G.R. No.

82027 March 29, 1990 to as the BANK), that all money now or hereafter deposited by us or any
or either of us with the BANK in our joint savings current account shall
ROMARICO G. VITUG, petitioner, be the property of all or both of us and shall be payable to and collectible
vs. or withdrawable by either or any of us during our lifetime, and after the
THE HONORABLE COURT OF APPEALS and ROWENA FAUSTINO- death of either or any of us shall belong to and be the sole property of
CORONA, respondents. the survivor or survivors, and shall be payable to and collectible or
withdrawable by such survivor or survivors.
Rufino B. Javier Law Office for petitioner.
We further agree with each other and the BANK that the receipt or check
of either, any or all of us during our lifetime, or the receipt or check of the
Quisumbing, Torres & Evangelista for private respondent.
survivor or survivors, for any payment or withdrawal made for our above-
mentioned account shall be valid and sufficient release and discharge of
the BANK for such payment or withdrawal. 5

SARMIENTO, J.: The trial courts 6 upheld the validity of this agreement and granted "the motion to sell
some of the estate of Dolores L. Vitug, the proceeds of which shall be used to pay the
This case is a chapter in an earlier suit decided by this Court 1 involving the probate of the personal funds of Romarico Vitug in the total sum of P667,731.66 ... ." 7
two wills of the late Dolores Luchangco Vitug, who died in New York, U. S.A., on
November 10, 1980, naming private respondent Rowena Faustino-Corona executrix. In On the other hand, the Court of Appeals, in the petition for certiorari filed by the herein
our said decision, we upheld the appointment of Nenita Alonte as co-special administrator private respondent, held that the above-quoted survivorship agreement constitutes a
of Mrs. Vitug's estate with her (Mrs. Vitug's) widower, petitioner Romarico G. Vitug, conveyance mortis causa which "did not comply with the formalities of a valid will as
pending probate. prescribed by Article 805 of the Civil Code," 8 and secondly, assuming that it is a mere
donation inter vivos, it is a prohibited donation under the provisions of Article 133 of the
On January 13, 1985, Romarico G. Vitug filed a motion asking for authority from the Civil Code. 9
probate court to sell certain shares of stock and real properties belonging to the estate to
cover allegedly his advances to the estate in the sum of P667,731.66, plus interests, The dispositive portion of the decision of the Court of Appeals states:
which he claimed were personal funds. As found by the Court of Appeals, 2 the alleged
advances consisted of P58,147.40 spent for the payment of estate tax, P518,834.27 as
WHEREFORE, the order of respondent Judge dated November 26,
deficiency estate tax, and P90,749.99 as "increment thereto." 3 According to Mr. Vitug, he
1985 (Annex II, petition) is hereby set aside insofar as it granted private
withdrew the sums of P518,834.27 and P90,749.99 from savings account No. 35342-038
respondent's motion to sell certain properties of the estate of Dolores L.
of the Bank of America, Makati, Metro Manila.
Vitug for reimbursement of his alleged advances to the estate, but the
same order is sustained in all other respects. In addition, respondent
On April 12, 1985, Rowena Corona opposed the motion to sell on the ground that the Judge is directed to include provisionally the deposits in Savings
same funds withdrawn from savings account No. 35342-038 were conjugal partnership Account No. 35342-038 with the Bank of America, Makati, in the
properties and part of the estate, and hence, there was allegedly no ground for inventory of actual properties possessed by the spouses at the time of
reimbursement. She also sought his ouster for failure to include the sums in question for the decedent's death. With costs against private respondent. 10
inventory and for "concealment of funds belonging to the estate." 4
In his petition, Vitug, the surviving spouse, assails the appellate court's ruling on the
Vitug insists that the said funds are his exclusive property having acquired the same strength of our decisions in Rivera v. People's Bank and Trust Co. 11 and Macam v.
through a survivorship agreement executed with his late wife and the bank on June 19, Gatmaitan 12 in which we sustained the validity of "survivorship agreements" and
1970. The agreement provides: considering them as aleatory contracts. 13

We hereby agree with each other and with the BANK OF AMERICAN The petition is meritorious.
NATIONAL TRUST AND SAVINGS ASSOCIATION (hereinafter referred
The conveyance in question is not, first of all, one of mortis causa, which should be indeterminate time. As already stated, Leonarda was the owner of the
embodied in a will. A will has been defined as "a personal, solemn, revocable and free act house and Juana of the Buick automobile and most of the furniture. By
by which a capacitated person disposes of his property and rights and declares or virtue of Exhibit C, Juana would become the owner of the house in case
complies with duties to take effect after his death." 14 In other words, the bequest or Leonarda died first, and Leonarda would become the owner of the
device must pertain to the testator. 15 In this case, the monies subject of savings account automobile and the furniture if Juana were to die first. In this manner
No. 35342-038 were in the nature of conjugal funds In the case relied on, Rivera v. Leonarda and Juana reciprocally assigned their respective property to
People's Bank and Trust Co., 16 we rejected claims that a survivorship agreement one another conditioned upon who might die first, the time of death
purports to deliver one party's separate properties in favor of the other, but simply, their determining the event upon which the acquisition of such right by the
joint holdings: one or the other depended. This contract, as any other contract, is
binding upon the parties thereto. Inasmuch as Leonarda had died before
xxx xxx xxx Juana, the latter thereupon acquired the ownership of the house, in the
same manner as Leonarda would have acquired the ownership of the
automobile and of the furniture if Juana had died first. 19
... Such conclusion is evidently predicated on the assumption that
Stephenson was the exclusive owner of the funds-deposited in the bank,
which assumption was in turn based on the facts (1) that the account xxx xxx xxx
was originally opened in the name of Stephenson alone and (2) that Ana
Rivera "served only as housemaid of the deceased." But it not There is no showing that the funds exclusively belonged to one party, and hence it must
infrequently happens that a person deposits money in the bank in the be presumed to be conjugal, having been acquired during the existence of the marita.
name of another; and in the instant case it also appears that Ana Rivera relations. 20
served her master for about nineteen years without actually receiving
her salary from him. The fact that subsequently Stephenson transferred Neither is the survivorship agreement a donation inter vivos, for obvious reasons,
the account to the name of himself and/or Ana Rivera and executed with because it was to take effect after the death of one party. Secondly, it is not a donation
the latter the survivorship agreement in question although there was no between the spouses because it involved no conveyance of a spouse's own properties to
relation of kinship between them but only that of master and servant, the other.
nullifies the assumption that Stephenson was the exclusive owner of the
bank account. In the absence, then, of clear proof to the contrary, we
It is also our opinion that the agreement involves no modification petition of the conjugal
must give full faith and credit to the certificate of deposit which recites in
partnership, as held by the Court of Appeals, 21 by "mere stipulation" 22 and that it is no
effect that the funds in question belonged to Edgar Stephenson and Ana
"cloak" 23 to circumvent the law on conjugal property relations. Certainly, the spouses are
Rivera; that they were joint (and several) owners thereof; and that either
not prohibited by law to invest conjugal property, say, by way of a joint and several bank
of them could withdraw any part or the whole of said account during the
lifetime of both, and the balance, if any, upon the death of either, account, more commonly denominated in banking parlance as an "and/or" account. In the
belonged to the survivor. 17 case at bar, when the spouses Vitug opened savings account No. 35342-038, they
merely put what rightfully belonged to them in a money-making venture. They did not
dispose of it in favor of the other, which would have arguably been sanctionable as a
xxx xxx xxx prohibited donation. And since the funds were conjugal, it can not be said that one
spouse could have pressured the other in placing his or her deposits in the money pool.
In Macam v. Gatmaitan, 18 it was held:
The validity of the contract seems debatable by reason of its "survivor-take-all" feature,
xxx xxx xxx but in reality, that contract imposed a mere obligation with a term, the term being death.
Such agreements are permitted by the Civil Code. 24
This Court is of the opinion that Exhibit C is an aleatory contract
whereby, according to article 1790 of the Civil Code, one of the parties Under Article 2010 of the Code:
or both reciprocally bind themselves to give or do something as an
equivalent for that which the other party is to give or do in case of the ART. 2010. By an aleatory contract, one of the parties or both
occurrence of an event which is uncertain or will happen at an reciprocally bind themselves to give or to do something in consideration
 of what the other shall give or do upon the happening of an event which
is uncertain, or which is to occur at an indeterminate time.

Under the aforequoted provision, the fulfillment of an aleatory contract depends on either
the happening of an event which is (1) "uncertain," (2) "which is to occur at an
indeterminate time." A survivorship agreement, the sale of a sweepstake ticket, a
transaction stipulating on the value of currency, and insurance have been held to fall
under the first category, while a contract for life annuity or pension under Article 2021, et
sequentia, has been categorized under the second. 25 In either case, the element of risk is
present. In the case at bar, the risk was the death of one party and survivorship of the
other.

However, as we have warned:

xxx xxx xxx

But although the survivorship agreement is per se not contrary to law its
operation or effect may be violative of the law. For instance, if it be
shown in a given case that such agreement is a mere cloak to hide an
inofficious donation, to transfer property in fraud of creditors, or to defeat
the legitime of a forced heir, it may be assailed and annulled upon such
grounds. No such vice has been imputed and established against the
agreement involved in this case. 26

xxx xxx xxx

There is no demonstration here that the survivorship agreement had been executed for
such unlawful purposes, or, as held by the respondent court, in order to frustrate our laws
on wills, donations, and conjugal partnership.

The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her
husband, the latter has acquired upon her death a vested right over the amounts under
savings account No. 35342-038 of the Bank of America. Insofar as the respondent court
ordered their inclusion in the inventory of assets left by Mrs. Vitug, we hold that the court
was in error. Being the separate property of petitioner, it forms no more part of the estate
of the deceased.

WHEREFORE, the decision of the respondent appellate court, dated June 29, 1987, and
its resolution, dated February 9, 1988, are SET ASIDE.

No costs.

SO ORDERED.
G.R. No. 94723 August 21, 1997 ii.) has given foreign currency depositors an undue
favor or a class privilege in violation of the equal
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural protection clause of the Constitution;
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E.
SALVACION, petitioners, iii.) has provided a safe haven for criminals like the
vs. herein respondent Greg Bartelli y Northcott since
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and criminals could escape civil liability for their wrongful
GREG BARTELLI y NORTHCOTT, respondents. acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit
account with an authorized bank.

TORRES, JR., J.: The antecedent facts:

In our predisposition to discover the "original intent" of a statute, courts become the On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured
unfeeling pillars of the status quo. Ligle do we realize that statutes or even constitutions petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein,
are bundles of compromises thrown our way by their framers. Unless we exercise Greg Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was
vigilance, the statute may already be out of tune and irrelevant to our day. 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
The petition is for declaratory relief. It prays for the following reliefs:
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-
a.) Immediately upon the filing of this petition, an Order be issued 8 (Peso Acct.); 3.) Dollar Account — China Banking Corp., US$/A#54105028-2; 4.) ID-
restraining the respondents from applying and enforcing Section 113 of 122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed
Central Bank Circular No. 960; Doll (Teddy Bear) used in seducing the complainant.

b.) After hearing, judgment be rendered: On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg
Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos.
1.) Declaring the respective rights and duties of petitioners and 802, 803, 804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with
respondents; the Regional Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary
attachment against Greg Bartelli. On February 24, 1989, the day there was a scheduled
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary hearing for Bartelli's petition for bail the latter escaped from jail.
to the provisions of the Constitution, hence void; because its provision
that "Foreign currency deposits shall be exempt from attachment, On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the
garnishment, or any other order or process of any court, legislative body, Issuance of Warrant of Arrest and Hold Departure Order. Pending the arrest of the
government agency or any administrative body whatsoever accused Greg Bartelli y Northcott, the criminal cases were archived in an Order dated
February 28, 1989.
i.) has taken away the right of petitioners to have the
bank deposit of defendant Greg Bartelli y Northcott Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22,
garnished to satisfy the judgment rendered in 1989 granting the application of herein petitioners, for the issuance of the writ of
petitioners' favor in violation of substantive due process preliminary attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance
guaranteed by the Constitution; Corporation in the amount of P100,000.00, a Writ of Preliminary Attachment was issued
by the trial court on February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Very truly yours,
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 (SGD) AGAPITO S. FAJARDO
garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Director1
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
Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve
garnishment properly and legally made by virtue of a court order which has placed the
summons by publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs.
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 Greg Bartelli y Northcott." Summons with the complaint was a published in the Manila
Central Bank Circular No. 960 to the effect that the dollar deposits or defendant Greg Times once a week for three consecutive weeks. Greg Bartelli failed to file his answer to
Bartelli are exempt from attachment, garnishment, or any other order or process of any the complaint and was declared in default on August 7, 1989. After hearing the case ex-
court, legislative body, government agency or any administrative body, whatsoever. parte, the court rendered judgment in favor of petitioners on March 29, 1990, the
dispositive portion of which reads:
This prompted the counsel for petitioners to make an inquiry with the Central Bank in a
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and
letter dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any
against defendant, ordering the latter:
exception or whether said section has been repealed or amended since said section has
rendered nugatory the substantive right of the plaintiff to have the claim sought to be
enforced by the civil action secured by way of the writ of preliminary attachment as 1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as
granted to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank moral damages;
responded as follows:
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and
May 26, 1989 Evelina E. Salvacion the amount of P150,000.00 each or a total of
P300,000.00 for both of them;
Ms. Erlinda S. Carolino
12 Pres. Osmena Avenue 3. To pay plaintiffs exemplary damages of P100,000.00; and
South Admiral Village
Paranaque, Metro Manila 4. To pay attorney's fees in an amount equivalent to 25% of the total
amount of damages herein awarded;
Dear Ms. Carolino:
5. To pay litigation expenses of P10,000.00; plus
This is in reply to your letter dated April 25, 1989 regarding your inquiry
on Section 113, CB Circular No. 960 (1983). 6. Costs of the suit.

The cited provision is absolute in application. It does not admit of any SO ORDERED.
exception, nor has the same been repealed nor amended.
The heinous acts of respondent Greg Bartelli which gave rise to the award were related in
The purpose of the law is to encourage dollar accounts within the graphic detail by the trial court in its decision as follows:
country's banking system which would help in the development of the
economy. There is no intention to render futile the basic rights of a The defendant in this case was originally detained in the municipal jail of
person as was suggested in your subject letter. The law may be harsh Makati but was able to escape therefrom on February 24, 1989 as per
as some perceive it, but it is still the law. Compliance is, therefore, report of the Jail Warden of Makati to the Presiding Judge, Honorable
enjoined. Manuel M. Cosico of the Regional Trial Court of Makati, Branch 136,
where he was charged with four counts of Rape and Serious Illegal
Detention (Crim. Cases Nos. 802 to 805). Accordingly, upon motion of niece inside the house, defendant told her maybe his niece was upstairs,
plaintiffs, through counsel, summons was served upon defendant by and invited Karen to go upstairs. (Id., p. 7)
publication in the Manila Times, a newspaper of general circulation as
attested by the Advertising Manager of the Metro Media Times, Inc., the Upon entering the bedroom defendant suddenly locked the door. Karen
publisher of the said newspaper. Defendant, however, failed to file his became nervous because his niece was not there. Defendant got a
answer to the complaint despite the lapse of the period of sixty (60) days piece of cotton cord and tied Karen's hands with it, and then he
from the last publication; hence, upon motion of the plaintiffs, through undressed her. Karen cried for help but defendant strangled her. He took
counsel, defendant was declared in default and plaintiffs were a packing tape and he covered her mouth with it and he circled it around
authorized to present their evidence ex parte. her head. (Id., p. 7)

In support of the complaint, plaintiffs presented as witnesses the minor Then, defendant suddenly pushed Karen towards the bed which was just
Karen E. Salvacion, her father, Federico N. Salvacion, Jr., a certain near the door. He tied her feet and hands spread apart to the bed posts.
Joseph Aguilar and a certain Liberato Madulio, who gave the following He knelt in front of her and inserted his finger in her sex organ. She felt
testimony: severe pain. She tried to shout but no sound could come out because
there were tapes on her mouth. When defendant withdrew his finger it
Karen took her first year high school in St. Mary's Academy in Pasay was full of blood and Karen felt more pain after the withdrawal of the
City but has recently transferred to Arellano University for her second finger. (Id., p. 8)
year.
He then got a Johnson's Baby Oil and he applied it to his sex organ as
In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati well as to her sex organ. After that he forced his sex organ into her but
Cinema Square, with her friend Edna Tangile whiling away her free time. he was not able to do so. While he was doing it, Karen found it difficult to
At about 3:30 p.m. while she was finishing her snack on a concrete breathe and she perspired a lot while feeling severe pain. She merely
bench in front of Plaza Fair, an American approached her. She was then presumed that he was able to insert his sex organ a little, because she
alone because Edna Tangile had already left, and she was about to go could not see. Karen could not recall how long the defendant was in that
home. (TSN, Aug. 15, 1989, pp. 2 to 5) position. (Id. pp. 8-9)

