonable for PDIC to
require the respondents, Citibank and BA, to insure the money placements
made by their home office and other branches. Deposit insurance is
superfluous and entirely unnecessary when, as in this case, the institution
holding the funds and the one which made the placements are one and the
same legal entity.
Funds not a deposit under the definition
of the PDIC Charter;
Excluded from assessment
As explained by the respondents, the transfer of funds, which resulted from
the inter-branch transactions, took place in the books of account of the
respective branches in their head office located in the United States. Hence,
because it is payable outside of the Philippines, it is not considered a deposit
pursuant to Section 3(f) of the PDIC Charter:
MARIA GUILKA R. SENARLO || BANKING LAWS 22
Sec. 3(f) The term "deposit" means the unpaid balance of money or its
equivalent received by a bank in the usual course of business and for which it
has given or is obliged to give credit to a commercial, checking, savings, time
or thrift account or which is evidenced by its certificate of deposit, and trust
funds held by such bank whether retained or deposited in any department of
said bank or deposit in another bank, together with such other obligations of a
bank as the Board of Directors shall find and shall prescribe by regulations to
be deposit liabilities of the Bank; Provided, that any obligation of a bank which
is payable at the office of the bank located outside of the Philippines shall not
be a deposit for any of the purposes of this Act or included as part of the total
deposits or of the insured deposits; Provided further, that any insured bank
which is incorporated under the laws of the Philippines may elect to include for
insurance its deposit obligation payable only at such branch. [Emphasis
supplied]

All things considered, the Court finds that the funds in question are not deposits
within the definition of the PDIC Charter and are, thus, excluded from
assessment.

WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the
Court of Appeals in CA-G.R. CV No. 61316 is AFFIRMED.