The American asked her name and introduced himself as Greg Bartelli. After that, he stood up and went to the bathroom to wash. He also told
He sat beside her when he talked to her. He said he was a Math teacher Karen to take a shower and he untied her hands. Karen could only hear
and told her that he has a sister who is a nurse in New York. His sister the sound of the water while the defendant, she presumed, was in the
allegedly has a daughter who is about Karen's age and who was with bathroom washing his sex organ. When she took a shower more blood
him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5) came out from her. In the meantime, defendant changed the mattress
because it was full of blood. After the shower, Karen was allowed by
The American asked Karen what was her favorite subject and she told defendant to sleep. She fell asleep because she got tired crying. The
him it's Pilipino. He then invited her to go with him to his house where incident happened at about 4:00 p.m. Karen had no way of determining
she could teach Pilipino to his niece. He even gave her a stuffed toy to the exact time because defendant removed her watch. Defendant did
persuade her to teach his niece. (Id., pp. 5-6) not care to give her food before she went to sleep. Karen woke up at
about 8:00 o'clock the following morning. (Id., pp. 9-10)
They walked from Plaza Fair along Pasong Tamo, turning right to reach
the defendant's house along Kalayaan Avenue. (Id., p. 6) The following day, February 5, 1989, a Sunday, after a breakfast of
biscuit and coke at about 8:30 to 9:00 a.m. defendant raped Karen while
she was still bleeding. For lunch, they also took biscuit and coke. She
When they reached the apartment house, Karen noticed that
was raped for the second time at about 12:00 to 2:00 p.m. In the
defendant's alleged niece was not outside the house but defendant told
evening, they had rice for dinner which defendant had stored downstairs;
her maybe his niece was inside. When Karen did not see the alleged
it was he who cooked the rice that is why it looks like "lugaw". For the
third time, Karen was raped again during the night. During those three 17) She again went to the bathroom and shouted for help. After shouting
times defendant succeeded in inserting his sex organ but she could not for about five minutes, she heard many voices. The voices were asking
say whether the organ was inserted wholly. for her name and she gave her name as Karen Salvacion. After a while,
she heard a voice of a woman saying they will just call the police. They
Karen did not see any firearm or any bladed weapon. The defendant did were also telling her to change her clothes. She went from the bathroom
not tie her hands and feet nor put a tape on her mouth anymore but she to the room but she did not change her clothes being afraid that should
did not cry for help for fear that she might be killed; besides, all the the neighbors call for the police and the defendant see her in different
windows and doors were closed. And even if she shouted for help, clothes, he might kill her. At that time she was wearing a T-shirt of the
nobody would hear her. She was so afraid that if somebody would hear American because the latter washed her dress. (Id., p. 16)
her and would be able to call the police, it was still possible that as she
was still inside the house, defendant might kill her. Besides, the Afterwards, defendant arrived and he opened the door. He asked her if
defendant did not leave that Sunday, ruling out her chance to call for she had asked for help because there were many policemen outside and
help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12- she denied it. He told her to change her clothes, and she did change to
14) the one she was wearing on Saturday. He instructed her to tell the police
that she left home and willingly; then he went downstairs but he locked
On February 6, 1989, Monday, Karen was raped three times, once in the the door. She could hear people conversing but she could not
morning for thirty minutes after a breakfast of biscuits; again in the understand what they were saying. (Id., p. 19)
afternoon; and again in the evening. At first, Karen did not know that
there was a window because everything was covered by a carpet, until When she heard the voices of many people who were conversing
defendant opened the window for around fifteen minutes or less to let downstairs, she knocked repeatedly at the door as hard as she could.
some air in, and she found that the window was covered by styrofoam She heard somebody going upstairs and when the door was opened,
and plywood. After that, he again closed the window with a hammer and she saw a policeman. The policeman asked her name and the reason
he put the styrofoam, plywood, and carpet back. (Id., pp. 14-15) why she was there. She told him she was kidnapped. Downstairs, he
saw about five policemen in uniform and the defendant was talking to
That Monday evening, Karen had a chance to call for help, although them. "Nakikipag-areglo po sa mga pulis," Karen added. "The policeman
defendant left but kept the door closed. She went to the bathroom and told him to just explain at the precinct. (Id., p. 20)
saw a small window covered by styrofoam and she also spotted a small
hole. She stepped on the bowl and she cried for help through the hole. They went out of the house and she saw some of her neighbors in front
She cried: "Maawa no po kayo so akin. Tulungan n'yo akong makalabas of the house. They rode the car of a certain person she called Kuya Boy
dito. Kinidnap ako!" Somebody heard her. It was a woman, probably a together with defendant, the policeman, and two of her neighbors whom
neighbor, but she got angry and said she was "istorbo". Karen pleaded she called Kuya Bong Lacson and one Ate Nita. They were brought to
for help and the woman told her to sleep and she will call the police. She Sub-Station I and there she was investigated by a policeman. At about
finally fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp. 15- 2:00 a.m., her father arrived, followed by her mother together with some
16) of their neighbors. Then they were brought to the second floor of the
police headquarters. (Id., p. 21)
She woke up at 6:00 o'clock the following morning, and she saw
defendant in bed, this time sleeping. She waited for him to wake up. At the headquarters, she was asked several questions by the
When he woke up, he again got some food but he always kept the door investigator. The written statement she gave to the police was marked
locked. As usual, she was merely fed with biscuit and coke. On that day, as Exhibit A. Then they proceeded to the National Bureau of
February 7, 1989, she was again raped three times. The first at about Investigation together with the investigator and her parents. At the NBI, a
6:30 to 7:00 a.m., the second at about 8:30 — 9:00, and the third was doctor, a medico-legal officer, examined her private parts. It was already
after lunch at 12:00 noon. After he had raped her for the second time he 3:00 in the early morning of the following day when they reached the
left but only for a short while. Upon his return, he caught her shouting for NBI. (TSN, Aug. 15, 1989, p. 22) The findings of the medico-legal officer
help but he did not understand what she was shouting about. After she has been marked as Exhibit B.
was raped the third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-
 She was studying at the St. Mary's Academy in Pasay City at the time of foreign currency depositors an undue favor or a class privilege in violation of the equal
the incident but she subsequently transferred to Apolinario Mabini, protection clause of the Constitution; 3.) it has provided a safe haven for criminals like the
Arellano University, situated along Taft Avenue, because she was herein respondent Greg Bartelli y Northcott since criminals could escape civil liability for
ashamed to be the subject of conversation in the school. She first their wrongful acts by merely converting their money to a foreign currency and depositing
applied for transfer to Jose Abad Santos, Arellano University along Taft it in a foreign currency deposit account with an authorized bank; and 4.) The Monetary
Avenue near the Light Rail Transit Station but she was denied admission Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its
after she told the school the true reason for her transfer. The reason for delegated quasi-legislative power when it took away: a.) the plaintiffs substantive right to
their denial was that they might be implicated in the case. (TSN, Aug. have the claim sought to be enforced by the civil action secured by way of the writ of
15, 1989, p. 46) preliminary attachment as granted by Rule 57 of the Revised Rules of Court; b.) the
plaintiffs substantive right to have the judgment credit satisfied by way of the writ of
xxx xxx xxx execution out of the bank deposit of the judgment debtor as granted to the judgment
creditor by Rule 39 of the Revised Rules of Court, which is beyond its power to do so.
After the incident, Karen has changed a lot. She does not play with her
brother and sister anymore, and she is always in a state of shock; she On the other hand, respondent Central Bank, in its Comment alleges that the Monetary
has been absent-minded and is ashamed even to go out of the house. Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority
(TSN, Sept. 12, 1989, p. 10) She appears to be restless or sad, (Id., p. because the subject Section is copied verbatim from a portion of R.A. No. 6426 as
11) The father prays for P500,000.00 moral damages for Karen for this amended by P.D. 1246. Hence, it was not the Monetary Board that grants exemption from
shocking experience which probably, she would always recall until she attachment or garnishment to foreign currency deposits, but the law (R.A. 6426 as
reaches old age, and he is not sure if she could ever recover from this amended) itself; that it does not violate the substantive due process guaranteed by the
experience. (TSN, Sept. 24, 1989, pp. 10-11) Constitution because a.) it was based on a law; b.) the law seems to be reasonable; c.) it
is enforced according to regular methods of procedure; and d.) it applies to all members
of a class.
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 Expanding, the Central Bank said; that one reason for exempting the foreign currency
decision of the trial court had become final, petitioners tried to execute on Bartelli's dollar deposits from attachment, garnishment or any other order or process of any court, is to
deposit with China Banking Corporation. Likewise, the bank invoked Section 113 of assure the development and speedy growth of the Foreign Currency Deposit System and
Central Bank Circular No. 960. the Offshore Banking System in the Philippines; that another reason is to encourage the
inflow of foreign currency deposits into the banking institutions thereby placing such
institutions more in a position to properly channel the same to loans and investments in
Thus, petitioners decided to seek relief from this Court.
the Philippines, thus directly contributing to the economic development of the country; that
the subject section is being enforced according to the regular methods of procedure; and
The issues raised and the arguments articulated by the parties boil down to two: that it applies to all foreign currency deposits made by any person and therefore does not
violate the equal protection clause of the Constitution.
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 Respondent Central Bank further avers that the questioned provision is needed to
Bank Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise promote the public interest and the general welfare; that the State cannot just stand idly
known as the Foreign Currency Deposit Act be made applicable to a foreign transient? by while a considerable segment of the society suffers from economic distress; that the
State had to take some measures to encourage economic development; and that in so
Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 doing persons and property may be subjected to some kinds of restraints or burdens to
providing that "Foreign currency deposits shall be exempt from attachment, garnishment, secure the general welfare or public interest. Respondent Central Bank also alleges that
or any other order or process of any court, legislative body, government agency or any Rule 39 and Rule 57 of the Revised Rules of Court provide that some properties are
administrative body whatsoever." should be adjudged as unconstitutional on the grounds exempted from execution/attachment especially provided by law and R.A. No. 6426 as
that: 1.) it has taken away the right of petitioners to have the bank deposit of defendant amended is such a law, in that it specifically provides, among others, that foreign currency
Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in deposits shall be exempted from attachment, garnishment, or any other order or process
violation of substantive due process guaranteed by the Constitution; 2.) it has given of any court, legislative body, government agency or any administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving reasons similar to xxx xxx xxx
that of respondent Central Bank, also stated that respondent China Bank is not unmindful
of the inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly The reason for imposing exemplary or corrective damages is due to the
hands of Greg Bartelli; that it is only too willing to release the dollar deposit of Bartelli wanton and bestial manner defendant had committed the acts of rape
which may perhaps partly mitigate the sufferings petitioner has undergone; but it is during a period of serious illegal detention of his hapless victim, the
restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank minor Karen Salvacion whose only fault was in her being so naive and
Circular No. 960; and that despite the harsh effect of these laws on petitioners, CBC has credulous to believe easily that defendant, an American national, could
no other alternative but to follow the same. 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
This Court finds the petition to be partly meritorious. happened, she has never heard of an old Filipino adage that in every
forest there is a
Petitioner deserves to receive the damages awarded to her by the court. But this petition snake, . . . .4
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- If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to
3214. fathom how the incentive for foreign currency deposit could be more important than his
child's rights to said award of damages; in this case, the victim's claim for damages from
This Court has no original and exclusive jurisdiction over a petition for declaratory this alien who had the gall to wrong a child of tender years of a country where he is a
relief.2 However, exceptions to this rule have been recognized. Thus, where the petition mere visitor. This further illustrates the flaw in the questioned provisions.
has far-reaching implications and raises questions that should be resolved, it may be
treated as one for mandamus.3 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
Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her presumably, this was the reason why said statute was enacted. But the realities of the
gesture of kindness by teaching his alleged niece the Filipino language as requested by present times show that the country has recovered economically; and even if not, the
the American, trustingly went with said stranger to his apartment, and there she was questioned law still denies those entitled to due process of law for being unreasonable
raped by said American tourist Greg Bartelli. Not once, but ten times. She was detained and oppressive. The intention of the questioned law may be good when enacted. The law
therein for four (4) days. This American tourist was able to escape from the jail and avoid failed to anticipate the iniquitous effects producing outright injustice and inequality such
punishment. On the other hand, the child, having received a favorable judgment in the as the case before us.
Civil Case for damages in the amount of more than P1,000,000.00, which amount could
alleviate the humiliation, anxiety, and besmirched reputation she had suffered and may It has thus been said that —
continue to suffer for a long, long time; and knowing that this person who had wronged
her has the money, could not, however get the award of damages because of this But I also know,5 that laws and institutions must go hand in hand with
unreasonable law. This questioned law, therefore makes futile the favorable judgment the progress of the human mind. As that becomes more developed,
and award of damages that she and her parents fully deserve. As stated by the trial court more enlightened, as new discoveries are made, new truths are
in its decision, disclosed and manners and opinions change with the change of
circumstances, institutions must advance also, and keep pace with the
Indeed, after hearing the testimony of Karen, the Court believes that it times. . . We might as well require a man to wear still the coat which
was undoubtedly a shocking and traumatic experience she had fitted him when a boy, as civilized society to remain ever under the
undergone which could haunt her mind for a long, long time, the mere regimen of their barbarous ancestors.
recall of which could make her feel so humiliated, as in fact she had
been actually humiliated once when she was refused admission at the In his Comment, the Solicitor General correctly opined, thus:
Abad Santos High School, Arellano University, where she sought to
transfer from another school, simply because the school authorities of
The present petition has far-reaching implications on the right of a
the said High School learned about what happened to her and allegedly
feared that they might be implicated in the case. 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 Sec. 8. Secrecy of Foreign Currency Deposits. — All
specifically, the petition raises the question whether the protection foreign currency deposits authorized under this Act, as
against attachment, garnishment or other court process accorded to amended by Presidential Decree No. 1035, as well as
foreign currency deposits by PD No. 1246 and CB Circular No. 960 foreign currency deposits authorized under Presidential
applies when the deposit does not come from a lender or investor but Decree No. 1034, are hereby declared as and
from a mere transient or tourist who is not expected to maintain the considered of an absolutely confidential nature and,
deposit in the bank for long. except upon the written permission of the depositor, in
no instance shall such foreign currency deposits be
The resolution of this question is important for the protection of nationals examined, inquired or looked into by any person,
who are victimized in the forum by foreigners who are merely passing government official, bureau or office whether judicial or
through. administrative or legislative or any other entity whether
public or private: Provided, however, that said foreign
currency deposits shall be exempt from attachment,
xxx xxx xxx
garnishment, or any other order or process of any
court, legislative body, government agency or any
. . . Respondents China Banking Corporation and Central Bank of the administrative body whatsoever.
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
The purpose of PD 1246 in according protection against attachment,
Circular No. 960:
garnishment and other court process to foreign currency deposits is
stated in its whereases, viz.:
Sec. 113. Exemption from attachment. — Foreign
currency deposits shall be exempt from attachment,
WHEREAS, under Republic Act No. 6426, as amended
garnishment, or any other order or process of any
by Presidential Decree No. 1035, certain Philippine
court, legislative body, government agency or any
banking institutions and branches of foreign banks are
administrative body whatsoever.
authorized to accept deposits in foreign currency;

Central Bank Circular No. 960 was issued pursuant to Section 7 of

WHEREAS, under the provisions of Presidential
Republic Act No. 6426:
Decree No. 1034 authorizing the establishment of an
offshore banking system in the Philippines, offshore
Sec. 7. Rules and Regulations. The Monetary Board of banking units are also authorized to receive foreign
the Central Bank shall promulgate such rules and currency deposits in certain cases;
regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the
WHEREAS, in order to assure the development and
publication of such rules and regulations in the Official
speedy growth of the Foreign Currency Deposit System
Gazette and in a newspaper of national circulation for
and the Offshore Banking System in the Philippines,
at least once a week for three consecutive weeks. In
certain incentives were provided for under the two
case the Central Bank promulgates new rules and
Systems such as confidentiality of deposits subject to
regulations decreasing the rights of depositors, the
certain exceptions and tax exemptions on the interest
rules and regulations at the time the deposit was made
income of depositors who are nonresidents and are not
shall govern.
engaged in trade or business in the Philippines;

The aforecited Section 113 was copied from Section 8 of Republic Act
WHEREAS, making absolute the protective cloak of
NO. 6426, as amended by P.D. 1246, thus:
confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing
 the vested rights of depositors would better encourage WHEREAS, the establishment of an offshore banking
the inflow of foreign currency deposits into the banking system in the Philippines has been authorized under a
institutions authorized to accept such deposits in the separate decree;
Philippines thereby placing such institutions more in a
position to properly channel the same to loans and WHEREAS, a number of local commercial banks, as
investments in the Philippines, thus directly contributing depository bank under the Foreign Currency Deposit
to the economic development of the country; Act (RA No. 6426), have the resources and managerial
competence to more actively engage in foreign
Thus, one of the principal purposes of the protection accorded to foreign exchange transactions and participate in the grant of
currency deposits is "to assure the development and speedy growth of foreign currency loans to resident corporations and
the Foreign Currency Deposit system and the Offshore Banking in the firms;
Philippines" (3rd Whereas).
WHEREAS, it is timely to expand the foreign currency
The Offshore Banking System was established by PD No. 1034. In turn, lending authority of the said depository banks under RA
the purposes of PD No. 1034 are as follows: 6426 and apply to their transactions the same taxes as
would be applicable to transaction of the proposed
WHEREAS, conditions conducive to the establishment offshore banking units;
of an offshore banking system, such as political
stability, a growing economy and adequate It is evident from the above [Whereas clauses] that the Offshore Banking
communication facilities, among others, exist in the System and the Foreign Currency Deposit System were designed to
Philippines; 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
WHEREAS, it is in the interest of developing countries are induced by the two laws and given protection and incentives by
to have as wide access as possible to the sources of them.
capital funds for economic development;
Obviously, the foreign currency deposit made by a transient or a tourist
WHEREAS, an offshore banking system based in the is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and
Philippines will be advantageous and beneficial to the given incentives and protection by said laws because such depositor
country by increasing our links with foreign lenders, stays only for a few days in the country and, therefore, will maintain his
facilitating the flow of desired investments into the deposit in the bank only for a short time.
Philippines, creating employment opportunities and
expertise in international finance, and contributing to Respondent Greg Bartelli, as stated, is just a tourist or a transient. He
the national development effort. deposited his dollars with respondent China Banking Corporation only
for safekeeping during his temporary stay in the Philippines.
WHEREAS, the geographical location, physical and
human resources, and other positive factors provide For the reasons stated above, the Solicitor General thus submits that the
the Philippines with the clear potential to develop as dollar deposit of respondent Greg Bartelli is not entitled to the protection
another financial center in Asia; of Section 113 of Central Bank Circular No. 960 and PD No. 1246
against attachment, garnishment or other court processes.6
On the other hand, the Foreign Currency Deposit system was created by
PD. No. 1035. Its purposes are as follows: In fine, the application of the law depends on the extent of its justice. Eventually, if we rule
that the questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides
that "in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail. "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Simply stated, when the statute is silent or ambiguous,
this is one of those fundamental solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377).

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would
be used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting
the guilty at the expense of the innocent.

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso?
Upholding the final and executory judgment of the lower court against the Central Bank
Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a
transient alien depositor against injustice to a national and victim of a crime? This
situation calls for fairness against legal tyranny.

We definitely cannot have both ways and rest in the belief that we have served the ends
of justice.

IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of R.A. 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.
JOSEPH VICTOR G. EJERCITO, Petitioner, v. SANDIGANBAYAN (Special c. Urban Bank MC # 34182 dated November 8, 1999 in the amount
Division) and PEOPLE OF THE PHILIPPINES, Respondents. of P42,716,554.22;

DECISION d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in the amount
of P54,161,496.52;
CARPIO MORALES, J.:
5. Trust Agreement dated January 1999:
The present petition for certiorari under Rule 65 assails the Sandiganbayan
Resolutions dated February 7 and 12, 2003 denying petitioner Joseph Victor Trustee: Joseph Victor C. Ejercito
G. Ejercito's Motions to Quash Subpoenas Duces Tecum/Ad Testificandum,
and Resolution dated March 11, 2003 denying his Motion for Reconsideration Nominee: URBAN BANK-TRUST DEPARTMENT
of the first two resolutions.
Special Private Account No. (SPAN) 858; and
The three resolutions were issued in Criminal Case No. 26558, "People of the
Philippines v. Joseph Ejercito Estrada, et al.," for plunder, defined and
6. Ledger of the SPAN # 858.
penalized in R.A. 7080, "AN ACT DEFINING AND PENALIZING THE CRIME OF
PLUNDER."
II. For Savings Account No. 0116-17345-9
In above-stated case of People v. Estrada, et al., the Special Prosecution
Panel1 filed on January 20, 2003 before the Sandiganbayan a Request for SPAN No. 858
Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing
the President of Export and Industry Bank (EIB, formerly Urban Bank) or 1. Signature Cards; and
his/her authorized representative to produce the following documents during
the hearings scheduled on January 22 and 27, 2003: 2. Statement of Account/Ledger

I. For Trust Account No. 858; III. Urban Bank Manager's Check and their corresponding Urban Bank
Manager's Check Application Forms, as follows:
1. Account Opening Documents;
1. MC # 039975 dated January 18, 2000 in the amount of P70,000,000.00;
2. Trading Order No. 020385 dated January 29, 1999;
2. MC # 039976 dated January 18, 2000 in the amount of P2,000,000.00;
3. Confirmation Advice TA 858;
3. MC # 039977 dated January 18, 2000 in the amount of P2,000,000.00;
4. Original/Microfilm copies, including the dorsal side, of the following:
4. MC # 039978 dated January 18, 2000 in the amount of P1,000,000.00;
A. Bank of Commerce MC # 0256254 in the amount of P2,000,000.00;
The Special Prosecution Panel also filed on January 20, 2003, a Request for
b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the amount of Issuance of Subpoena Duces Tecum/Ad Testificandum directed to the
P10,875,749.43; authorized representative of Equitable-PCI Bank to produce statements of
account pertaining to certain accounts in the name of "Jose Velarde" and to
testify thereon.
The Sandiganbayan granted both requests by Resolution of January 21, 2003 economy, a consequence that may have been overlooked. There appears to
and subpoenas were accordingly issued. have been deplorable connivance.

The Special Prosecution Panel filed still another Request for Issuance of xxx
Subpoena Duces Tecum/Ad Testificandum dated January 23, 2003 for the
President of EIB or his/her authorized representative to produce the same I hope and pray, Your Honors, that I will be given time to retain the services
documents subject of the Subpoena Duces Tecum dated January 21, 2003 of a lawyer to help me protect my rights and those of every banking
and to testify thereon on the hearings scheduled on January 27 and 29, 2003 depositor. But the one I have in mind is out of the country right now.
and subsequent dates until completion of the testimony. The request was
likewise granted by the Sandiganbayan. A Subpoena Duces Tecum/Ad
May I, therefore, ask your Honors, that in the meantime, the issuance of the
Testificandum was accordingly issued on January 24, 2003.
subpoena be held in abeyance for at least ten (10) days to enable me to take
appropriate legal steps in connection with the prosecution's request for the
Petitioner, claiming to have learned from the media that the Special issuance of subpoena concerning my accounts. (Emphasis
Prosecution Panel had requested for the issuance of subpoenas for the supplied)cralawlibrary
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
From the present petition, it is gathered that the "accounts" referred to by
date expressing his concerns as follows, quoted verbatim:
petitioner in his above-quoted letter are Trust Account No. 858 and Savings
Account No. 0116-17345-9.2
Your Honors:
In open court, the Special Division of the Sandiganbayan, through Associate
It is with much respect that I write this court relative to the concern of Justice Edilberto Sandoval, advised petitioner that his remedy was to file a
subpoenaing the undersigned's bank account which I have learned through motion to quash, for which he was given up to 12:00 noon the following day,
the media. January 28, 2003.

I am sure the prosecution is aware of our banking secrecy laws everyone Petitioner, unassisted by counsel, thus filed on January 28, 2003 a Motion to
supposed to observe. But, instead of prosecuting those who may have Quash Subpoena Duces Tecum/Ad Testificandum praying that the subpoenas
breached such laws, it seems it is even going to use supposed evidence which previously issued to the President of the EIB dated January 21 and January
I have reason to believe could only have been illegally obtained. 24, 2003 be quashed.3

The prosecution was not content with a general request. It even lists and In his Motion to Quash, petitioner claimed that his bank accounts are covered
identifies specific documents meaning someone else in the bank illegally by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under
released confidential information. any of the exceptions stated therein. He further claimed that the specific
identification of documents in the questioned subpoenas, including details on
If this can be done to me, it can happen to anyone. Not that anything can still dates and amounts, could only have been made possible by an earlier illegal
shock our family. Nor that I have anything to hide. Your Honors. disclosure thereof by the EIB and the Philippine Deposit Insurance Corporation
(PDIC) in its capacity as receiver of the then Urban Bank.
But, I am not a lawyer and need time to consult one on a situation that affects
every bank depositor in the country and should interest the bank itself, the The disclosure being illegal, petitioner concluded, the prosecution in the case
Bangko Sentral ng Pilipinas, and maybe the Ombudsman himself, who may may not be allowed to make use of the information.
want to investigate, not exploit, the serious breach that can only harm the
Before the Motion to Quash was resolved by the Sandiganbayan, the On February 7, 2003, petitioner, this time assisted by counsel, filed an Urgent
prosecution filed another Request for the Issuance of Subpoena Duces Motion to Quash Subpoenae Duces Tecum/Ad Testificandum praying that the
Tecum/Ad Testificandum dated January 31, 2003, again to direct the subpoena dated January 31, 2003 directed to Aurora Baldoz be quashed for
President of the EIB to produce, on the hearings scheduled on February 3 and the same reasons which he cited in the Motion to Quash4 he had earlier filed.
5, 2003, the same documents subject of the January 21 and 24, 2003
subpoenas with the exception of the Bank of Commerce MC #0256254 in the On the same day, February 7, 2003, the Sandiganbayan issued a Resolution
amount of P2,000,000 as Bank of Commerce MC #0256256 in the amount denying petitioner's Motion to Quash Subpoenae Duces Tecum/Ad
of P200,000,000 was instead requested. Moreover, the request covered the Testificandum dated January 28, 2003.
following additional documents:
Subsequently or on February 12, 2003, the Sandiganbayan issued a
IV. For Savings Account No. 1701-00646-1: Resolution denying petitioner's Urgent Motion to Quash Subpoena Duces
Tecum/Ad Testificandum dated February 7, 2003.
1. Account Opening Forms;
Petitioner's Motion for Reconsideration dated February 24, 2003 seeking a
2. Specimen Signature Card/s; and reconsideration of the Resolutions of February 7 and 12, 2003 having been
denied by Resolution of March 11, 2003, petitioner filed the present petition.
3. Statements of Account.
Raised as issues are:
The prosecution also filed a Request for the Issuance of Subpoena Duces
Tecum/Ad Testificandum bearing the same date, January 31, 2003, directed 1. Whether petitioner's Trust Account No. 858 is covered by the term
to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to produce the "deposit" as used in R.A. 1405;
following documents on the scheduled hearings on February 3 and 5, 2003:
2. Whether petitioner's Trust Account No. 858 and Savings Account No. 0116-
1. Letter of authority dated November 23, 1999 re: SPAN [Special Private 17345-9 are excepted from the protection of R.A. 1405; andcralawlibrary
Account Number] 858;
3. Whether the "extremely-detailed" information contained in the Special
2. Letter of authority dated January 29, 2000 re: SPAN 858; Prosecution Panel's requests for subpoena was obtained through a prior illegal
disclosure of petitioner's bank accounts, in violation of the "fruit of the
3. Letter of authority dated April 24, 2000 re: SPAN 858; poisonous tree" doctrine.

4. Urban Bank check no. 052092 dated April 24, 2000 for the amount of P36, Respondent People posits that Trust Account No. 8585 may be inquired into,
572, 315.43; not merely because it falls under the exceptions to the coverage of R.A. 1405,
but because it is not even contemplated therein. For, to respondent People,
the law applies only to "deposits" which strictly means the money delivered to
5. Urban Bank check no. 052093 dated April 24, 2000 for the amount of
the bank by which a creditor-debtor relationship is created between the
P107,191,780.85; and
depositor and the bank.

6. Signature Card Savings Account No. 0116-17345-9. (Underscoring

The contention that trust accounts are not covered by the term "deposits," as
supplied)cralawlibrary
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 subpoenas prayed for in both requests were issued by the Sandiganbayan the law shows that the term "deposits" used therein is to be understood
on January 31, 2003.
broadly and not limited only to accounts which give rise to a creditor-debtor generally, the law applies not only to money which is deposited but also to
relationship between the depositor and the bank. 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
The policy behind the law is laid down in Section 1: would have been no need to add the phrase "or invested."

SECTION 1. It is hereby declared to be the policy of the Government to give Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.
encouragement to the people to deposit their money in banking institutions
and to discourage private hoarding so that the same may be properly utilized The protection afforded by the law is, however, not absolute, there being
by banks in authorized loans to assist in the economic development of the recognized exceptions thereto, as above-quoted Section 2 provides. In the
country. (Underscoring supplied)cralawlibrary 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
If the money deposited under an account may be used by banks for of duty of public officials, and (2) the money deposited or invested is the
authorized loans to third persons, then such account, regardless of whether it subject matter of the litigation.
creates a creditor-debtor relationship between the depositor and the bank,
falls under the category of accounts which the law precisely seeks to protect Petitioner contends that since plunder is neither bribery nor dereliction of
for the purpose of boosting the economic development of the country. duty, his accounts are not excepted from the protection of R.A.
1405. Philippine National Bank v. Gancayco7 holds otherwise:
Trust Account No. 858 is, without doubt, one such account. The Trust
Agreement between petitioner and Urban Bank provides that the trust account Cases of unexplained wealth are similar to cases of bribery or dereliction of
covers "deposit, placement or investment of funds" by Urban Bank for and in duty and no reason is seen why these two classes of cases cannot be
behalf of petitioner.6 The money deposited under Trust Account No. 858, was, excepted from the rule making bank deposits confidential. The policy as to
therefore, intended not merely to remain with the bank but to be invested by one cannot be different from the policy as to the other. This policy
it elsewhere. To hold that this type of account is not protected by R.A. 1405 expresses the notion that a public office is a public trust and any
would encourage private hoarding of funds that could otherwise be invested person who enters upon its discharge does so with the full knowledge that his
by banks in other ventures, contrary to the policy behind the law. life, so far as relevant to his duty, is open to public scrutiny.

Section 2 of the same law in fact even more clearly shows that the term Undoubtedly, cases for plunder involve unexplained wealth. Section 2 of R.A.
"deposits" was intended to be understood broadly: No. 7080 states so.

SECTION 2. All deposits of whatever nature with banks or banking SECTION 2. Definition of the Crime of Plunder; Penalties. - Any public
institutions in the Philippines including investments in bonds issued by the officer who, by himself or in connivance with members of his family, relatives
Government of the Philippines, its political subdivisions and its by affinity or consanguinity, business associates, subordinates or other
instrumentalities, are hereby considered as of an absolutely confidential persons, amasses, accumulates or acquires ill-gotten wealth through a
nature and may not be examined, inquired or looked into by any person, combination or series of overt or criminal acts as described in Section 1(d)
government official, bureau or office, except upon written permission of the hereof, in the aggregate amount or total value of at least Seventy-five million
depositor, or in cases of impeachment, or upon order of a competent court in pesos (P75,000,000.00), shall be guilty of the crime of plunder and shall be
cases of bribery or dereliction of duty of public officials, or in cases where the punished by life imprisonment with perpetual absolute disqualification from
money deposited or invested is the subject matter of the litigation. holding any public office. Any person who participated with said public officer
(Emphasis and underscoring supplied)cralawlibrary in the commission of plunder shall likewise be punished. In the imposition of
penalties, the degree of participation and the attendance of mitigating and
The phrase "of whatever nature" proscribes any restrictive interpretation of extenuating circumstances shall be considered by the court. The court shall
"deposits." Moreover, it is clear from the immediately quoted provision that, declare any and all ill-gotten wealth and their interests and other incomes and
assets including the properties and shares of stock derived from the deposit or Indeed, all the above-enumerated overt acts are similar to bribery such that,
investment thereof forfeited in favor of the State. (Emphasis and underscoring in each case, it may be said that "no reason is seen why these two classes of
supplied)cralawlibrary cases cannot be excepted from the rule making bank deposits confidential."8

An examination of the "overt or criminal acts as described in Section 1(d)" of The crime of bribery and the overt acts constitutive of plunder are crimes
R.A. No. 7080 would make the similarity between plunder and bribery even committed by public officers, and in either case the noble idea that "a public
more pronounced since bribery is essentially included among these criminal office is a public trust and any person who enters upon its discharge does so
acts. Thus Section 1(d) states: with the full knowledge that his life, so far as relevant to his duty, is open to
public scrutiny" applies with equal force.
d) "Ill-gotten wealth" means any asset, property, business enterprise or
material possession of any person within the purview of Section Two (2) Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable
hereof, acquired by him directly or indirectly through dummies, nominees, in cases of bribery must also apply to cases of plunder.
agents, subordinates and or business associates by any combination or series
of the following means or similar schemes. Respecting petitioner's claim that the money in his bank accounts is not the
"subject matter of the litigation," the meaning of the phrase "subject matter
1) Through misappropriation, conversion, misuse, or malversation of public of the litigation" as used in R.A. 1405 is explained in Union Bank of the
funds or raids on the public treasury; Philippines v. Court of Appeals,9 thus:

2) By receiving, directly or indirectly, any commission, gift, share, Petitioner contends that the Court of Appeals confuses the "cause of action"
percentage, kickbacks or any other form of pecuniary benefit from with the "subject of the action". In Yusingco v. Ong Hing Lian, petitioner
any person and/or entity in connection with any government contract points out, this Court distinguished the two concepts.
or project or by reason of the office or position of the public officer
concerned; x x x "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
3) By the illegal or fraudulent conveyance or disposition of assets belonging to legal relief; but the subject of the action is neither of these since it is not the
the National Government or any of its subdivisions, agencies or wrong or the relief demanded, the subject of the action is the matter or thing
instrumentalities or government-owned or -controlled corporations and their with respect to which the controversy has arisen, concerning which the wrong
subsidiaries; has been done, and this ordinarily is the property or the contract and its
subject matter, or the thing in dispute."
4) By obtaining, receiving or accepting directly or indirectly any shares of
stock, equity or any other form of interest or participation including promise of The argument is well-taken. We note with approval the difference between the
future employment in any business enterprise or undertaking; 'subject of the action' from the 'cause of action.' We also find petitioner's
definition of the phrase 'subject matter of the action' is consistent with the
5) By establishing agricultural, industrial or commercial monopolies or other term 'subject matter of the litigation', as the latter is used in the Bank
combinations and/or implementation of decrees and orders intended to benefit Deposits Secrecy Act.
particular persons or special interests; or
In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently
6) By taking undue advantage of official position, authority, relationship, caused the transfer of the amount of US$1,000,000.00 instead of only
connection or influence to unjustly enrich himself or themselves at the US$1,000.00, the Court sanctioned the examination of the bank accounts
expense and to the damage and prejudice of the Filipino people and the where part of the money was subsequently caused to be deposited:
Republic of the Philippines. (Emphasis supplied)cralawlibrary
'x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank pending case before the court of competent jurisdiction. The bank personnel
deposits in cases where the money deposited is the subject matter of the and the account holder must be notified to be present during the inspection,
litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the and such inspection may cover only the account identified in the pending
amount converted by the Javiers for their own benefit, necessarily, an case. (Underscoring supplied)cralawlibrary
inquiry into the whereabouts of the illegally acquired amount extends
to whatever is concealed by being held or recorded in the name of As no plunder case against then President Estrada had yet been filed before a
persons other than the one responsible for the illegal acquisition." court of competent jurisdiction at the time the Ombudsman conducted an
investigation, petitioner concludes that the information about his bank
Clearly, Mellon Bank involved a case where the money deposited was the accounts were acquired illegally, hence, it may not be lawfully used to
subject matter of the litigation since the money deposited was the very thing facilitate a subsequent inquiry into the same bank accounts.
in dispute. x x x" (Emphasis and underscoring supplied)cralawlibrary
Petitioner's attempt to make the exclusionary rule applicable to the instant
The plunder case now pending with the Sandiganbayan necessarily involves case fails. R.A. 1405, it bears noting, nowhere provides that an unlawful
an inquiry into the whereabouts of the amount purportedly acquired illegally examination of bank accounts shall render the evidence obtained therefrom
by former President Joseph Estrada. 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
In light then of this Court's pronouncement in Union Bank, the subject matter imprisonment of not more than five years or a fine of not more than twenty
of the litigation cannot be limited to bank accounts under the name of thousand pesos or both, in the discretion of the court."
President Estrada alone, but must include those accounts to which the money
purportedly acquired illegally or a portion thereof was alleged to have been The case of U.S. v. Frazin,11 involving the Right to Financial Privacy Act of
transferred. Trust Account No. 858 and Savings Account No. 0116-17345-9 in 1978 (RFPA) of the United States, is instructive.
the name of petitioner fall under this description and must thus be part of the
subject matter of the litigation. Because the statute, when properly construed, excludes a suppression
remedy, it would not be appropriate for us to provide one in the exercise of
In a further attempt to show that the subpoenas issued by the Sandiganbayan our supervisory powers over the administration of justice. Where Congress
are invalid and may not be enforced, petitioner contends, as earlier stated, has both established a right and provided exclusive remedies for its violation,
that the information found therein, given their "extremely detailed" character, we would "encroach upon the prerogatives" of Congress were we to authorize
could only have been obtained by the Special Prosecution Panel through an a remedy not provided for by statute. United States v. Chanen, 549 F.2d
illegal disclosure by the bank officials concerned. Petitioner thus claims that, 1306, 1313 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83
following the "fruit of the poisonous tree" doctrine, the subpoenas must be (1977).
quashed.
The same principle was reiterated in U.S. v. Thompson:12
Petitioner further contends that even if, as claimed by respondent People, the
"extremely-detailed" information was obtained by the Ombudsman from the x x x When Congress specifically designates a remedy for one of its acts,
bank officials concerned during a previous investigation of the charges against courts generally presume that it engaged in the necessary balancing of
President Estrada, such inquiry into his bank accounts would itself be illegal. interests in determining what the appropriate penalty should
be. See Michaelian, 803 F.2d at 1049 (citing cases); Frazin, 780 F.2d at 1466.
Petitioner relies on Marquez v. Desierto10 where the Court held: Absent a specific reference to an exclusionary rule, it is not appropriate for the
courts to read such a provision into the act.
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
Even assuming arguendo, however, that the exclusionary rule applies in 1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-
principleto cases involving R.A. 1405, the Court finds no reason to apply the 99, 1-07-00, 04-03-00 and 04-24-00;
same in this particular case.
2. Report of Unregularized TAFs & TDs for UR COIN A & B Placements of
Clearly, the "fruit of the poisonous tree" doctrine13 presupposes a violation of Various Branches as of February 29, 2000 and as of December 16, 1999;
law. If there was no violation of R.A. 1405 in the instant case, then there andcralawlibrary
would be no "poisonous tree" to begin with, and, thus, no reason to apply the
doctrine. 3. Trading Orders Nos. A No. 78102 and A No. 078125.

How the Ombudsman conducted his inquiry into the bank accounts of Trading Order A No. 07125 is filed in two copies - a white copy which showed
petitioner is recounted by respondent People of the Philippines, viz: "set up" information; and a yellow copy which showed "reversal" information.
Both copies have been reproduced and are enclosed with this letter.
x x x [A]s early as February 8, 2001, long before the issuance of
the Marquez ruling, the Office of the Ombudsman, acting under the powers We are continuing our search for other records and documents pertinent to
granted to it by the Constitution and R.A. No. 6770, and acting on information your request and we will forward to you on Friday, 23 February 2001, such
obtained from various sources, including impeachment (of then Pres. Joseph additional records and documents as we might find until then. (Attachment
Estrada) related reports, articles and investigative journals, issued "4")
a Subpoena Duces Tecum addressed to Urban Bank. (Attachment "1-b") It
should be noted that the description of the documents sought to be produced
The Office of the Ombudsman then requested for the manger's checks,
at that time included that of numbered accounts 727, 737, 747, 757, 777 and
detailed in the Subpoena Duces Tecum dated March 7, 2001. (Attachment
858 and included such names as Jose Velarde, Joseph E. Estrada, Laarni
"5")
Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or
Kelvin Garcia. The subpoena did not single out account 858.
PDIC again complied with the said Subpoena Duces Tecum dated March 7,
2001 and provided copies of the manager's checks thus requested under
xxx
cover letter dated March 16, 2001. (Attachment "6")14 (Emphasis in the
original)
Thus, on February 13, 2001, PDIC, as receiver of Urban Bank, issued a
certification as to the availability of bank documents relating to A/C 858 and
The Sandiganbayan credited the foregoing account of respondent
T/A 858 and the non-availability of bank records as to the other accounts
People.15 The Court finds no reason to disturb this finding of fact by the
named in the subpoena. (Attachments "2", "2-1" and "2-b)
Sandiganbayan.

Based on the certification issued by PDIC, the Office of the Ombudsman

The Marquez ruling notwithstanding, the above-described examination by the
on February 16, 2001 again issued a Subpoena Duces Tecum directed to Ms.
Ombudsman of petitioner's bank accounts, conducted before a case was filed
Corazon dela Paz, as Interim Receiver, directing the production of documents
with a court of competent jurisdiction, was lawful.
pertinent to account A/C 858 and T/C 858. (Attachment "3")

For the Ombudsman issued the subpoenas bearing on the bank accounts of
In compliance with the said subpoena dated February 16, 2001, Ms. Dela Paz,
petitioner about four months before Marquez was promulgated on June 27,
as interim receiver, furnished the Office of the Ombudsman certified copies of
2001.
documents under cover latter dated February 21, 2001:
While judicial interpretations of statutes, such as that made in Marquez with P.D. 1630 to issue subpoenas duces tecum for bank documents prior to the
respect to R.A. No. 6770 or the Ombudsman Act of 1989, are deemed part of filing of a case before a court of competent jurisdiction.
the statute as of the date it was originally passed, the rule is not absolute.
Marquez, on the other hand, practically reversed this ruling in Banco Filipino
Columbia Pictures, Inc. v. Court of Appeals16 teaches: despite the fact that the subpoena power of the Ombudsman under R.A. 6770
was essentially the same as that under P.D. 1630. Thus Section 15 of R.A.
It is consequently clear that a judicial interpretation becomes a part of the law 6770 empowers the Office of the Ombudsman to
as of the date that law was originally passed, subject only to the
qualification that when a doctrine of this Court is overruled and a (8) Administer oaths, issue subpoena and subpoena duces tecum, and take
different view is adopted, and more so when there is testimony in any investigation or inquiry, including the power to examine and
a reversal thereof, the new doctrine should be have access to bank accounts and records;
applied prospectively and should not apply to parties who relied on the old
doctrine and acted in good faith. (Emphasis and underscoring A comparison of this provision with its counterpart in Sec. 10(d) of P.D. 1630
supplied)cralawlibrary clearly shows that it is only more explicit in stating that the power of the
Ombudsman includes the power to examine and have access to bank accounts
When this Court construed the Ombudsman Act of 1989, in light of the and records which power was recognized with respect to the Tanodbayan
Secrecy of Bank Deposits Law in Marquez, that "before an in camera through Banco Filipino.
inspection may be allowed there must be a pending case before a court of
competent jurisdiction", it was, in fact, reversing an earlier doctrine found The Marquez ruling that there must be a pending case in order for the
in Banco Filipino Savings and Mortgage Bank v. Purisima17 . Ombudsman to validly inspect bank records in camera thus reversed a
prevailing doctrine.21 Hence, it may not be retroactively applied.
Banco Filipino involved subpoenas duces tecum issued by the Office of the
Ombudsman, then known as the Tanodbayan,18 in the course of The Ombudsman's inquiry into the subject bank accounts prior to the filing of
its preliminary investigation of a charge of violation of the Anti-Graft and any case before a court of competent jurisdiction was therefore valid at the
Corrupt Practices Act. time it was conducted.