MARIA GUILKA R. SENARLO || BANKING LAWS 23

 G.R. No. 176438 January 24, 2011
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), Petitioner,
vs.
PHILIPPINE COUNTRYSIDE RURAL BANK, INC., RURAL BANK OF
CARMEN (CEBU), INC., BANK OF EAST ASIA (MINGLANILLA, CEBU),
INC., and PILIPINO RURAL BANK (CEBU), INC., Respondents.
MENDOZA, J.:
On March 9, 2005, the Board of Directors of the PDIC (PDIC Board) adopted
Resolution approving the conduct of an investigation, in accordance with
Section 9(b-1) of Republic Act (R.A.) No. 3591, as amended, on the basis of
the Reports of Examination of the Bangko Sentral ng Pilipinas (BSP) on ten
(10) banks, four (4) of which are respondents in this petition for review. The
said resolution also created a Special Investigation Team to conduct the said
investigation, with the authority to administer oaths, to examine, take and
preserve testimony of any person relating to the subject of the investigation,
and to examine pertinent bank records.
On May 25, 2005, the PDIC Board adopted another resolution, Resolution No.
2005-05-056,4 approving the conduct of an investigation on PCRBI based on
a Complaint-Affidavit filed by a corporate depositor, the Philippine School of
Entrepreneurship and Management (PSEMI) through its president, Jacinto L.
Jamero.
On June 3, 2005, in accordance with the two PDIC Board resolutions, then
PDIC President and Chief Executive Officer Ricardo M. Tan issued the Notice
of Investigation to the President or The Highest Ranking Officer of PCRBI.
According to PDIC, in the course of its investigation, PCRBI was found to have
granted loans to certain individuals, which were settled by way of dacion of
properties. These properties, however, had already been previously
foreclosed and consolidated under the names of PRBI, BEAI and RBCI.
The notice of investigation was served on PRBI and BEAI.
On June 25, 2005, a separate notice of investigation was served on RBCI. The
latter provided the PDIC Investigation Team with certified copies of the loan
documents they had requested, until its president received an order directing
him not to allow the investigation.
Subsequently, PRBI and BEAI refused entry to their bank premises and
access to their records and documents by the PDIC Investigation Team, upon
advice of their respective counsels.
On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the Tiongson &
Antenor Cruz Law Office sent letters to the PDIC informing it of her legal advice
to PCRBI and BEAI not to submit to PDIC investigation on the ground that its
investigatory power pursuant to Section 9(b-1) of R.A. No. 3591, as amended
(An Act Establishing The Philippine Deposit Insurance Corporation, Defining
Its Powers And Duties And For Other Purposes), cannot be differentiated from
the examination powers accorded to PDIC under Section 8, paragraph 8 of the
same law, under which, prior approval from the Monetary Board is required.
On June 27 and 28, 2005, the Banks, through counsel, sought further
clarification from PDIC on its source of authority to conduct the impending
investigations and requested that PDIC refrain from proceeding with the
investigations.
Simultaneously, the Banks wrote to the Monetary Board requesting a
clarification on the parameters of PDICs power of investigation/examination
over the Banks and for an issuance of a directive to PDIC not to pursue the
investigations pending the requested clarification.
Notwithstanding, on July 11, 2005, the Banks received a letter, dated July 8,
2005, from the PDIC General Counsel reiterating its position that prior
Monetary Board approval was not a pre-requisite to PDICs exercise of its
investigative power.
On March 15, 2006, the CA-Cebu issued a resolution granting the Banks
application for a TRO. This enjoined the PDIC, its representatives or agents or
any other persons or agency assisting them or acting for and in their behalf
from conducting examinations/investigations on the Banks head and branch
offices without securing the requisite approval from the Monetary Board of
BSP.
During the pendency of the CA-Cebu petition, PDIC filed with this Court a
Petition for Certiorari, Prohibition and Mandamus with Prayer for Issuance of
Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule
65 docketed as G.R. No. 173370.37 It alleged that the CA-Cebu committed
grave abuse of discretion amounting to lack or excess of jurisdiction in taking
cognizance of the Banks petition, and in issuing a TRO and a writ of
preliminary injunction.
MARIA GUILKA R. SENARLO || BANKING LAWS 24
On July 31, 2006, this Court issued a resolution dismissing the petition for
certiorari in G.R. No. 173370. The Resolution reads: the Court resolves to
DISMISS the petition for failure to sufficiently show that the questioned
resolution of the Court of Appeals is tainted with grave abuse of discretion.
[A]fter undergoing a series of amendments, the controlling law with respect to
PDICs power to conduct examination of banks is-prior approval of the
Monetary Board is a condition sine qua non for PDIC to exercise its power of
examination. To rule otherwise would disregard the amendatory law of the
PDICs charter.
The Court is not also swayed by the contention of respondent that what it seeks
to conduct is an investigation and not an examination of petitioners
transactions, hence prior approval of the Monetary Board is a mere
surplusage.
The ordinary definition of the words "examination" and "investigation" would
lead one to conclude that both pertain to the same thing and there seems to
be no fine line differentiating one from the other.
In the case of Anti-Graft League of the Philippines, Inc. vs. Hon. Ortega, et al.,
the Supreme Court using Ballentines Law Dictionary defines an "investigation"
as an inquiry, judicial or otherwise, for the discovery or collection of facts
concerning the matter or matters involved. Such common definitions would
show that there is really nothing to distinguish between these two (2) terms as
to support the PDIC view differentiating Section 9 (b-1) from paragraph 8,
Section 8 of the PDIC Charter.
With the foregoing premises, this Court rules that a prior approval from the
Monetary Board is necessary before respondent PDIC can proceed with its
investigations on petitioners-banks.43
PDIC moved for reconsideration but it was denied in a resolution dated
January 25, 2007.44
Hence, this petition.
THE ISSUES
V.
WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT PRIOR
APPROVAL OF THE MONETARY BOARD OF THE BANGKO SENTRAL NG
PILIPINAS IS NECESSARY BEFORE THE PDIC MAY CONDUCT AN
INVESTIGATION OF RESPONDENT BANKS.
THE RULING
ON V Whether the Court of Appeals-Cebu erred in finding that prior approval
of the Monetary Board of the Bangko Sentral ng Pilipinas is necessary before
the PDIC may conduct an investigation of respondent banks.
After an evaluation of the respective positions of the parties, the Court is of the
view that the Monetary Board approval is not required for PDIC to conduct an
investigation on the Banks.