While the main issue in Banco Filipino was whether R.A. 1405 precluded the Likewise, the Marquez ruling that "the account holder must be notified to be
Tanodbayan's issuance of subpoena duces tecum of bank records in the name present during the inspection" may not be applied retroactively to the inquiry
of persons other than the one who was charged, this Court, citing P.D. of the Ombudsman subject of this case. This ruling is not a judicial
1630,19 Section 10, the relevant part of which states: interpretation either of R.A. 6770 or R.A. 1405, but a "judge-made" law
which, as People v. Luvendino22 instructs, can only be given prospective
(d) He may issue a subpoena to compel any person to appear, give sworn application:
testimony, or produce documentary or other evidence the Tanodbayan deems
relevant to a matter under his inquiry, x x x The doctrine that an uncounselled waiver of the right to counsel
is not to be given legal effect was initially a judge-made one and was
held that "The power of the Tanodbayan to issue subpoenae ad first announced on 26 April 1983 in Morales v. Enrile and reiterated on
testificandum and subpoenae duces tecum at the time in question is 20 March 1985 in People v. Galit. x x x
not disputed, and at any rate does not admit of doubt."20
While the Morales-Galit doctrine eventually became part of Section 12(1) of
As the subpoenas subject of Banco Filipino were issued during a preliminary the 1987 Constitution, that doctrine affords no comfort to appellant Luvendino
investigation, in effect this Court upheld the power of the Tandobayan under for the requirements and restrictions outlined
in Morales and Galit have no retroactive effect and do not reach conducted, through which it can eventually obtain the same information
waivers made prior to 26 April 1983 the date of promulgation of Morales. previously disclosed to it by the PDIC, for it is an inescapable fact that the
(Emphasis supplied)cralawlibrary bank records of petitioner are no longer protected by R.A. 1405 for the
reasons already explained above.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
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. Since conducting such an inquiry would, however, only result in the disclosure
of the same documents to the Ombudsman, this Court, in avoidance of what
At all events, even if the challenged subpoenas are quashed, the Ombudsman would be a time-wasteful and circuitous way of administering
is not barred from requiring the production of the same documents based justice,24 upholds the challenged subpoenas.
solely on information obtained by it from sources independent of its previous
inquiry. Respecting petitioner's claim that the Sandiganbayan violated his right to due
process as he was neither notified of the requests for the issuance of the
In particular, the Ombudsman, even before its inquiry, had already possessed subpoenas nor of the grant thereof, suffice it to state that the defects were
information giving him grounds to believe that (1) there are bank accounts cured when petitioner ventilated his arguments against the issuance thereof
bearing the number "858," (2) that such accounts are in the custody of Urban through his earlier quoted letter addressed to the Sandiganbayan and when
Bank, and (3) that the same are linked with the bank accounts of former he filed his motions to quash before the Sandiganbayan.
President Joseph Estrada who was then under investigation for plunder.
IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse
Only with such prior independent information could it have been possible for of discretion in issuing the challenged subpoenas for documents pertaining to
the Ombudsman to issue the February 8, 2001 subpoena duces petitioner's Trust Account No. 858 and Savings Account No. 0116-17345-9 for
tecum addressed to the President and/or Chief Executive Officer of Urban the following reasons:
Bank, which described the documents subject thereof as follows:
1. These accounts are no longer protected by the Secrecy of Bank Deposits
(a) bank records and all documents relative thereto pertaining to all bank Law, there being two exceptions to the said law applicable in this case,
accounts (Savings, Current, Time Deposit, Trust, Foreign Currency Deposits, namely: (1) the examination of bank accounts is upon order of a competent
etc' ) under the account names of Jose Velarde, Joseph E. Estrada, Laarni court in cases of bribery or dereliction of duty of public officials, and (2) the
Enriquez, Guia Gomez, Joy Melendrez, Peach Osorio, Rowena Lopez, Kevin or money deposited or invested is the subject matter of the litigation. Exception
Kelvin Garcia, 727, 737, 747, 757, 777 and 858. (Emphasis and underscoring (1) applies since the plunder case pending against former President Estrada is
supplied)cralawlibrary analogous to bribery or dereliction of duty, while exception (2) applies
because the money deposited in petitioner's bank accounts is said to form
part of the subject matter of the same plunder case.
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 2. The "fruit of the poisonous tree" principle, which states that once the
Estrada, related reports, articles and investigative journals.23 In the absence primary source (the "tree") is shown to have been unlawfully obtained, any
of proof to the contrary, this explanation proffered by respondent must be secondary or derivative evidence (the "fruit") derived from it is also
upheld. To presume that the information was obtained in violation of R.A. inadmissible, does not apply in this case. In the first place, R.A. 1405 does not
1405 would infringe the presumption of regularity in the performance of provide for the application of this rule. Moreover, there is no basis for applying
official functions. the same in this case since the primary source for the detailed information
regarding petitioner's bank accounts - the investigation previously conducted
by the Ombudsman - was lawful.
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
3. At all events, even if the subpoenas issued by the Sandiganbayan were
quashed, the Ombudsman may conduct on its own the same inquiry into the
subject bank accounts that it earlier conducted last February-March 2001,
there being a plunder case already pending against former President Estrada.
To quash the challenged subpoenas would, therefore, be pointless since the
Ombudsman may obtain the same documents by another route. Upholding the
subpoenas avoids an unnecessary delay in the administration of justice.

WHEREFORE, the petition is DISMISSED. The Sandiganbayan Resolutions

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

The Sandiganbayan is hereby directed, consistent with this Court's 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.
G.R. No. 161397 June 30, 2005 on June 11, 1987, that the balance of his loan account with the bank had been converted
to a regular housing loan, thus:
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,
vs.
Amount converted Monthly
FELIPE P. ARCILLA, JR., Respondent. Interest Rate Remaining Term
to PH Loan Amortization

x - - - - - - - - - - - - - - - - - - - - - - -x ₱ 155,218.79 - 1 9% 22 yrs. & 6 mos< ₱1,342.72

G.R. No. 161426 June 30, 2005 6,802.45 - 2 9% 21 yrs. & 10 mos. 59.41

24,342.91 - 3 9% 22 yrs. 212.07

FELIPE P. ARCILLA, JR., Petitioner,
vs. Plus: MRI at PC. 41/thousand ₱1,614.20
DEVELOPMENT BANK OF THE PHILIPPINES, Respondent.
76.41
DECISION

CALLEJO, SR., J.: ₱186,364.15 Total ₱1,690.617

=========
Atty. Felipe P. Arcilla, Jr. was employed by the Development Bank of the Philippines
(DBP) in October 1981. About five or six months thereafter, he was assigned to the legal
On July 24, 1987, Arcilla signed three Promissory Notes8 for the total amount of
department, and thereafter, decided to avail of a loan under the Individual Housing
₱186,364.15. He was also obliged to pay service charge and interests, as follows:
Project (IHP) of the bank.1 On September 12, 1983, DBP and Arcilla executed a Deed of
Conditional Sale2 over a parcel of land, as well as the house to be constructed thereon,
for the price of ₱160,000.00. Arcilla borrowed the said amount from DBP for the purchase a.1 On the amount advanced or balance thereof that remains unpaid for 30
of the lot and the construction of a residential building thereon. He obliged himself to pay days* or less:
the loan in 25 years, with a monthly amortization of ₱1,417.91, with 9% interest per
annum, to be deducted from his monthly salary.3
i. Interest on advances at 7% p.a. over DBP's borrowing cost:

DBP obliged itself to transfer the title of the property upon the payment of the loan, ii. No 2% service charge
including any increments thereof. It was also agreed therein that if Arcilla availed of
optional retirement, he could elect to continue paying the loan, provided that the iii. No 8% penalty charge
loan/amount would be converted into a regular real estate loan account with the prevailing
interest assigned on real estate loans, payable within the remaining term of the loan a.2 On the amount advanced or balance thereof that remains unpaid for more
account.4 than 30 days:

Arcilla was notified of the periodic release of his loan.5 During the period of July 1984 to i. Interest on the advance at 7% p.a. ]
December 31, 1986, the monthly amortizations for the said account were deducted from over DBP's borrowing cost; ]
his monthly salary, for which he was issued receipts.6
ii. One time 2% service charge ] -- To be computed from
The monthly amortization was increased to ₱1,468.92 in November 1984, and to
₱1,691.51 beginning January 1985. However, Arcilla opted to resign from the bank in iii. Interest on the service charge ] the start of the 30-day
December 1986. Conformably with the Deed of Conditional Sale, the bank informed him,
 iv. 8% penalty charge on the balances ] period b.1 One time service charge 2% of the amount advanced
of the advances and service charge.9
b.2 Interest and penalty charge Interest - 7% p.a. over borrowing cost
Penalty charge û 8% p.a. if unpaid
Arcilla also agreed to pay to DBP the following: after 30 days from date of advance

*Insurance Premiums - 30-day period to be computed from date of advances

However, Arcilla also agreed to the reservation by the DBP of its right to increase (with
notice to him) the "rate of interest on the loan, as well as all other fees and charges on
Other Advances - 30-day period to be computed from date of notification
loans and advances pursuant to such policy as it may adopt from time to time during the
period of the loan; Provided, that the rate of interest on the loan shall be reduced by law
b. Taxes or by the Monetary Board; Provided, further, that the adjustment in the rate of interest
shall take effect on or after the effectivity of the increase or decrease in the maximum rate
of interest."10
b.1 One time service charge 2% of the amount advanced

b.2 Interest and penalty charge Interest - 7% p.a. over borrowing cost Upon his request, DBP agreed to grant Arcilla an additional cash advance of ₱32,000.00.
Penalty charge û 8% p.a. if unpaid Thereafter, on May 23, 1984, a Supplement to the Conditional Sale Agreement was
after 30 days from date of advance executed in which DBP and Arcilla agreed on the following terms of the loan:

i. Interest of the advance at ]

Amount Interest Rate Per Annum Terms Amortization
7% p.a. over DBP's ]
₱32,000.00 Nine (9%) per cent MRI for 24 years ₱271.57
P32,000.00 at P0.40/1,000.00
borrowing costs; ]-- To be computed from start of 30-day
12.80
period
₱32,000.00 same to be consolidated with the (Est.
One time 2% service
ii. ] original advance in accordance with Amort.) ₱ 284.37
charge
Condition No. 8 hereof.11 =========
Interest on the service
iii. ]
charge The additional advance was, thus, consolidated to the outstanding balance of Arcilla's
original advance, payable within the remaining term thereof at 9% per annum. However,
iv. 8% penalty charge on the ] he failed to pay his loan account, advances, penalty charges and interests which, as of
balances of the advance ] October 31, 1990, amounted to ₱241,940.93.12 DBP rescinded the Deed of Conditional
and ] Sale by notarial act on November 27, 1990.13 Nevertheless, it wrote Arcilla, on January 3,
service charge. 1992, giving him until October 24, 1992, within which to repurchase the property upon full
payment of the current appraisal or updated total, whichever is lesser; in case of failure to
do so, the property would be advertised for bidding.14 DBP reiterated the said offer on
*Insurance Premiums - 30-day period to be computed from date of advances.
October 7, 1992.15 Arcilla failed to respond. Consequently, the property was advertised
for sale at public bidding on February 14, 1994.16
Other Advances - 30-day period to be computed from date of notification.
Arcilla filed a complaint against DBP with the Regional Trial Court (RTC) of Antipolo,
b. Taxes Rizal, on February 21, 1994. He alleged that DBP failed to furnish him with the disclosure
statement required by Republic Act (R.A.) No. 3765 and Central Bank (CB) Circular No.
158 prior to the execution of the deed of conditional sale and the conversion of his loan 4.1. The trial court erred in ruling that the provision of the details of the loan
account with the bank into a regular housing loan account. Despite this, DBP immediately without the issuance of a "Disclosure Statement" is not compliance with the
deducted the account from his salary as early as 1984. Moreover, the bank applied its "Truth in Lending Act;"
own formula and imposed its usurious interests, penalties and charges on his loan
account and advances. He further alleged, thus: 4.2. The trial court erred in declaring the Notarial Rescission null and void; and

13. That when plaintiff could no longer cope-up with defendant's illegal and usurious 4.3. The trial court erred in denying DBP's counterclaims for recovery of
impositions, the DBP unilaterally increased further the rate of interest, without notice to possession, back rentals and litigation expenses.19
the latter, and heaped-up usurious interests, penalties and charges;
On May 29, 2003, the CA rendered judgment setting aside and reversing the decision of
--- the RTC. In ordering the dismissal of the complaint, the appellate court ruled that DBP
substantially complied with R.A. No. 3765 and CB Circular No. 158. Arcilla filed a motion
14. That to further bend the back of the plaintiff, defendant rescinded the subject deed of for reconsideration of the decision. For its part, DBP filed a motion for partial
conditional sale on 4 December 1990 without giving due notice to plaintiff; reconsideration of the decision, praying that Arcilla be ordered to vacate the property.
However, the appellate court denied both motions.
15. That much later, on 10 October 1993, plaintiff received a letter from defendant dated
19 September 1993, informing plaintiff that the subject deed of conditional sale was The parties filed separate petitions for review on certiorari with this Court. The first
already rescinded on 4 December 1990 (xerox copy of the same is hereto attached and petition, entitled Development Bank of the Philippines v. Court of Appeals, was docketed
made an integral part hereof as Annex "C";17 as G.R. No. 161397; the second petition, entitled Felipe Arcilla, Jr. v. Court of Appeals,
was docketed as G.R. No. 161426. The Court resolved to consolidate the two cases.
In its answer to the complaint, the DBP alleged that it substantially complied with R.A. No.
3765 and CB Circular No. 158 because the details required in said statements were The issues raised in the two petitions are the following: a) whether or not petitioner DBP
particularly disclosed in the promissory notes, deed of conditional sale and the required complied with the disclosure requirement of R.A. No. 3765 and CB Circular No. 158,
notices sent to Arcilla. In any event, its failure to comply strictly with R.A. No. 3765 did not Series of 1978, in the execution of the deed of conditional sale, the supplemental deed of
affect the validity and enforceability of the subject contracts or transactions. DBP conditional sale, as well as the promissory notes; and b) whether or not respondent Felipe
interposed a counterclaim for the possession of the property. Arcilla, Jr. is mandated to vacate the property and pay rentals for his occupation thereof
after the notarial rescission of the deed of conditional sale was rescinded by notarial act,
On April 27, 2001, the trial court rendered judgment in favor of Arcilla and nullified the as well as the supplement executed by DBP.
notarial rescission of the deeds executed by the parties. The fallo of the decision reads:
On the first issue, Arcilla avers that under R.A. No. 3765 and CB Circular No. 158, the
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff DBP, as the creditor bank, was mandated to furnish him with the requisite information in
and against the defendant.1avvphil.zw+ Defendant is hereby directed to furnish the such form prescribed by the Central Bank before the commutation of the loan transaction.
disclosure statement to the plaintiff within five (5) days upon receipt hereof in the manner He avers that the disclosure of the details of the loan contained in the deed of conditional
and form provided by R.A. No. 3765 and submit to this Court for approval the total sale and the supplement thereto, the promissory notes and release sheet, do not
obligation of the plaintiff as of this date, within ten (10) days from receipt of this order. The constitute substantial compliance with the law and the CB Circular. He avers that the
Notarial Rescission (Exh. "16") dated November 27, 1990 is hereby declared null and required disclosure did not include the following:
void. Costs against the defendant.
à [T]he percentage of Finance Charges to Total Amount Financed (Computed in
SO ORDERED.18 accordance with Sec. 2(i) of CB Circular 158; the Additional Charges in case certain
stipulations in the contract are not met by the debtor; Total Non-Finance Charges; Total
Finance Charges, Effective Interest Rate, etc. à20
DBP appealed the decision to the Court of Appeals (CA) wherein it made the following
assignment of errors:
Arcilla further posits that the failure of DBP to comply with its obligation under R.A. No. (7) the percentage that the finance charge bears to the total amount to be
3765 and CB Circular No. 158 forecloses its right to rescind the transaction between financed expressed as a simple annual rate on the outstanding unpaid balance of
them, and to demand compliance of his obligation arising from said transaction. the obligation.
Moreover, the bank had no right to deduct the monthly amortizations from his salary
without first complying with the mandate of R.A. No. 3765. Under Circular No. 158 of the Central Bank, the information required by R.A. No. 3765
shall be included in the contract covering the credit transaction or any other document to
DBP, on the other hand, avers that all the information required by R.A. No. 3765 was be acknowledged and signed by the debtor, thus:
already contained in the loan transaction documents. It posits that even if it failed to
comply strictly with the disclosure requirement of R.A. No. 3765, nevertheless, under The contract covering the credit transaction, or any other document to be acknowledged
Section 6(b) of the law, the validity and enforceability of any action or transaction is not and signed by the debtor, shall indicate the above seven items of information. In addition,
affected. It asserts that Arcilla was estopped from invoking R.A. No. 3765 because he the contract or document shall specify additional charges, if any, which will be collected in
failed to demand compliance with R.A. No. 3765 from the bank before the consummation case certain stipulations in the contract are not met by the debtor.
of the loan transaction, until the time his complaint was filed with the trial court.
Furthermore, the contract or document shall specify additional charges, if any, which will
In its petition in G.R. No. 161397, DBP asserts that the RTC erred in not rendering be collected in case certain stipulations in the contract are not met by the debtor.21
judgment on its counterclaim for the possession of the subject property, and the liability of
Arcilla for rentals while in the possession of the property after the notarial rescission of the
If the borrower is not duly informed of the data required by the law prior to the
deeds of conditional sale. For his part, Arcilla (in G.R. No. 161426) insists that the
consummation of the availment or drawdown, the lender will have no right to collect such
respondent failed to comply with its obligation under R.A. No. 3765; hence, the notarial
charge or increases thereof, even if stipulated in the promissory note.22 However, such
rescission of the deed of conditional sale and the supplement thereof was null and void.
failure shall not affect the validity or enforceability of any contract or transaction.23
Until DBP complies with its obligation, he is not obliged to comply with his.

The petition of Arcilla has no merit. In the present case, DBP failed to disclose the requisite information in the disclosure
statement form authorized by the Central Bank, but did so in the loan transaction
documents between it and Arcilla. There is no evidence on record that DBP sought to
Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, collect or collected any interest, penalty or other charges, from Arcilla other than those
the bank, as creditor, is obliged to furnish a client with a clear statement, in writing, setting disclosed in the said deeds/documents.1avvphi1.zw+
forth, to the extent applicable and in accordance with the rules and regulations prescribed
by the Monetary Board of the Central Bank of the Philippines, the following information:
The Court is convinced that Arcilla's claim of not having been furnished the
data/information required by R.A. No. 3765 and CB Circular No. 158 was but an
(1) the cash price or delivered price of the property or service to be acquired; afterthought. Despite the notarial rescission of the conditional sale in 1990, and DBP's
subsequent repeated offers to repurchase the property, the latter maintained his silence.
(2) the amounts, if any, to be credited as down payment and/or trade-in; Arcilla filed his complaint only on February 21, 1994, or four years after the said notarial
rescission. The Court finds and so holds that the following findings and ratiocinations of
(3) the difference between the amounts set forth under clauses (1) and (2); the CA are correct:

(4) the charges, individually itemized, which are paid or to be paid by such After a careful perusal of the records, We find that the appellee had been sufficiently
person in connection with the transaction but which are not incident to the informed of the terms and the requisite charges necessarily included in the subject loan. It
extension of credit; must be stressed that the Truth in Lending Act (R.A. No. 3765), was enacted primarily "to
protect its citizens from a lack of awareness of the true cost of credit to the user
(5) the total amount to be financed;
by using a full disclosure of such cost with a view of preventing the uninformed use of
credit to the detriment of the national economy" (Emata vs. Intermediate Appellate Court,
(6) the finance charges expressed in terms of pesos and centavos; and
174, SCRA 464 [1989]; Sec. 2, R.A. No. 3765). Contrary to appellee's claim that he was
not sufficiently informed of the details of the loan, the records disclose that the required
informations were readily available in the three (3) promissory notes he executed.
Precisely, the said promissory notes were executed to apprise appellee of the remaining
balance on his loan when the same was converted into a regular housing loan. And on its
face, the promissory notes signed by no less than the appellee readily shows all the data
required by the Truth in Lending Act (R.A. No. 3765).

Apropos, We agree with the appellant that appellee, a lawyer, would not be so gullible or
negligent as to sign documents without knowing fully well the legal implications and
consequences of his actions, and that appellee was a former employee of appellant. As
such employee, he is as well presumed knowledgeable with matters relating to appellant's
business and fully cognizant of the terms of the loan he applied for, including the charges
that had to be paid.

It might have been different if the borrower was, say, an ordinary employee eager to buy
his first house and is easily lured into accepting onerous terms so long as the same is
payable on installments. In such cases, the Court would be disposed to be stricter in the
application of the Truth in Lending Act, insisting that the borrower be fully informed of
what he is entering into. But in the case at bar, considering appellee's education and
training, We must hold, in the light of the evidence at hand, that he was duly informed of
the necessary charges and fully understood their implications and effects. Consequently,
the trial court's annulment of the rescission anchored on this ground was unjustified.24

Anent the prayer of DBP to order Arcilla to vacate the property and pay rentals therefor
from 1990, a review of the records has shown that it failed to adduce evidence on the
reasonable amount of rentals for Arcilla's occupancy of the property. Hence, the Court
orders a remand of the case to the court of origin, for the parties to adduce their
respective evidence on the bank's counterclaim.

IN LIGHT OF ALL THE FOREGOING, the petition in G.R. No. 161426 is DENIED for lack
of merit. The petition in G.R. No. 161397 is
PARTIALLY GRANTED. The case is hereby REMANDED to the Regional Trial Court of
Antipolo, Rizal, Branch 73, for it to resolve the counterclaim of the Development Bank of
the Philippines for possession of the property, and for the reasonable rentals for Felipe P.
Arcilla, Jr.'s occupancy thereof after the notarial rescission of the Deed of Conditional
Sale in 1990.

Costs against petitioner Felipe P. Arcilla, Jr.

SO ORDERED.
 In the pre-trial conference, the parties agreed to limit the issue to whether or not the
period within which the bank was placed under receivership and liquidation was a
G.R. No. 135706 October 1, 2004 fortuitous event which suspended the running of the ten-year prescriptive period in
bringing actions.8
SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners,
vs. On April 17, 1998, the RTC rendered its decision, the fallo of which reads:
PHILIPPINE VETERANS BANK, respondent.
WHEREFORE, premises considered judgment is hereby rendered dismissing the
DECISION complaint for lack of merit. Likewise the compulsory counterclaim of defendant is
dismissed for being unmeritorious.9
AUSTRIA-MARTINEZ, J.:
It reasoned that:
Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu
City, Branch 24, dated April 17, 1998,1 and the order denying petitioner’s motion for …defendant bank was placed under receivership by the Central Bank from April
reconsideration dated August 25, 1998, raising pure questions of law.2 1985 until 1992. The defendant bank was given authority by the Central Bank to
operate as a private commercial bank and became fully operational only on
August 3, 1992. From April 1985 until July 1992, defendant bank was restrained
The following facts are uncontroverted: from doing its business. Doing business as construed by Justice Laurel in 222
SCRA 131 refers to:
On March 3, 1980, petitioner spouses contracted a monetary loan with
respondent Philippine Veterans Bank in the amount of ₱135,000.00, evidenced "….a continuity of commercial dealings and arrangements and
by a promissory note, due and demandable on February 27, 1981, and secured contemplates to that extent, the performance of acts or words or the
by a Real Estate Mortgage executed on their lot together with the improvements exercise of some of the functions normally incident to and in progressive
thereon. prosecution of the purpose and object of its organization."

On March 23, 1985, the respondent bank went bankrupt and was placed under The defendant bank’s right to foreclose the mortgaged property prescribes in ten
receivership/liquidation by the Central Bank from April 25, 1985 until August (10) years but such period was interrupted when it was placed under
1992.3 receivership. Article 1154 of the New Civil Code to this effect provides:

On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter "The period during which the obligee was prevented by a fortuitous
for "accounts receivable in the total amount of ₱6,345.00 as of August 15, 1984,"4 which event from enforcing his right is not reckoned against him."
pertains to the insurance premiums advanced by respondent bank over the mortgaged
property of petitioners.5
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the
Supreme Court said.
On August 23, 1995, more than fourteen years from the time the loan became due and
demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of
petitioners’ property.6 On October 18, 1995, the property was sold in a public auction by "Having arrived at the conclusion that a foreclosure is part of a bank’s activity
Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder. which could not have been pursued by the receiver then because of the
circumstances discussed in the Central Bank case, we are thus convinced that
the prescriptive period was legally interrupted by fuerza mayor in 1972 on
On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the account of the prohibition imposed by the Monetary Board against petitioner from
extra-judicial foreclosure and the subsequent sale thereof to respondent bank null and transacting business, until the directive of the Board was nullified in 1981.
void.7 Indeed, the period during which the obligee was prevented by a caso fortuito
from enforcing his right is not reckoned against him. (Art. 1154, NCC) When
 prescription is interrupted, all the benefits acquired so far from the possession Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was
cease and when prescription starts anew, it will be entirely a new one. This effected by the bank on October 18, 1995, which was fourteen years from the date the
concept should not be equated with suspension where the past period is included obligation became due on February 27, 1981, said foreclosure and the subsequent sale
in the computation being added to the period after the prescription is presumed at public auction should be set aside and declared null and void ab initio since they are
(4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the already barred by prescription; the court a quo erred in sustaining the respondent’s theory
Philippines 1991 ed. pp. 18-19), consequently, when the closure of the petitioner that its having been placed under receivership by the Central Bank between April 1985
was set aside in 1981, the period of ten years within which to foreclose under Art. and August 1992 was a fortuitous event that interrupted the running of the prescriptive
1142 of the N.C.C. began to run and, therefore, the action filed on August 21, period;13 the court a quo’s reliance on the case of Provident Savings Bank vs. Court of
1986 to compel petitioner to release the mortgage carried with it the mistaken Appeals14 is misplaced since they have different sets of facts; in the present case, a
notion that petitioner’s own suit for foreclosure has prescribed." liquidator was duly appointed for respondent bank and there was no judgment or court
order that would legally or physically hinder or prohibit it from foreclosing petitioners’
Even assuming that the liquidation of defendant bank did not affect its right to property; despite the absence of such legal or physical hindrance, respondent bank’s
foreclose the plaintiffs’ mortgaged property, the questioned extrajudicial receiver or liquidator failed to foreclose petitioners’ property and therefore such inaction
foreclosure was well within the ten (10) year prescriptive period. It is noteworthy should bind respondent bank;15 foreclosure of mortgages is part of the
to mention at this point in time, that defendant bank through authorized Deputy receiver’s/liquidator’s duty of administering the bank’s assets for the benefit of its
Francisco Go made the first extrajudicial demand to the plaintiffs on August depositors and creditors, thus, the ten-year prescriptive period which started on February
1985. Then on March 24, 1995 defendant bank through its officer-in-charge 27, 1981, was not interrupted by the time during which the respondent bank was placed
Llanto made the second extrajudicial demand. And we all know that a written under receivership; and the Monetary Board’s prohibition from doing business should not
extrajudicial demand wipes out the period that has already elapsed and starts be construed as barring any and all business dealings and transactions by the bank,
anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)10 otherwise, the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as
amended by Executive Order No. 65 would be rendered nugatory.16 Said provision reads:
Petitioners filed a motion for reconsideration which the RTC denied on August 25,
1998.11 Thus, the present petition for review where petitioners claim that the RTC erred: Section 29. Proceedings upon Insolvency – Whenever, upon examination by the
head of the appropriate supervising or examining department or his examiners or
agents into the condition of any bank or non-bank financial intermediary
I
performing quasi-banking functions, it shall be disclosed that the condition of the
same is one of insolvency, or that its continuance in business would involve
…IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT probable loss to its depositors or creditors, it shall be the duty of the department
BANK WAS PUT UNDER RECEIVERSHIP AND LIQUIDATION WAS A head concerned forthwith, in writing, to inform the Monetary Board of the facts.
FORTUITOUS EVENT THAT INTERRUPTED THE RUNNING OF THE The Board may, upon finding the statements of the department head to be true,
PRESCRIPTIVE PERIOD. forbid the institution to do business in the Philippines and designate the official of
the Central Bank or a person of recognized competence in banking or finance, as
II receiver to immediately take charge its assets and liabilities, as expeditiously as
possible, collect and gather all the assets and administer the same for the benefit
…IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND of its creditors, and represent the bank personally or through counsel as he may
MADE BY RESPONDENT ON PETITIONERS WIPED OUT THE retain in all actions or proceedings for or against the institution, exercising all the
PERIOD THAT HAD ALREADY ELAPSED. powers necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank.
III
Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after
the ten-year prescriptive period, thus it cannot be deemed to have revived a period that
…IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION has already elapsed; it is also not one of the instances enumerated by Art. 1115 of the
OF ITS HEREIN ASSAILED DECISION.12 Civil Code when prescription is interrupted;17 and the August 23, 1985 letter by Francisco
Go demanding ₱6,345.00, refers to the insurance premium on the house of petitioners,
advanced by respondent bank, thus such demand letter referred to another obligation and
could not have the effect of interrupting the running of the prescriptive period in favor of While it is true that foreclosure falls within the broad definition of "doing business," that is:
herein petitioners insofar as foreclosure of the mortgage is concerned.18
…a continuity of commercial dealings and arrangements and contemplates to
Petitioners then prayed that respondent bank be ordered to pay them ₱100,000.00 as that extent, the performance of acts or words or the exercise of some of the
moral damages, ₱50,000.00 as exemplary damages and ₱100,000.00 as attorney’s functions normally incident to and in progressive prosecution of the purpose and
fees.19 object of its organization.23

Respondent for its part asserts that: the period within which it was placed under it should not be considered included, however, in the acts prohibited whenever banks are
receivership and liquidation was a fortuitous event that interrupted the running of the "prohibited from doing business" during receivership and liquidation proceedings.
prescriptive period for the foreclosure of petitioners’ mortgaged property; within such
period, it was specifically restrained and immobilized from doing business which includes This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board,
foreclosure proceedings; the extra-judicial demand it made on March 24, 1995 wiped out Central Bank of the Philippines24 where we explained that:
the period that has already lapsed and started anew the prescriptive period; respondent
through its authorized deputy Francisco Go made the first extra-judicial demand on the
Section 29 of the Republic Act No. 265, as amended known as the Central Bank
petitioners on August 23, 1985; while it is true that the first demand letter of August 1985
Act, provides that when a bank is forbidden to do business in the Philippines and
pertained to the insurance premium advanced by it over the mortgaged property of
placed under receivership, the person designated as receiver shall immediately
petitioners, the same however formed part of the latter’s total loan obligation with
take charge of the bank’s assets and liabilities, as expeditiously as possible,
respondent under the mortgage instrument and therefore constitutes a valid extra-judicial
demand made within the prescriptive period.20 collect and gather all the assets and administer the same for the benefit of its
creditors, and represent the bank personally or through counsel as he may retain
in all actions or proceedings for or against the institution, exercising all the
In their Reply, petitioners reiterate their earlier arguments and add that it was respondent powers necessary for these purposes including, but not limited to, bringing and
that insured the mortgaged property thus it should not pass the obligation to petitioners foreclosing mortgages in the name of the bank.25
through the letter dated August 1985.21
This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles
To resolve this petition, two questions need to be answered: (1) Whether or not the period and preserve the assets of the bank in substitution of its former management, and
within which the respondent bank was placed under receivership and liquidation prevent the dissipation of its assets to the detriment of the creditors of the bank.26
proceedings may be considered a fortuitous event which interrupted the running of the
prescriptive period in bringing actions; and (2) Whether or not the demand letter sent by
respondent bank’s representative on August 23, 1985 is sufficient to interrupt the running When a bank is declared insolvent and placed under receivership, the Central Bank,
of the prescriptive period. through the Monetary Board, determines whether to proceed with the liquidation or
reorganization of the financially distressed bank. A receiver, who concurrently represents
the bank, then takes control and possession of its assets for the benefit of the bank’s
Anent the first issue, we answer in the negative. creditors. A liquidator meanwhile assumes the role of the receiver upon the determination
by the Monetary Board that the bank can no longer resume business. His task is to
One characteristic of a fortuitous event, in a legal sense and consequently in relations to dispose of all the assets of the bank and effect partial payments of the bank’s obligations
contract, is that its occurrence must be such as to render it impossible for a party to fulfill in accordance with legal priority. In both receivership and liquidation proceedings, the
his obligation in a normal manner.22 bank retains its juridical personality notwithstanding the closure of its business and may
even be sued as its corporate existence is assumed by the receiver or liquidator. The
Respondent’s claims that because of a fortuitous event, it was not able to exercise its receiver or liquidator meanwhile acts not only for the benefit of the bank, but for its
right to foreclose the mortgage on petitioners’ property; and that since it was banned from creditors as well.27
pursuing its business and was placed under receivership from April 25, 1985 until August
1992, it could not foreclose the mortgage on petitioners’ property within such period since In Provident Savings Bank vs. Court of Appeals,28 we further stated that:
foreclosure is embraced in the phrase "doing business," are without merit.
 When a bank is prohibited from continuing to do business by the Central Bank Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein
and a receiver is appointed for such bank, that bank would not be able to do new respondent to deter its receiver and liquidator from performing their obligations under the
business, i.e., to grant new loans or to accept new deposits. However, the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar.
receiver of the bank is in fact obliged to collect debts owing to the bank,
which debts form part of the assets of the bank. The receiver must There is also no truth to respondent’s claim that it could not continue doing business from
assemble the assets and pay the obligation of the bank under receivership, the period of April 1985 to August 1992, the time it was under receivership. As correctly
and take steps to prevent dissipation of such assets. Accordingly, the pointed out by petitioner, respondent was even able to send petitioners a demand letter,
receiver of the bank is obliged to collect pre-existing debts due to the bank, through Francisco Go, on August 23, 1985 for "accounts receivable in the total amount of
and in connection therewith, to foreclose mortgages securing such ₱6,345.00 as of August 15, 1984" for the insurance premiums advanced by respondent
debts.29 (Emphasis supplied.) bank over the mortgaged property of petitioners. How it could send a demand letter on
unpaid insurance premiums and not foreclose the mortgage during the time it was
It is true that we also held in said case that the period during which the bank was placed "prohibited from doing business" was not adequately explained by respondent.
under receivership was deemed fuerza mayor which validly interrupted the prescriptive
period.30 This is being invoked by the respondent and was used as basis by the trial court Settled is the principle that a bank is bound by the acts, or failure to act of its
in its decision. Contrary to the position of the respondent and court a quo however, such receiver.34 As we held in Philippine Veterans Bank vs. NLRC,35 a labor case which also
ruling does not find application in the case at bar. involved respondent bank,

A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, … all the acts of the receiver and liquidator pertain to petitioner, both having
which is an exception to the general rule, due to the peculiar circumstances of Provident assumed petitioner’s corporate existence. Petitioner cannot disclaim liability by
Savings Bank at the time. In said case, we stated that: arguing that the non-payment of MOLINA’s just wages was committed by the
liquidators during the liquidation period.36
Having arrived at the conclusion that a foreclosure is part of a bank’s business
activity which could not have been pursued by the receiver then because of However, the bank may go after the receiver who is liable to it for any culpable or
the circumstances discussed in the Central Bank case, we are thus negligent failure to collect the assets of such bank and to safeguard its assets. 37
convinced that the prescriptive period was legally interrupted by fuerza mayor in
1972 on account of the prohibition imposed by the Monetary Board against
Having reached the conclusion that the period within which respondent bank was placed
petitioner from transacting business, until the directive of the Board was nullified
in 1981.31 (Emphasis supplied.) under receivership and liquidation proceedings does not constitute a fortuitous event
which interrupted the prescriptive period in bringing actions, we now turn to the second
issue on whether or not the extra-judicial demand made by respondent bank, through
Further examination of the Central Bank case reveals that the circumstances of Provident Francisco Go, on August 23, 1985 for the amount of ₱6,345.00, which pertained to the
Savings Bank at the time were peculiar because after the Monetary Board issued MB insurance premiums advanced by the bank over the mortgaged property, constitutes a
Resolution No. 1766 on September 15, 1972, prohibiting it from doing business in the valid extra-judicial demand which interrupted the running of the prescriptive period. Again,
Philippines, the bank’s majority stockholders immediately went to the Court of First we answer this question in the negative.
Instance of Manila, which prompted the trial court to issue its judgment dated February
20, 1974, declaring null and void the resolution and ordering the Central Bank to desist
Prescription of actions is interrupted when they are filed before the court, when there is a
from liquidating Provident. The decision was appealed to and affirmed by this Court in
written extra-judicial demand by the creditors, and when there is any written
1981. Thus, the Superintendent of Banks, which was instructed to take charge of the
acknowledgment of the debt by the debtor.38
assets of the bank in the name of the Monetary Board, had no power to act as a receiver
of the bank and carry out the obligations specified in Sec. 29 of the Central Bank Act. 32
Respondent’s claim that while its first demand letter dated August 23, 1985 pertained to
the insurance premium it advanced over the mortgaged property of petitioners, the same
In this case, it is not disputed that Philippine Veterans Bank was placed under
formed part of the latter’s total loan obligation with respondent under the mortgage
receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364
instrument, and therefore, constitutes a valid extra-judicial demand which interrupted the
on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of
running of the prescriptive period, is not plausible.
banks.33
The real estate mortgage signed by the petitioners expressly states that: WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April
17, 1998, and the order denying petitioners’ motion for reconsideration dated August 25,
This mortgage is constituted by the Mortgagor to secure the payment of the loan 1998 are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real
and/or credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and estate mortgage on October 18, 1995, is hereby declared null and void and respondent is
Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND ordered to return to petitioners their owner’s duplicate certificate of title.
(₱135,000.00) PESOS ONLY Philippine Currency in favor of the herein
Mortgagee.39 Costs against respondent.

The promissory note, executed by the petitioners, also states that: SO ORDERED.

…FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO

PAY THE PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT
CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS
(P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF
FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY
PAID.40

Considering that the mortgage contract and the promissory note refer only to the loan of
petitioners in the amount of ₱135,000.00, we have no reason to hold that the insurance
premiums, in the amount of ₱6,345.00, which was the subject of the August 1985
demand letter, should be considered as pertaining to the entire obligation of petitioners.

In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,41 we held that the
notices of foreclosure sent by the mortgagee to the mortgagor cannot be considered
tantamount to written extrajudicial demands, which may validly interrupt the running of the
prescriptive period, where it does not appear from the records that the notes are covered
by the mortgage contract.42

In this case, it is clear that the advanced payment of the insurance premiums is not part of
the mortgage contract and the promissory note signed by petitioners. They pertain only to
the amount of ₱135,000.00 which is the principal loan of petitioners plus interest. The
arguments of respondent bank on this point must therefore fail.

As to petitioners’ claim for damages, however, we find no sufficient basis to award the
same. For moral damages to be awarded, the claimant must satisfactorily prove the
existence of the factual basis of the damage and its causal relation to defendant’s
acts.43 Exemplary damages meanwhile, which are imposed as a deterrent against or as a
negative incentive to curb socially deleterious actions, may be awarded only after the
claimant has proven that he is entitled to moral, temperate or compensatory
damages.44 Finally, as to attorney’s fees, it is demanded that there be factual, legal and
equitable justification for its award.45 Since the bases for these claims were not
adequately proven by the petitioners, we find no reason to grant the same.
G.R. No. L-46208 April 5, 1990 private respondents, as plaintiffs, the amended complaint was dismissed without
prejudice against defendants Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and
FIDELITY SAVINGS AND MORTGAGE BANK, petitioner, Ernani A. Pacana. 2 In its aforesaid decision of December 3, 1976, the court a
vs. quo dismissed the complaint as against defendants Central Bank of the Philippines,
HON. PEDRO D. CENZON, in his capacity as Presiding Judge of the Court of First Eusebio Lopez, Jr., Arsenio S. Lopez, Jr., Arsenio M. Lopez, Sr. and Bibiana S. Lacuna.
Instance of Manila (Branch XL) and SPOUSES TIMOTEO AND OLIMPIA
SANTIAGO, respondents. Back on August 10, 1973, the plaintiffs (herein private respondents) and the defendants
Fidelity Savings and Mortgage Bank (petitioner herein), Central Bank of the Philippines
Agapito S. Fajardo and Marino E. Eslao for petitioner. and Bibiana E. Lacuna had filed in said case in the lower court a partial stipulation of
Leovillo C. Agustin Law Offices for private respondents. facts, as follows:

COME NOW herein plaintiffs, SPOUSES TIMOTEO M. SANTIAGO and

OLIMPIA R. SANTIAGO, herein defendants FIDELITY SAVINGS AND
MORTGAGE BANK and the CENTRAL BANK OF THE PHILIPPINES, and
herein defendant BIBIANA E. LACUNA, through their respective undersigned
REGALADO, J.:
counsel, and before this Honorable Court most respectfully submit the following
Partial Stipulation of Facts:
The instant petition seeks the review, on pure questions of law, of the decision rendered
by the Court of First Instance of Manila (now Regional Trial Court), Branch XL, on
1. That herein plaintiffs are husband and wife, both of legal age, and presently
December 3, 1976 in Civil Case No. 84800,1 ordering herein petitioner to pay private residing at No. 480 C. de la Paz Street, Sta. Elena, Marikina, Rizal;
respondents the following amounts:
2. That herein defendant Fidelity Savings and Mortgage Bank is a corporation
(a) P90,000.00 with accrued interest in accordance with Exhibits A and B until duly organized and existing under and by virtue of the laws of the Philippines;
fully paid;
that defendant Central Bank of the Philippines is a corporation duly organized
and existing under and by virtue of the laws of the Philippines;
(b) P30,000,00 as exemplary damages; and
3. That herein defendant Bibiana E. Lacuna is of legal age and a resident of No.
(c) P10,000.00 as and for attorney's fees. 42 East Lawin Street, Philamlife Homes, Quezon City, said defendant was an
assistant Vice-President of the defendant fidelity Savings and Mortgage Bank,
The payment by the defendant Fidelity Savings and Mortgage Bank of the
aforementioned sums of money shall be subject to the Bank Liquidation Rules and 4. That sometime on May 16, 1968, here in plaintiffs deposited with the
Regulations embodied in the Order of the Court of First Instance of Manila, Branch XIII, defendant Fidelity Savings Bank the amount of FIFTY THOUSAND PESOS
dated October 3, 1972, Civil Case No. 86005, entitled, "IN RE: Liquidation of the Fidelity (P50,000.00) under Savings Account No. 16-0536; that likewise, sometime on
Savings Bank versus Central Bank of the Philippines, Liquidator." July 6, 1968, herein plaintiff,- deposited with the defendant Fidelity Savings and
Mortgage Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under
With costs against the defendant Fidelity Savings and Mortgage Bank. Certificate of Time Deposit No. 0210; that the aggregate amount of deposits of
the plaintiffs with the defendant Fidelity Savings and Mortgage Bank is ONE
SO ORDERED. HUNDRED THOUSAND PESOS (P100,000.00);

Private respondents instituted this present action for a sum of money with damages 5. That on February 18, 1969, the Monetary Board, after finding the report of the
against Fidelity Savings and Mortgage Bank, Central Bank of the Philippines, Eusebio Superintendent of Banks, that the condition of the defendant Fidelity Savings and
Lopez, Jr., Arsenio M. Lopez, Sr., Arsenio S. Lopez, Jr., Bibiana E. Lacuna, Jose C. Mortgage Bank is one of insolvency, to be true, issued Resolution No. 350
Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. On motion of herein deciding, among others, as follows:
 1) To forbid the Fidelity Savings Bank to do business in the Philippines; Assigning error in the judgment of the lower court quoted ab antecedents, petitioner
raises two questions of law, to wit:
2) To instruct the Acting Superintendent of Banks to take charge, in the
name of the Monetary Board, of the Bank's assets 1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be
adjudged to pay interest on unpaid deposits even after its closure by the Central Bank by
6. That pursuant to the above-cited instructions of the Monetary Board, the reason of insolvency without violating the provisions of the Civil Code on preference of
Superintendent of Banks took charge in the name of the Monetary Board, of the credits; and
assets of defendant Fidelity Savings Bank on February 19, 1969; and that since
that date up to this date, the Superintendent of Banks (now designated as 2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be
Director, Department of Commercial and Savings Banks) has been taking charge adjudged to pay moral and exemplary damages, attorney's fees and costs when the
of the assets of defendant Fidelity Savings and Mortgage Bank; insolvency is caused b the anomalous real estate transactions without violating the
provisions of the Civil Code on preference of credits.
7. That sometime on October 10, 1969 the Philippine Deposit Insurance
Corporation paid the plaintiffs the amount of TEN THOUSAND PESOS There is merit in the petition.
(P10,000.00) on the aggregate deposits of P100,000.00 pursuant to Republic Act
No. 5517, thereby leaving a deposit balance of P90,000.00; It is settled jurisprudence that a banking institution which has been declared insolvent and
subsequently ordered closed by the Central Bank of the Philippines cannot be held liable
8. That on December 9, 1969, the Monetary Board issued its Resolution No. to pay interest on bank deposits which accrued during the period when the bank is
2124 directing the liquidation of the affairs of defendant Fidelity Savings Bank; actually closed and non-operational.