The disagreement stems from the interpretation of these two key provisions of
the PDIC Charter. The confusion can be attributed to the fact that although
"investigation" and "examination" are two separate and distinct procedures
under the charter of the PDIC and the BSP, the words seem to be used loosely
and interchangeably.
It does not help that indeed these terms are very closely related in a generic
sense. However, while "examination" connotes a mere generic perusal or
inspection, "investigation" refers to a more intensive scrutiny for a more
specific fact-finding purpose.
The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of
deposits in all banks entitled to the benefits of insurance under the PDIC
Charter to promote and safeguard the interests of the depositing public by way
of providing permanent and continuing insurance coverage of all insured
deposits. It is a government instrumentality that operates under the
Department of Finance. Its primary purpose is to act as deposit insurer, as a
co-regulator of banks, and as receiver and liquidator of closed banks.
Section 1 of the PDIC Charter states:
SECTION 1. There is hereby created a Philippine Deposit Insurance
Corporation hereinafter referred to as the "Corporation" which shall insure, as
herein provided, the deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers hereinafter granted.
The Corporation shall, as a basic policy, promote and safeguard the interests
of the depositing public by way of providing permanent and continuing
insurance coverage on all insured deposits.
MARIA GUILKA R. SENARLO || BANKING LAWS 25
Under its charter, the PDIC is empowered to conduct examination of banks
with prior approval of the Monetary Board:
As stated above, the charter empowers the PDIC to conduct an investigation
of a bank and to appoint examiners who shall have the power to examine any
insured bank. Such investigators are authorized to conduct investigations on
frauds, irregularities and anomalies committed in banks, based on an
examination conducted by the PDIC and the BSP or on complaints from
depositors or from other government agencies.
The distinction between the power to investigate and the power to examine is
emphasized by the existence of two separate sets of rules governing the
procedure in the conduct of investigation and examination. Regulatory
Issuance (RI) No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of
Fraud, Irregularities and Anomalies Committed in Banks covers the procedural
requirements of the exercise of the PDICs power of investigation. On the other
hand, RI No. 2009-05 sets forth the guidelines for the conduct of the power of
examination.
The definitions provided under the two aforementioned regulatory issuances
elucidate on the distinction between the power of examination and the power
of investigation.
Section 2 of RI No. 2005-02 states that its coverage shall be applicable to "all
fact-finding investigations on fraud, irregularities and/or anomalies committed
in banks that are conducted by PDIC based on: [a] complaints from depositors
or other government agencies; and/or [b] final reports of examinations of banks
conducted by the Bangko Sentral ng Pilipinas and/or PDIC."
Thus, RI No. 2005-02 defines an "investigation" as a "fact-finding examination,
study or inquiry for determining whether the allegations in a complaint or
findings in a final report of examination may properly be the subject of an
administrative, criminal or civil action."
In 2009, to clarify procedural matters, PDIC released RI No. 2009-05 or the
Rules and Regulations on Examination of Banks. Section 2 thereof
differentiated between the two types of examination as follows:
Section 2. Types of Examination
a. Regular Examination - An examination conducted independently or jointly
with the BSP. It requires the prior approval of the PDIC Board of Directors and
the Monetary Board (MB). It may be conducted only after an interval of at least
twelve (12) months from the closing date of the last Regular Examination.
b. Special Examination An examination conducted at any time in
coordination with the BSP, by an affirmative vote of a majority of all the
members of the PDIC Board of Directors, without need of prior MB approval,
if there is a threatened or impending bank closure as determined by the PDIC
Board of Directors.
the process of examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a bank and
determines its compliance with the set standards regarding solvency, liquidity,
asset valuation, operations, systems, management, and compliance with
banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on specific findings of
certain acts or omissions which are subject of a complaint or a Final Report of
Examination.
Clearly, investigation does not involve a general evaluation of the status of a
bank. An investigation zeroes in on specific acts and omissions uncovered via
an examination, or which are cited in a complaint.
An examination entails a review of essentially all the functions and facets of a
bank and its operation. It necessitates poring through voluminous documents,
and requires a detailed evaluation thereof. Such a process then involves an
intrusion into a banks records.
In contrast, although it also involves a detailed evaluation, an investigation
centers on specific acts of omissions and, thus, requires a less invasive
assessment.
The practical justification for not requiring the Monetary Board approval to
conduct an investigation of banks is the administrative hurdles and paperwork
it entails, and the correspondent time to complete those additional steps or
requirements. As in other types of investigation, time is always of essence, and
it is prudent to expedite the proceedings if an accurate conclusion is to be
arrived at, as an investigation is only as precise as the evidence on which it is
based.
A PDIC investigation is conducted to "determine[e] whether the allegations in
a complaint or findings in a final report of examination may properly be the
subject of an administrative, criminal or civil action."
MARIA GUILKA R. SENARLO || BANKING LAWS 26
In other words, an investigation is based on reports of examination and an
examination is conducted with prior Monetary Board approval. Therefore, it
would be unnecessary to secure a separate approval for the conduct of an
investigation. Such would merely prolong the process and provide
unscrupulous individuals the opportunity to cover their tracks.

Indeed, while in a literary sense, the two terms may be used interchangeably,
under the PDIC Charter, examination and investigation refer to two different
processes. To reiterate, an examination of banks requires the prior consent of
the Monetary Board, whereas an investigation based on an examination
report, does not.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the

Court of Appeals in CA G.R. CEB SP. No. 01550, dated September 18, 2006
and January 25, 2007 are REVERSED and SET ASIDE.

SO ORDERED.

MARIA GUILKA R. SENARLO || BANKING LAWS 27