9. That on January 25, 1972, the Solicitor General of the Philippines filed a In The Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, 4 we held that:
"Petition for Assistance and Supervision in Liquidation" of the affairs of the
defendant Fidelity Savings and Mortgage Bank with the Court of First Instance of It is a matter of common knowledge, which We take judicial notice of, that what
Manila, assigned to Branch XIII and docketed as Civil Case No. 86005; enables a bank to pay stipulated interest on money deposited with it is that thru
the other aspects of its operation it is able to generate funds to cover the
10. That on October 3, 1972, the Liquidation Court promulgated the Bank Rules payment of such interest. Unless a bank can lend money, engage in international
and Regulations to govern the liquidation of the affairs of defendant Fidelity transactions, acquire foreclosed mortgaged properties or their proceeds and
Savings and Mortgage Bank, prescribing the rules on the conversion of the generally engage in other banking and financing activities from which it can
Bank's assets into money, processing of claims against it and the manner and derive income, it is inconceivable how it can carry on as a depository obligated to
time of distributing the proceeds from the assets of the Bank; pay stipulated interest. Conventional wisdom dictates this inexorable fair and just
conclusion. And it can be said that all who deposit money in banks are aware of
11. That the liquidation proceedings has not been terminated and is still pending such a simple economic proposition. Consequently, it should be deemed read
up to the present; into every contract of deposit with a bank that the obligation to pay interest on the
deposit ceases the moment the operation of the bank is completely suspended
by the duly constituted authority, the Central Bank.
12. That herein plaintiffs, through their counsel, sent demand letters to herein
defendants, demanding the immediate payment of the aforementioned savings
and time deposits. This was reiterated in the subsequent case of The Overseas Bank of Manila vs. The Hon.
Court of Appeals and Julian R. Cordero. 5 and in the recent cases of Integrated Realty
Corporation, et al. vs. Philippine National Bank, et al. and the Overseas Bank of Manila
WHEREFORE, it is respectfully prayed that the foregoing Partial Stipulation of vs. Court of appeals, et al. 6
Facts be approved by this Honorable Court, without prejudice to the presentation
of additional documentary or testimonial evidence by herein parties.
From the aforecited authorities, it is manifest that petitioner cannot be held liable for
interest on bank deposits which accrued from the time it was prohibited by the Central
Manila, Philippines, August 10, 1973. 3
Bank to continue with its banking operations, that is, when Resolution No. 350 to that instant case would be violative of the legal provisions on preference and concurrence of
effect was issued on February 18, 1969. credits. As the trial court puts it:

The order, therefore, of the Central Bank as receiver/liquidator of petitioner bank allowing . . . But this order of payment should not be understood as raising these deposits
the claims of depositors and creditors to earn interest up to the date of its closure on to the category of preferred credits of the defendant Fidelity Savings and
February 18, 1969, 7 in line with the doctrine laid down in the jurisprudence above cited. Mortgage Bank but shall be paid in accordance with the Bank Liquidation Rules
and Regulations embodied in the Order of the. Court of First Instance of Manila,
Although petitioner's formulation of the second issue that it poses is slightly inaccurate Branch XIII dated October 3, 1972 (Exh. 3). . . . 14
and defective, we likewise find the awards of moral and exemplary damages and
attorney's fees to be erroneous. WHEREFORE, the judgment appealed from is hereby MODIFIED. Petitioner Fidelity
Savings and Mortgage Bank is hereby declared liable to pay private respondents Timoteo
The trial court found, and it is not disputed, that there was no fraud or bad faith on the part and Olimpia Santiago the sum of P90,000.00, with accrued interest in accordance with
of petitioner bank and the other defendants in accepting the deposits of private the terms of Savings Account Deposit No. 16-0536 (Exhibit A) and Certificate of Time
respondents. Petitioner bank could not even be faulted in not immediately returning the Deposit No. 0210 (Exhibit B) until February 18, 1969. The awards for moral and
amount claimed by private respondents considering that the demand to pay was made exemplary damages, and attorney's fees are hereby DELETED. No costs.
and Civil Case No. 84800 was filed in the trial court several months after the Central Bank
had ordered petitioner's closure. By that time, petitioner bank was no longer in a position SO ORDERED.
to comply with its obligations to its creditors, including herein private respondents. Even
the trial court had to admit that petitioner bank failed to pay private respondents because
it was already insolvent. 8 Further, this case is not one of the specified or analogous
cases wherein moral damages may be recovered. 9

There is no valid basis for the award of exemplary damages which is supposed to serve
as a warning to other banks from dissipating their assets in anomalous transactions. It
was not proven by private respondents, and neither was there a categorical finding made
by the trial court, that petitioner bank actually engaged in anomalous real estate
transactions. The same were raised only during the testimony of the bank examiner of the
Central Ban k, 10 but no documentary evidence was ever presented in support thereof.
Hence, it was error for the lower court to impose exemplary damages upon petitioner
bank since, in contracts, such sanction requires that the offending party acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. 11 Neither does this case
present the situation where attorney's fees may be awarded. 12

In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may,
therefore, not be held responsible for damages which may be reasonably attributed to the
non-performance of the obligation. 13 Consequently, we reiterate that under the premises
and pursuant to the aforementioned provisions of law, it is apparent that private
respondents are not justifiably entitled to the payment of moral and exemplary damages
and attorney's fees.

While we tend to agree with petitioner bank that private respondents' claims should he
been filed in the liquidation proceedings in Civil Case No. 86005, entitled "In Re:
Liquidation of the Fidelity Savings and Mortgage Bank," pending before Branch XIII of the
then Court of First Instance of Manila, we do not believe that the decision rendered in the
 G.R. No. 213241, August 01, 2016 his name because the owner's copy of the certificate of title was not turned
over to him by the Sheriff.
PHILIPPINE NATIONAL BANK, Petitioner, v. JUAN F. VILA, Respondent.
Despite the lapse of the redemption period and the fact of issuance of a
Certificate of Final Sale to Vila, the Spouses Cormsta were nonetheless
PEREZ, J.:
allowed to buy back the subject property by tendering the amount of
P50,000.00. A Certificate of Redemption7 dated 14 March 1989 was issued for
For resolution of the Court is the instant Petition for Review on Certiorari1 filed this purpose and was duly annotated in the title under Entry No. 708261.
by petitioner Philippine National Bank (PNB), seeking to reverse and set aside
the Decision2 dated 18 December 2013 and Resolution3 dated 13 June 2014 of Claiming that the Spouses Cornista already lost their right to redeem the
the Court of Appeals (CA) in CA-G.R. CV No. 97612. The assailed decision and subject property, Vila filed an action for nullification of redemption, transfer of
resolution affirmed the 22 June 2011 Decision4 of the Regional Trial- Court title and damages against the Spouses Cornista and Alfredo Vega in his
(RTC) of Villasis, Pangasinan, Branch 50 which found that petitioner PNB is capacity as the Register of Deeds of Pangasinan. The case was docketed
not a mortgagee in good faith. as Civil Case No. V-0242 on 10 January 1992 and was raffled to Branch 50. A
Notice of Lis Pendens was issued for this purpose and was duly recorded in
The Facts the certificate of title of the property on 19 October 1992 under Entry No.
759302.8chanrobleslaw
Petitioner PNB is a universal banking corporation duly authorized by Bangko
Sentral ng Pilipinas (BSP) to engage in banking business. On 3 February 1995, the RTC rendered a Decision9 in Civil Case No. V-0242 in
favor of Vila thereby ordering the Register of Deeds to cancel the registration
Sometime in 1986, Spouses Reynaldo Cormsta and Erlinda Gamboa Cornista of the certificate of redemption and the annotation thereof on TCT No.
(Spouses Cornista) obtained a loan from Traders Royal Bank (Traders 131498. The said decision was affirmed by the CA on 19 October 1997 in CA-
Bank).5 To secure the said obligation, the Spouses Cornista mortgaged to the G.R. CV No. 49463.10 The decision of the appellate court became final and
bank a parcel of land with an area of 451 square meters designated as Lot executory on 19 November 1997.
555-A-2 and registered under Transfer Certificate of Title (TCT) No. 131498 in
their names by the Register of Deeds of Pangasinan. In order to enforce the favorable decision, Vila filed before the RTC a Motion
for the Issuance of Writ of Execution which was granted by the court.
For failure of the Spouses Cornista to make good of their loan obligation after Accordingly, a Writ of Execution11 was issued by the RTC on 14 December
it has become due, Traders Bank foreclosed the mortgage constituted on the 1997.
security of the loan. After the notice and publication requirements were
complied with, the subject property was sold at the public auction on 23 By unfortunate turn of events, the Sheriff could not successfully enforce the
December 1987. During the public sale, respondent Juan F. Vila (Vila) was decision because the certificate of title covering the subject property was no
declared as the highest bidder after he offered to buy the subject property for longer registered under the names of the Spouses Cornista. Hence, the
P50,000.00. The Certificate of Sale dated 13 January 1988 was duly recorded judgment was returned unsatisfied as shown in Sheriffs Return12 dated 13 July
in TCT No. 131498 under Entry No. 623599.6chanrobleslaw 1999.

To exercise his right of ownership, Vila immediately took possession of the Upon investigation it was found out that during the interregnum the Spouses
subject property and paid the real estate taxes corresponding thereon. Cornista were able to secure a loan from the PNB in the amount of
P532,000.00 using the same property subject of litigation as security. The
On 11 February 1989, a Certificate of Final Sale was issued to Vila after the Real Estate Mortgage (REM) was recorded on 28 September 1992
one-year redemption period had passed without the Spouses Cornista under Entry No. 75817113 or month before the Notice of Lis Pendens was
exercising their statutory right to redeem the subject property. He was, annotated.
however, prevented from consolidating the ownership of the property under
Eventually, the Spouses Cornista defaulted in the payment of their loan status of a mortgaged property. The dispositive portion of the decision
obligation with the PNB prompting the latter to foreclose the property offered reads:ChanRoblesVirtualawlibrary
as security. The bank emerged as the highest bidder during the public sale as "WHEREFORE, judgment is hereby rendered:
shown at the Certificate of Sale issued by the Sheriff. As with the prior
mortgage, the Spouses Cornista once again failed to exercise their right of 1. Declaring the Real Estate Mortgage dated September 28, 1992,
redemption within the required period allowing PNB to consolidate its executed by the Spouses Reynaldo Cornista and Erlinda
ownership over the subject property. Accordingly, TCT No. 13149814 in the Gamboa in favor of the Philippine National Bank, Tayug,
name of the Spouses Cornista was cancelled and a new one under TCT No. Pangasinan Branch, over the parcel of land covered by TCT No.
21677115 under the name of the PNB was issued. 131498 null and void;

The foregoing turn of events left Vila with no other choice but to commence 2. Declaring the Deed of Sale dated September 27, 1996, in favor
another round of litigation against the Spouses Cornista and PNB before the of the PNB null and void;
RTC of Viliasis, Pangasinan, Branch 50. In his Complaint docketed as Civil
Case No. V-0567, Vila sought for the nullification of TCT No. 216771 issued 3. Ordering the nullification and cancellation of Transfer
under the name of PNB and for the payment of damages. Certificate of Title No. 216771 in the name of PNB;

To refute the allegations of Vila, PNB pounded that it was a mortgagee in good 4. Ordering the Register of Deeds of Pangasinan to issue a new
faith pointing the fact that at the time the subject property was mortgaged to certificate of title covering the property subject matter of this
it, the same was still free from any liens and encumbrances and the Notice case in the name-of Juan F. Vila; and cralawlawlibrary
of Lis Pendens was registered only a month after the REM was annotated on
the title. PNB meant to say that at the time of the transaction, the Spouses 5. Ordering [the] defendant PNB to pay the plaintiff P50,000.00
Cornista were still the absolute owners of the property possessing all the moral damages, P50,000.00 exemplary damages and
rights to mortgage the same to third persons. PNB also harped on the fact P100,000.00 attorney's fees and litigation expenses.
that a close examination of title was conducted and nowhere was it shown
that there was any cloud in the title of the Spouses Cornista, the latter having
Costs against defendant Philippine National Bank.
redeemed the property after they have lost it in a foreclosure
sale.16chanrobleslaw
SO ORDERED."18chanroblesvirtuallawlibrary
In a Resolution19 dated 13 June 2014, the RTC refused to reconsider its earlier
After the Pre-Trial Conference, trial on the merits ensued. The court a
decision and thereby denied the Motion for Reconsideration interposed by
quo then proceeded to receive documentary and testimonial evidence from
PNB.
the opposing parties. Thereafter, the parties submitted their respective
memorandum and the case was submitted for decision.
On appeal, the CA Decision20 dated 18 December 2013 affirmed the RTC
ruling. In failing to exercise greater care and diligence in approving the loan of
On 22 June 2011, the RTC rendered a Decision17 in favor of Vila and ruled that
the Spouses Cornista without first ascertaining if there were any defects in
PNB is not a mortgagee in good faith. As a financial institution, the trial court
their title, the appellate court held that PNB could not be afforded the status
held that PNB is expected to observe a higher degree of diligence. In hastily
of a mortgagee in good faith. It went further by declaring that [a] bank whose
granting the loan, the trial court declared that PNB failed in this regard. Had
business is impressed with public interest is expected to exercise more care
the bank exercised due diligence, it could have easily discovered that the
and prudence in its dealings than a private individual, even in cases involving
Spouses Cornista were not the possessors of the subject property which could
registered lands. A bank cannot assume that, simply because the title offered
lead it to the fact that at the time the subject property was mortgaged to it, a
as security is on its face free of any encumbrances of lien, it is relieved of the
litigation involving the same was already commenced before the court. It was
responsibility of taking further steps to verify the title and inspect the
further ratiocinated by the RTC that "[a] mortgagee cannot close his eyes to
properties to be mortgaged.21 The CA thus
facts which should put a reasonable man upon his guard" in ascertaining the
disposed:ChanRoblesVirtualawlibrary
"WHEREFORE, the instant appeal is DENIED. The assailed Decision dated
June 22, 2011 and the Resolution dated August 11, 2011 of the Regional Trial Resonating the findings of the RTC, the CA also declared that PNB fell short in
Court of Villasis, Pangasinan, Branch 50, in Civil Case No, V-0567 are exercising the degree of diligence expected from bank and financial
hereby AFFIRMED."22chanroblesvirtuallawlibrary Institutions. We hereby quote with approval the disquisition of the appellate
On 13 June 2014, the CA issued a Resolution23 denying the Motion for court:ChanRoblesVirtualawlibrary
Reconsideration of the PNB prompting the bank to seek recourse before the Thus, before approving a loan application, it is a standard operating practice
Court via instant Petition for Review on Certiorari. For Our resolution are the for these institutions to conduct an ocular inspection of the property offered
following issues:ChanRoblesVirtualawlibrary for mortgage and to verify the genuineness of the title to determine the real
The Issues owner thereof. The apparent purpose of an ocular inspection is to protect the
"true owner" of the property as well as innocent third parties with a right,
I. interest or claim thereon from a usurper who may have acquired a fraudulent
certificate of title thereto. Here, [the] PNB has failed to exercise the requisite
WHETHER OR NOT PNB IS A MORTGAGEE IN GOOD FAITH; due diligence in ascertaining the status and condition of the property being
offered to it as security for the loan before it approved the same.
II xxx.27chanroblesvirtuallawlibrary
Clearly, the PNB failed to observe the exacting standards required of banking
WHETHER OR NOT PNB IS LIABLE FOR DAMAGES.24chanroblesvirtuallawlibrary institutions which are behooved by statutes and jurisprudence to exercise
The Court's Ruling greater care and prudence before entering into a mortgage contract.

We resolve to deny the petition. No credible proof on the records could substantiate the claim of PNB that a
physical inspection of the property was conducted. We agree with, bbth the
In general, the issue of whether a mortgagee is in good faith cannot be RTC and CA that if in fact it were true that ocular inspection was conducted, a
entertained in a Rule 45 petition. This is because the ascertainment of good suspicion could have been raised as to the real status of property. By failing to
faith or the lack thereof, and the determination of negligence are factual uncover a crucial fact that the mortgagors were not the possessors of the
matters which lay outside the scope of a petition for review on certiorari. Good subject property. We could not lend credence to claim of the bank that an
faith, or the lack of it, is a question of intention. In ascertaining intention, ocular inspection of the property was conducted. What further tramples upon
courts are necessarily controlled by the evidence as to the conduct and PNB's claim is the fact that, as shown on the records, it was Vila who was
outward facts by which alone the inward motive may, with safety, be religiously paying the real property tax due on the property from 1989 to
determined.25cralawred A recognized, exception to the rule is when there are 1996, another significant fact that could have raised a red flag as to the real
conflicting findings of fact by the CA and the RTC.26 In the case at bar, RTC ownership of the property. The failure of the mortgagee to take precautionary
and the CA agreed on their findings. steps would mean negligence on his part and would thereby preclude it from
invoking that it is a mortgagee in good faith.
The RTC, which possessed the first hand opportunity to observe the demeanor
of the witnesses and admit the documentary evidence, found that PNB Before approving a loan application, it is standard operating procedure for
accepted outright the collateral offered by the Spouses Cornista without banks and financial institutions to conduct an ocular inspection of the property
making farther inquiry as to the real status of the subject property. Had the offered for mortgage and to determine the real owner(s) thereof The apparent
bank been prudent and diligent enough in ascertaining the condition of the purpose of an ocular inspection is to protect the "true owner" of the property
property, it could have discovered that the same was in the possession of Vila as well as innocent third parties with a right, interest or claim thereon from a
who, at that time, possessed a colorable title thereon being a holder of a Final usurper who may have acquired a fraudulent certificate of title
Certificate of Sale. The RTC further exposed the frailty of PNB's claim by thereto.28chanrobleslaw
pointing to the fact that it was Vila who was paying the realty tax on the
property, a crucial information that the bank could have easily discovered had In this case, it was adjudged by the courts of competent jurisdiction in a final
it exercised due diligence. and executory decision that the Spouses Cornista's reacquisition of the
property after the lapse of the redemption period is fraudulent and the purchaser for value.34chanrobleslaw
property used by the mortgagors as collateral rightfully belongs to Vila, an
innocent third party with a right, could have been protected if PNB only Having laid down that the PNB is not in good faith, We are led to affirm the
observed the degree diligence expected from it. award of moral damages, exemplary damages, attorney's fees and costs of
litigation in favor of Vila. Moral damages are not awardecl to penalize the
In Land Bank of the Philippines v. Belle Corporation,29 the Court exhorted defendant but to compensate the plaintiff for the injuries he may have
banks to exercise the highest degree of diligence in its dealing with properties suffered.35 Willful injury to property may be a legal ground for awarding moral
offered as securities for the loan obligation:ChanRoblesVirtualawlibrary damages if the court should find that, under the circumstances, such damages
When the purchaser or the mortgagee is a bank, the rule on innocent are justly due.36 In the instant case, we find that the award of moral damages
purchasers or mortgagees for value is applied more strictly. Being in the is proper.37 As for the award of exemplary damages, we deem that the same
business of extending loans secured by real estate mortgage, banks are is proper for the PNB was remiss in its obligation to inquire the real status of
presumed to be familiar with the rules on land registration. Since the banking the subject property, causing damage to Vila.38 Finally, we rule that the award
business-is impressed with public interest, they are expected to be more of attorney's fees and litigation expenses is valid since Vila was compelled to
cautious, to exercise a higher degree of diligence, care and prudence, than litigate and thus incur expenses in order to protect its rights over the subject
private individuals in their dealings, even those involving registered lands. property.39chanrobleslaw
Banks may not simply rely on the face of the certificate of title. Hence, they
cannot assume that, xxx the title offered as security is on its face free of any WHEREFORE, premises considered, the petition is DENIED. The assailed
encumbrances or lien, they are relieved of the responsibility of taking further Decision and Resolution of the Court of Appeals are hereby AFFIRMED.
steps to verify the title and inspect the properties to be mortgaged. As Accordingly, the decision of the RTC dated 22 June 2011 STANDS as the final
expected, the ascertainment of the status or condition of a property offered to resolution of this case.
it as security for a loan must be a standard and indispensable part of the
bank's operations. xxx. (Citations omitted)
We never fail to stress the remarkable significance of a banking institution to
commercial transactions, in particular, and to the country's economy in
general.30 The banking system is an indispensable institution in the modern
world and plays a vital role in the economic life of every civilized
nation.31 Whether as mere passive entities for the safekeeping and saving of
money or as active instruments of business and commerce, banks have
become an ubiquitous presence among the people, who have come to regard
them with respect and even gratitude and, most of all,
confidence.32 Consequently, the highest degree of diligence is expected, and
high standards of integrity and performance are even required, of
it.33chanrobleslaw

PNB clearly failed to observe the required degree of caution in readily

approving the loan and accepting the collateral offered by the Spouses
Cornista without first ascertaining the real ownership of the property. It
should not have simply relied on the face of title but went furthef to physically
ascertain the actual condition of the property. That the propprty offered as
security was in the possession of the person other than the lone applying for
the loan and the taxes were declared not in their names could have raised a
suspicion. A person who deliberately ignores a significant fact that could
create suspicion in an otherwise reasonable person is not an innocent
G.R. No. 162336 February 1, 2010 investigation be conducted and the corresponding criminal charges be filed against
petitioner at his last known address.
HILARIO P. SORIANO, Petitioner,
vs. Acting on the letter-request and its annexes, State Prosecutor Albert R. Fonacier
PEOPLE OF THE PHILIPPINES, BANGKO SENTRAL NG PILIPINAS (BSP), proceeded with the preliminary investigation. He issued a subpoena with the witnesses’
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), PUBLIC PROSECUTOR affidavits and supporting documents attached, and required petitioner to file his counter-
ANTONIO C.BUAN, and STATE PROSECUTOR ALBERTO R. affidavit. In due course, the investigating officer issued a Resolution finding probable
FONACIER, Respondents. cause and correspondingly filed two separate informations against petitioner before the
Regional Trial Court (RTC) of Malolos, Bulacan.13
DECISION
The first Information,14 dated November 14, 2000 and docketed as Criminal Case No.
DEL CASTILLO, J.: 237-M-2001, was for estafa through falsification of commercial documents, under Article
315, paragraph 1(b), of the Revised Penal Code (RPC), in relation to Article 172 of the
RPC and PD 1689. It basically alleged that petitioner and his co-accused, in abuse of the
A bank officer violates the DOSRI2 law when he acquires bank funds for his personal
confidence reposed in them as RBSM officers, caused the falsification of a number of
benefit, even if such acquisition was facilitated by a fraudulent loan application. Directors,
loan documents, making it appear that one Enrico Carlos filled up the same, and thereby
officers, stockholders, and their related interests cannot be allowed to interpose the
succeeded in securing a loan and converting the loan proceeds for their personal gain
fraudulent nature of the loan as a defense to escape culpability for their circumvention of and benefit.15 The information reads:
Section 83 of Republic Act (RA) No. 337.3

That in or about the month of April, 1997, and thereafter, in San Miguel, Bulacan, and
Before us is a Petition for Review on Certiorari4 under Rule 45 of the Rules of Court,
within the jurisdiction of this Honorable Court, the said accused HILARIO P. SORIANO
assailing the September 26, 2003 Decision5 and the February 5, 2004 Resolution6 of the
and ROSALINDA ILAGAN, as principals by direct participation, with unfaithfulness or
Court of Appeals (CA) in CA-G.R. SP No. 67657. The challenged Decision disposed as
abuse of confidence and taking advantage of their position as President of the Rural Bank
follows:
of San Miguel (Bulacan), Inc. and Branch Manager of the Rural Bank of San Miguel – San
Miguel Branch [sic], a duly organized banking institution under Philippine Laws,
WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED.7 conspiring, confederating and mutually helping one another, did then and there, willfully
and feloniously falsify loan documents consisting of undated loan application/information
Factual Antecedents sheet, credit proposal dated April 14, 1997, credit proposal dated April 22, 1997, credit
investigation report dated April 15, 1997, promissory note dated April 23, 1997, disclosure
Sometime in 2000, the Office of Special Investigation (OSI) of the Bangko Sentral ng statement on loan/credit transaction dated April 23, 1997, and other related documents,
Pilipinas (BSP), through its officers,8 transmitted a letter9 dated March 27, 2000 to by making it appear that one Enrico Carlos filled up the application/information sheet and
Jovencito Zuño, Chief State Prosecutor of the Department of Justice (DOJ). The letter filed the aforementioned loan documents when in truth and in fact Enrico Carlos did not
attached as annexes five affidavits,10 which would allegedly serve as bases for filing participate in the execution of said loan documents and that by virtue of said falsification
criminal charges for Estafa thru Falsification of Commercial Documents, in relation to and with deceit and intent to cause damage, the accused succeeded in securing a loan in
Presidential Decree (PD) No. 1689,11 and for Violation of Section 83 of RA 337, as the amount of eight million pesos (PhP8,000,000.00) from the Rural Bank of San Miguel –
amended by PD 1795,12 against, inter alia, petitioner herein Hilario P. Soriano. These five San Ildefonso branch in the name of Enrico Carlos which amount of PhP8 million
affidavits, along with other documents, stated that spouses Enrico and Amalia Carlos representing the loan proceeds the accused thereafter converted the same amount to
appeared to have an outstanding loan of ₱8 million with the Rural Bank of San Miguel their own personal gain and benefit, to the damage and prejudice of the Rural Bank of
(Bulacan), Inc. (RBSM), but had never applied for nor received such loan; that it was San Miguel – San Ildefonso branch, its creditors, the Bangko Sentral ng Pilipinas, and the
petitioner, who was then president of RBSM, who had ordered, facilitated, and received Philippine Deposit Insurance Corporation.
the proceeds of the loan; and that the ₱8 million loan had never been authorized by
RBSM's Board of Directors and no report thereof had ever been submitted to the CONTRARY TO LAW.16
Department of Rural Banks, Supervision and Examination Sector of the BSP. The letter of
the OSI, which was not subscribed under oath, ended with a request that a preliminary
The other Information17 dated November 10, 2000 and docketed as Criminal Case No. DOSRI law (as set out in Section 8323 of RA 337, as amended by PD 1795),24 hence a
238-M-2001, was for violation of Section 83 of RA 337, as amended by PD 1795. The person cannot be charged for both offenses. He argued that a violation of DOSRI law
said provision refers to the prohibition against the so-called DOSRI loans. The information requires the offender to obtain a loan from his bank, without complying with procedural,
alleged that, in his capacity as President of RBSM, petitioner indirectly secured an ₱8 reportorial, or ceiling requirements. On the other hand, estafa under par. 1(b), Article 315
million loan with RBSM, for his personal use and benefit, without the written consent and of the RPC requires the offender to misappropriate or convert something that he holds in
approval of the bank's Board of Directors, without entering the said transaction in the trust, or on commission, or for administration, or under any other obligation involving
bank's records, and without transmitting a copy of the transaction to the supervising the duty to return the same.25
department of the bank. His ruse was facilitated by placing the loan in the name of an
unsuspecting RBSM depositor, one Enrico Carlos.18 The information reads: Essentially, the petitioner theorized that the characterization of possession is different in
the two offenses. If petitioner acquired the loan as DOSRI, he owned the loaned money
That in or about the month of April, 1997, and thereafter, and within the jurisdiction of this and therefore, cannot misappropriate or convert it as contemplated in the offense of
Honorable Court, the said accused, in his capacity as President of the Rural Bank of San estafa. Conversely, if petitioner committed estafa, then he merely held the money in trust
Miguel (Bulacan), Inc., did then and there, willfully and feloniously indirectly borrow or for someone else and therefore, did not acquire a loan in violation of DOSRI rules.
secure a loan with the Rural Bank of San Miguel – San Ildefonso branch, a domestic rural
banking institution created, organized and existing under Philippine laws, amounting to Ruling of the Regional Trial Court
eight million pesos (PhP8,000,000.00), knowing fully well that the same has been done by
him without the written consent and approval of the majority of the board of directors of
In an Order26 dated August 8, 2001, the trial court denied petitioner's Motion to Quash for
the said bank, and which consent and approval the said accused deliberately failed to
lack of merit. The lower court agreed with the prosecution that the assailed OSI letter
obtain and enter the same upon the records of said banking institution and to transmit a
copy thereof to the supervising department of the said bank, as required by the General was not the complaint-affidavit itself; thus, it need not comply with the requirements under
Banking Act, by using the name of one depositor Enrico Carlos of San Miguel, Bulacan, the Rules of Court. The trial court held that the affidavits, which were attached to the OSI
the latter having no knowledge of the said loan, and one in possession of the said amount letter, comprised the complaint-affidavit in the case. Since these affidavits were duly
of eight million pesos (PhP8,000,000.00), accused converted the same to his own subscribed and sworn to before a notary public, there was adequate compliance with the
personal use and benefit, in flagrant violation of the said law. Rules. The trial court further held that the two offenses were separate and distinct
violations, hence the prosecution of one did not pose a bar to the other.27
CONTRARY TO LAW.19
Petitioner’s Motion for Reconsideration was likewise denied in an Order dated September
20
5, 2001.28
Both cases were raffled to Branch 79 of the RTC of Malolos, Bulacan.
Aggrieved, petitioner filed a Petition for Certiorari29 with the CA, reiterating his arguments
On June 8, 2001, petitioner moved to quash21 these informations on two grounds: that the before the trial court.
court had no jurisdiction over the offense charged, and that the facts charged do not
constitute an offense.
Ruling of the Court of Appeals
On the first ground, petitioner argued that the letter transmitted by the BSP to the DOJ
The CA denied the petition on both issues presented by petitioner.
constituted the complaint and hence was defective for failure to comply with the
mandatory requirements of Section 3(a), Rule 112 of the Rules of Court, such as the
statement of address of petitioner and oath and subscription.22 Moreover, petitioner On the first issue, the CA determined that the BSP letter, which petitioner characterized to
argued that the officers of OSI, who were the signatories to the "letter-complaint," were be a fatally infirm complaint, was not actually a complaint, but a transmittal or cover letter
not authorized by the BSP Governor, much less by the Monetary Board, to file the only. This transmittal letter merely contained a summary of the affidavits which were
complaint. According to petitioner, this alleged fatal oversight violated Section 18, pars. attached to it. It did not contain any averment of personal knowledge of the events and
(c) and (d) of the New Central Bank Act (RA 7653). transactions that constitute the elements of the offenses charged. Being a mere
transmittal letter, it need not comply with the requirements of Section 3(a) of Rule 112 of
the Rules of Court.30
On the second ground, petitioner contended that the commission of estafa under
paragraph 1(b) of Article 315 of the RPC is inherently incompatible with the violation of
The CA further determined that the five affidavits attached to the transmittal letter should IV
be considered as the complaint-affidavits that charged petitioner with violation of Section
83 of RA 337 and for Estafa thru Falsification of Commercial Documents. These Whether petitioner is entitled to a writ of injunction.
complaint-affidavits complied with the mandatory requirements set out in the Rules of
Court – they were subscribed and sworn to before a notary public and subsequently
Our Ruling
certified by State Prosecutor Fonacier, who personally examined the affiants and was
convinced that the affiants fully understood their sworn statements.31
The petition lacks merit.
Anent the second ground, the CA found no merit in petitioner's argument that the violation
of the DOSRI law and the commission of estafa thru falsification of commercial First Issue:
documents are inherently inconsistent with each other. It explained that the test in
considering a motion to quash on the ground that the facts charged do not constitute an Whether the complaint complied with the mandatory requirements provided under
offense, is whether the facts alleged, when hypothetically admitted, constitute the Section 3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d)
elements of the offense charged. The appellate court held that this test was sufficiently of
met because the allegations in the assailed informations, when hypothetically admitted,
clearly constitute the elements of Estafa thru Falsification of Commercial Documents and Republic Act No. 7653
Violation of DOSRI law.32
Petitioner moved to withdraw the first issue from the instant petition
Petitioner’s Motion for Reconsideration33 was likewise denied for lack of merit.
On March 5, 2007, the Court noted35 petitioner's Manifestation and Motion for Partial
Hence, this petition. Withdrawal of the Petition36 dated February 7, 2007. In the said motion, petitioner
informed the Court of the promulgation of a Decision entitled Soriano v. Hon.
Issues Casanova,37 which also involved petitioner and similar BSP letters to the DOJ. According
to petitioner, the said Decision allegedly ruled squarely on the nature of the BSP letters
Restated, petitioner raises the following issues34 for our consideration: and the validity of the sworn affidavits attached thereto. For this reason, petitioner moved
for the partial withdrawal of the instant petition insofar as it involved the issue of "whether
I or not a court can legally acquire jurisdiction over a complaint which failed to comply with
the mandatory requirements provided under Section 3(a), Rule 112 of the Rules of Court
and Section 18, paragraphs (c) and (d) of RA 7653".38
Whether the complaint complied with the mandatory requirements provided under Section
3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of RA 7653.
Given that the case had already been submitted for resolution of the Court when
petitioner filed his latest motion, and that all respondents had presented their positions
II and arguments on the first issue, the Court deems it proper to rule on the same.

Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of In Soriano v. Hon. Casanova, the Court held that the affidavits attached to the BSP
RA 337, as amended) could also be the subject of Estafa under Article 315 (1) (b) of the transmittal letter complied with the mandatory requirements under the Rules of Court.
Revised Penal Code.
To be sure, the BSP letters involved in Soriano v. Hon. Casanova39 are not the same as
III the BSP letter involved in the instant case. However, the BSP letters in Soriano v. Hon.
Casanova and the BSP letter subject of this case are similar in the sense that they are all
Is a petition for certiorari under Rule 65 the proper remedy against an Order denying a signed by the OSI officers of the BSP, they were not sworn to by the said officers, they all
Motion to Quash? contained summaries of their attached affidavits, and they all requested the conduct of a
preliminary investigation and the filing of corresponding criminal charges against
petitioner Soriano. Thus, the principle of stare decisis dictates that the ruling in Soriano v.
Hon. Casanova be applied in the instant case – once a question of law has been events and transactions constitutive of the criminal violations alleged to have been made
examined and decided, it should be deemed settled and closed to further argument.40 by the accused. In fact, the letters clearly stated that what the OSI of the BSP and the LIS
of the PDIC did was to respectfully transmit to the DOJ for preliminary investigation the
We held in Soriano v. Hon. Casanova, after a close scrutiny of the letters transmitted by affidavits and personal knowledge of the acts of the petitioner. These affidavits were
the BSP to the DOJ, that these were not intended to be the complaint, as envisioned subscribed under oath by the witnesses who executed them before a notary public. Since
under the Rules. They did not contain averments of personal knowledge of the events the affidavits, not the letters transmitting them, were intended to initiate the preliminary
and transactions constitutive of any offense. The letters merely transmitted for preliminary investigation, we hold that Section 3(a), Rule 112 of the Rules of Court was substantially
investigation the affidavits of people who had personal knowledge of the acts of petitioner. complied with.
We ruled that these affidavits, not the letters transmitting them, initiated the preliminary
investigation. Since these affidavits were subscribed under oath by the witnesses who Citing the ruling of this Court in Ebarle v. Sucaldito, the Court of Appeals correctly held
executed them before a notary public, then there was substantial compliance with Section that a complaint for purposes of preliminary investigation by the fiscal need not be filed by
3(a), Rule 112 of the Rules of Court. the offended party. The rule has been that, unless the offense subject thereof is one
that cannot be prosecuted de oficio, the same may be filed, for preliminary
Anent the contention that there was no authority from the BSP Governor or the Monetary investigation purposes, by any competent person. The crime of estafa is a public crime
Board to file a criminal case against Soriano, we held that the requirements of Section 18, which can be initiated by "any competent person." The witnesses who executed the
paragraphs (c) and (d) of RA 7653 did not apply because the BSP did not institute the affidavits based on their personal knowledge of the acts committed by the petitioner fall
complaint but merely transmitted the affidavits of the complainants to the DOJ. within the purview of "any competent person" who may institute the complaint for a public
crime. x x x (Emphasis and italics supplied)
We further held that since the offenses for which Soriano was charged were public
crimes, authority holds that it can be initiated by "any competent person" with personal A preliminary investigation can thus validly proceed on the basis of an affidavit of
knowledge of the acts committed by the offender. Thus, the witnesses who executed the any competent person, without the referral document, like the NBI-NCR Report, having
affidavits clearly fell within the purview of "any competent person" who may institute the been sworn to by the law enforcer as the nominal complainant. To require otherwise is a
complaint for a public crime. needless exercise. The cited case of Oporto, Jr. v. Judge Monserate does not appear to
dent this proposition. After all, what is required is to reduce the evidence into affidavits,
for while reports and even raw information may justify the initiation of an investigation, the
The ruling in Soriano v. Hon. Casanova has been adopted and elaborated upon in the
preliminary investigation stage can be held only after sufficient evidence has been
recent case of Santos-Concio v. Department of Justice.41 Instead of a transmittal letter
gathered and evaluated which may warrant the eventual prosecution of the case in
from the BSP, the Court in Santos-Concio was faced with an NBI-NCR Report, likewise court.42
with affidavits of witnesses as attachments. Ruling on the validity of the witnesses’ sworn
affidavits as bases for a preliminary investigation, we held:
Following the foregoing rulings in Soriano v. Hon. Casanova and Santos-Concio v.
Department of Justice, we hold that the BSP letter, taken together with the affidavits
The Court is not unaware of the practice of incorporating all allegations in one document
attached thereto, comply with the requirements provided under Section 3(a), Rule 112 of
denominated as "complaint-affidavit." It does not pronounce strict adherence to only one the Rules of Court and Section 18, paragraphs (c) and (d) of RA 7653.
approach, however, for there are cases where the extent of one’s personal knowledge
may not cover the entire gamut of details material to the alleged offense. The private
offended party or relative of the deceased may not even have witnessed the fatality, in Second Issue:
which case the peace officer or law enforcer has to rely chiefly on affidavits of witnesses.
The Rules do not in fact preclude the attachment of a referral or transmittal letter similar Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of
to that of the NBI-NCR. Thus, in Soriano v. Casanova, the Court held: RA 337, as amended) could be the subject of Estafa under Article 315 (1) (b) of the

A close scrutiny of the letters transmitted by the BSP and PDIC to the DOJ shows that Revised Penal Code
these were not intended to be the complaint envisioned under the Rules. It may be
clearly inferred from the tenor of the letters that the officers merely intended to transmit The second issue was raised by petitioner in the context of his Motion to Quash
the affidavits of the bank employees to the DOJ. Nowhere in the transmittal letters is there Information on the ground that the facts charged do not constitute an offense.43 It is
any averment on the part of the BSP and PDIC officers of personal knowledge of the settled that in considering a motion to quash on such ground, the test is "whether the
facts alleged, if hypothetically admitted, would establish the essential elements of the Petitioner’s theory is based on the false premises that the loan was extended to him by
offense charged as defined by law. The trial court may not consider a situation contrary to the bank in his own name, and that he became the owner of the loan proceeds. Both
that set forth in the criminal complaint or information. Facts that constitute the defense of premises are wrong.
the petitioner[s] against the charge under the information must be proved by [him] during
trial. Such facts or circumstances do not constitute proper grounds for a motion to quash The bank money (amounting to ₱8 million) which came to the possession of petitioner
the information on the ground that the material averments do not constitute the was money held in trust or administration by him for the bank, in his
offense". 44
fiduciary capacity as the President of said bank.47 It is not accurate to say that petitioner
We have examined the two informations against petitioner and we find that they contain became the owner of the ₱8 million because it was the proceeds of a loan. That would
allegations which, if hypothetically admitted, would establish the essential elements of the have been correct if the bank knowingly extended the loan to petitioner himself. But that is
crime of DOSRI violation and estafa thru falsification of commercial documents. not the case here. According to the information for estafa, the loan was supposed to be
for another person, a certain "Enrico Carlos"; petitioner, through falsification, made it
In Criminal Case No. 238-M-2001 for violation of DOSRI rules, the information alleged appear that said "Enrico Carlos" applied for the loan when in fact he ("Enrico Carlos") did
that petitioner Soriano was the president of RBSM; that he was able to indirectly obtain a not. Through such fraudulent device, petitioner obtained the loan proceeds and converted
loan from RBSM by putting the loan in the name of depositor Enrico Carlos; and that he the same. Under these circumstances, it cannot be said that petitioner became the legal
did this without complying with the requisite board approval, reportorial, and ceiling owner of the ₱8 million. Thus, petitioner remained the bank’s fiduciary with respect to that
requirements. money, which makes it capable of misappropriation or conversion in his hands.

In Criminal Case No. 237-M-2001 for estafa thru falsification of commercial documents, The next question is whether there can also be, at the same time, a charge for DOSRI
the information alleged that petitioner, by taking advantage of his position as president of violation in such a situation wherein the accused bank officer did not secure a loan in his
RBSM, falsified various loan documents to make it appear that an Enrico Carlos secured own name, but was alleged to have used the name of another person in order to indirectly
a loan of ₱8 million from RBSM; that petitioner succeeded in obtaining the loan proceeds; secure a loan from the bank. We answer this in the affirmative. Section 83 of RA 337
that he later converted the loan proceeds to his own personal gain and benefit; and that reads:
his action caused damage and prejudice to RBSM, its creditors, the BSP, and the PDIC.
Section 83. No director or officer of any banking institution shall, either directly or
Significantly, this is not the first occasion that we adjudge the sufficiency of similarly indirectly, for himself or as the representative or agent of others, borrow any of the
worded informations. In Soriano v. People,45 involving the same petitioner in this case deposits of funds of such bank, nor shall he become a guarantor, indorser, or surety for
(but different transactions), we also reviewed the sufficiency of informations for DOSRI loans from such bank to others, or in any manner be an obligor for moneys borrowed from
violation and estafa thru falsification of commercial documents, which were almost the bank or loaned by it, except with the written approval of the majority of the directors of
identical, mutatis mutandis, with the subject informations herein. We held in Soriano v. the bank, excluding the director concerned. Any such approval shall be entered upon the
People that there is no basis for the quashal of the informations as "they contain material records of the corporation and a copy of such entry shall be transmitted forthwith to the
allegations charging Soriano with violation of DOSRI rules and estafa thru falsification of Superintendent of Banks. The office of any director or officer of a bank who violates the
commercial documents". provisions of this section shall immediately become vacant and the director or officer shall
be punished by imprisonment of not less than one year nor more than ten years and by a
Petitioner raises the theory that he could not possibly be held liable for estafa in fine of not less than one thousand nor more than ten thousand pesos. x x x
concurrence with the charge for DOSRI violation. According to him, the DOSRI charge
presupposes that he acquired a loan, which would make the loan proceeds The prohibition in Section 83 is broad enough to cover various modes of borrowing.[48] It
his own money and which he could neither possibly misappropriate nor convert to the covers loans by a bank director or officer (like herein petitioner) which are made either:
prejudice of another, as required by the statutory definition of estafa.46 On the other hand, (1) directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of others. It
if petitioner did not acquire any loan, there can be no DOSRI violation to speak of. Thus, applies even if the director or officer is a mere guarantor, indorser or surety for someone
petitioner posits that the two offenses cannot co-exist. This theory does not persuade us. else's loan or is in any manner an obligor for money borrowed from the bank or loaned by
it. The covered transactions are prohibited unless the approval, reportorial and ceiling
requirements under Section 83 are complied with. The prohibition is intended to protect
the public, especially the depositors,[49] from the overborrowing of bank funds by bank
officers, directors, stockholders and related interests, as such overborrowing may lead to This issue may be speedily resolved by adopting our ruling in Soriano v. People,55 where
bank failures.[50] It has been said that "banking institutions are not created for the benefit we held:
of the directors [or officers]. While directors have great powers as directors, they have no
special privileges as individuals. They cannot use the assets of the bank for their own In fine, the Court has consistently held that a special civil action for certiorari is not the
benefit except as permitted by law. Stringent restrictions are placed about them so that proper remedy to assail the denial of a motion to quash an information. The proper
when acting both for the bank and for one of themselves at the same time, they must procedure in such a case is for the accused to enter a plea, go to trial without prejudice
keep within certain prescribed lines regarded by the legislature as essential to safety in on his part to present the special defenses he had invoked in his motion to quash and if
the banking business".51 after trial on the merits, an adverse decision is rendered, to appeal therefrom in the
manner authorized by law. Thus, petitioners should not have forthwith filed a special civil
A direct borrowing is obviously one that is made in the name of the DOSRI himself or action for certiorari with the CA and instead, they should have gone to trial and reiterated
where the DOSRI is a named party, while an indirect borrowing includes one that is made the special defenses contained in their motion to quash. There are no special or
by a third party, but the DOSRI has a stake in the transaction.52 The latter type – indirect exceptional circumstances in the present case that would justify immediate resort to a
borrowing – applies here. The information in Criminal Case 238-M-2001 alleges that filing of a petition for certiorari. Clearly, the CA did not commit any reversible error, much
petitioner "in his capacity as President of Rural Bank of San Miguel – San Ildefonso less, grave abuse of discretion in dismissing the petition.56
branch x x x indirectly borrow[ed] or secure[d] a loan with [RBSM] x x x knowing fully well
that the same has been done by him without the written consent and approval of the Fourth Issue:
majority of the board of directors x x x, and which consent and approval the said accused
deliberately failed to obtain and enter the same upon the records of said banking
Whether petitioner is entitled to a writ of injunction
institution and to transmit a copy thereof to the supervising department of the said bank x
x x by using the name of one depositor Enrico Carlos x x x, the latter having no
knowledge of the said loan, and once in possession of the said amount of eight million The requisites to justify an injunctive relief are: (1) the right of the complainant is clear and
pesos (₱8 million), [petitioner] converted the same to his own personal use and benefit".53 unmistakable; (2) the invasion of the right sought to be protected is material and
substantial; and (3) there is an urgent and paramount necessity for the writ to prevent
serious damage. A clear legal right means one clearly founded in or granted by law or is
The foregoing information describes the manner of securing the loan as indirect; names
"enforceable as a matter of law." Absent any clear and unquestioned legal right, the
petitioner as the benefactor of the indirect loan; and states that the requirements of the
issuance of an injunctive writ would constitute grave abuse of discretion.57 Caution and
law were not complied with. It contains all the required elements54 for a violation of
Section 83, even if petitioner did not secure the loan in his own name. prudence must, at all times, attend the issuance of an injunctive writ because it effectively
disposes of the main case without trial and/or due process.58 In Olalia v. Hizon,59 the
Court held as follows:
The broad interpretation of the prohibition in Section 83 is justified by the fact that it even
expressly covers loans to third parties where the third parties are aware of the transaction
It has been consistently held that there is no power the exercise of which is more delicate,
(such as principals represented by the DOSRI), and where the DOSRI’s interest does not
which requires greater caution, deliberation and sound discretion, or more dangerous in a
appear to be beneficial but even burdensome (such as in cases when the DOSRI acts as
doubtful case, than the issuance of an injunction. It is the strong arm of equity that should
a mere guarantor or surety). If the law finds it necessary to protect the bank and the
never be extended unless to cases of great injury, where courts of law cannot afford an
banking system in such situations, it will surely be illogical for it to exclude a case like this
adequate or commensurate remedy in damages.
where the DOSRI acted for his own benefit, using the name of an unsuspecting person. A
contrary interpretation will effectively allow a DOSRI to use dummies to circumvent the
requirements of the law. Every court should remember that an injunction is a limitation upon the freedom of action
of the [complainant] and should not be granted lightly or precipitately. It should be granted
only when the court is fully satisfied that the law permits it and the emergency demands it.
In sum, the informations filed against petitioner do not negate each other.

Third Issue: Given this Court's findings in the earlier issues of the instant case, we find no compelling
reason to grant the injunctive relief sought by petitioner.
Is a Rule 65 petition for certiorari the proper remedy against an Order denying a
Motion to Quash?
WHEREFORE, the petition is DENIED. The assailed September 26, 2003 Decision as
well as the February 5, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 67657
are AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 170865 April 25, 2012 On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina)
were having a conversation in the latter’s office when Adelina’s friend, Filipina Tuazon
PHILIPPINE NATIONAL BANK, Petitioner, (Filipina), approached her to ask if she could have Filipina’s check cleared and encashed
vs. for a service fee of 2.5%. The check is Bank of America Check No. 1906 under the
SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO CHEAH, Respondents. account of Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales
against Bank of America Alhambra Branch in California, USA, with a face amount of
$300,000.00, payable to cash. Because Adelina does not have a dollar account in which
x-----------------------x
to deposit the check, she asked Ofelia if she could accommodate Filipina’s request since
she has a joint dollar savings account with her Malaysian husband Cheah Chee Chong
G.R. No. 170892 (Chee Chong) under Account No. 265-705612-2 with PNB Buendia Branch.

SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO CHEAH, Petitioners, Ofelia agreed.
vs.
PHILIPPINE NATIONAL BANK, Respondent.
That same day, Ofelia and Adelina went to PNB Buendia Branch. They met with Perfecto
Mendiola of the Loans Department who referred them to PNB Division Chief Alberto Garin
DECISION (Garin). Garin discussed with them the process of clearing the subject check and they
were told that it normally takes 15 days.7 Assured that the deposit and subsequent
DEL CASTILLO, J.: clearance of the check is a normal transaction, Ofelia deposited Filipina’s check. PNB
then sent it for clearing through its correspondent bank, Philadelphia National Bank. Five
Law favoreth diligence, and therefore, hateth folly and negligence.—Wingate’s Maxim. days later, PNB received a credit advice8 from Philadelphia National Bank that the
proceeds of the subject check had been temporarily credited to PNB’s account as of
November 6, 1992. On November 16, 1992, Garin called up Ofelia to inform her that the
In doing a friend a favor to help the latter’s friend collect the proceeds of a foreign check, check had already been cleared.9 The following day, PNB Buendia Branch, after
a woman deposited the check in her and her husband’s dollar account. The local bank deducting the bank charges, credited $299,248.37 to the account of the spouses
accepted the check for collection and immediately credited the proceeds thereof to said Cheah.10 Acting on Adelina’s instruction to withdraw the credited amount, Ofelia that day
spouses’ account even before the lapse of the clearing period. And just when the money personally withdrew $180,000.00.11 Adelina was able to withdraw the remaining amount
had been withdrawn and distributed among different beneficiaries, it was discovered that the next day after having been authorized by Ofelia.12 Filipina received all the proceeds.
all along, to the horror of the woman whose intention to accommodate a friend’s friend
backfired, she and her
In the meantime, the Cable Division of PNB Head Office in Escolta, Manila received on
November 16, 1992 a SWIFT13 message from Philadelphia National Bank dated
bank had dealt with a rubber check. November 13, 1992 with Transaction Reference Number (TRN) 46506218, informing
PNB of the return of the subject check for insufficient funds.14 However, the PNB Head
These consolidated1 Petitions for Review on Certiorari filed by the Philippine National Office could not ascertain to which branch/office it should forward the same for proper
Bank (PNB)2 and by the spouses Cheah Chee Chong and Ofelia Camacho Cheah action. Eventually, PNB Head Office sent Philadelphia National Bank a SWIFT message
(spouses Cheah)3 both assail the August 22, 2005 Decision4 and December 21, 2005 informing the latter that SWIFT message with TRN 46506218 has been relayed to PNB’s
Resolution5 of the Court of Appeals (CA) in CA-G.R. CV No. 63948 which declared both various divisions/departments but was returned to PNB Head Office as it seemed
parties equally negligent and, hence, should equally suffer the resulting loss. For its part, misrouted. PNB Head Office thus requested for Philadelphia National Bank’s advice on
PNB questions why it was declared blameworthy together with its depositors, spouses said SWIFT message’s proper disposition.15 After a few days, PNB Head Office
Cheah, for the amount wrongfully paid the latter, while the spouses Cheah plead that they ascertained that the SWIFT message was intended for PNB Buendia Branch.
be declared entirely faultless.
PNB Buendia Branch learned about the bounced check when it received on November
Factual Antecedents 20, 1992 a debit advice,16 followed by a letter17 on November 24, 1992, from Philadelphia
National Bank to which the November 13, 1992 SWIFT message was attached. Informed
about the bounced check and upon demand by PNB Buendia Branch to return the money
withdrawn, Ofelia immediately contacted Filipina to get the money back. But the latter told
her that all the money had already been given to several people who asked for the WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff
check’s encashment. In their effort to recover the money, spouses Cheah then sought the Philippine National Bank [and] against defendants Mr. Cheah Chee Chong and Ms. Ofelia
help of the National Bureau of Investigation. Said agency’s Anti-Fraud and Action Division Camacho Cheah, ordering the latter to pay jointly and severally the herein plaintiffs’ bank
was later able to apprehend some of the beneficiaries of the proceeds of the check and the amount:
recover from them $20,000.00. Criminal charges were then filed against these suspect
beneficiaries.18 1. of US$298,950.25 or its peso equivalent based on Central Bank Exchange Rate
prevailing at the time the proceeds of the BA Check No. 190 were withdrawn or the
Meanwhile, the spouses Cheah have been constantly meeting with the bank officials to prevailing Central Bank Rate at the time the amount is to be reimbursed by the
discuss matters regarding the incident and the recovery of the value of the check while defendants to plaintiff or whatever is lower. This is without prejudice however, to the rights
the cases against the alleged perpetrators remain pending. Chee Chong in the end of the defendants (accommodating parties) to go against the group of Adelina Guarin,
signed a PNB drafted19 letter20 which states that the spouses Cheah are offering their Atty. Eduardo Rosales, Filipina Tuazon, etc., (Beneficiaries- accommodated parties) who
condominium units as collaterals for the amount withdrawn. Under this setup, the amount are privy to the defendants.
withdrawn would be treated as a loan account with deferred interest while the spouses try
to recover the money from those who defrauded them. Apparently, Chee Chong signed No pronouncement as to costs.
the letter after the Vice President and Manager of PNB Buendia Branch, Erwin Asperilla
(Asperilla), asked the spouses Cheah to help him and the other bank officers as they
No other award of damages for non[e] has been proven.
were in danger of losing their jobs because of the incident. Asperilla likewise assured the
spouses Cheah that the letter was a mere formality and that the mortgage will be
disregarded once PNB receives its claim for indemnity from Philadelphia National Bank. SO ORDERED.28

Although some of the officers of PNB were amenable to the proposal,21 the same did not The RTC held that spouses Cheah were guilty of contributory negligence.
materialize. Subsequently, PNB sent a demand letter to spouses Cheah for the return of
the amount of the check,22 froze their peso and dollar deposits in the amounts of Because Ofelia trusted a friend’s friend whom she did not know and considering the
₱275,166.80 and $893.46,23 and filed a complaint24 against them for Sum of Money with amount of the check made payable to cash, the RTC opined that Ofelia showed lack of
Branch 50 of the Regional Trial Court (RTC) of Manila, docketed as Civil Case No. 94- vigilance in her dealings. She should have exercised due care by investigating the
71022. In said complaint, PNB demanded payment of around ₱8,202,220.44, plus negotiability of the check and the identity of the drawer. While the court found that the
interests25 and attorney’s fees, from the spouses Cheah. proximate cause of the wrongful payment of the check was PNB’s negligence in not
observing the 15-day guarantee period rule, it ruled that spouses Cheah still cannot
As their main defense, the spouses Cheah claimed that the proximate cause of PNB’s escape liability to reimburse PNB the value of the check as an accommodation party
injury was its own negligence of paying a US dollar denominated check without waiting for pursuant to Section 29 of the Negotiable Instruments Law.29 It likewise applied the
the 15-day clearing period, in violation of its bank practice as mandated by its own bank principle of solutio indebiti under the Civil Code. With regard to the award of other forms
circular, i.e., PNB General Circular No. 52-101/88.26 Because of this, spouses Cheah of damages, the RTC held that each party must suffer the consequences of their own acts
averred that PNB is barred from claiming what it had lost. They further averred that it is and thus left both parties as they are.
unjust for them to pay back the amount disbursed as they never really benefited
therefrom. As counterclaim, they prayed for the return of their frozen deposits, the Unwilling to accept the judgment, the spouses Cheah appealed to the CA.
recoupment of ₱400,000.00 representing the amount they had so far spent in recovering
the value of the check, and payment of moral and exemplary damages, as well as Ruling of the Court of Appeals
attorney’s fees.
While the CA recognized the spouses Cheah as victims of a scam who nevertheless have
Ruling of the Regional Trial Court to suffer the consequences of Ofelia’s lack of care and prudence in immediately trusting a
stranger, the appellate court did not hold PNB scot-free. It ruled in its August 22, 2005
The RTC ruled in PNB’s favor. The dispositive portion of its Decision 27 dated May 20, Decision,30 viz:
1999 reads:
As both parties were equally negligent, it is but right and just that both parties should "Proximate cause is ‘that cause, which, in natural and continuous sequence, unbroken by
equally suffer and shoulder the loss. The scam would not have been possible without the any efficient intervening cause, produces the injury and without which the result would not
negligence of both parties. As earlier stated, the complaint of PNB cannot be dismissed have occurred.’ x x x To determine the proximate cause of a controversy, the question
because the Cheah spouses were negligent and Ms. Cheah took an active part in the that needs to be asked is: If the event did not happen, would the injury have resulted? If
deposit of the check and the withdrawal of the subject amounts. On the other hand, the the answer is no, then the event is the proximate cause."34
Cheah spouses cannot entirely bear the loss because PNB allowed her to withdraw
without waiting for the clearance of the check. The remedy of the parties is to go after Here, while PNB highlights Ofelia’s fault in accommodating a stranger’s check and
those who perpetrated, and benefited from, the scam. depositing it to the bank, it remains mum in its release of the proceeds thereof without
exhausting the 15-day clearing period, an act which contravened established banking
WHEREFORE, the May 20, 1999 Decision of the Regional Trial Court, Branch 5, Manila, rules and practice.
in Civil Case No. 94-71022, is hereby REVERSED and SET ASIDE and another one
entered DECLARING both parties equally negligent and should suffer and shoulder the It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking
loss. days. As declared by Josephine Estella, the Administrative Service Officer who was the
bank’s Remittance Examiner, what was unusual in the processing of the check was that
Accordingly, PNB is hereby ordered to credit to the peso and dollar accounts of the the "lapse of 15 banking days was not observed."35 Even PNB’s agreement with
Cheah spouses the amount due to them. Philadelphia National Bank36 regarding the rules on the collection of the proceeds of US
dollar checks refers to "business/ banking days." Ofelia deposited the subject check on
SO ORDERED.31 November 4, 1992. Hence, the 15th banking day from the date of said deposit should fall
on November 25, 1992. However, what happened was that PNB Buendia Branch, upon
calling up Ofelia that the check had been cleared, allowed the proceeds thereof to be
In so ruling, the CA ratiocinated that PNB Buendia Branch’s non-receipt of the SWIFT
withdrawn on November 17 and 18, 1992, a week before the lapse of the standard 15-day
message from Philadelphia National Bank within the 15-day clearing period is not an clearing period.
acceptable excuse. Applying the last clear chance doctrine, the CA held that PNB had the
last clear opportunity to avoid the impending loss of the money and yet, it glaringly
exhibited its negligence in allowing the withdrawal of funds without exhausting the 15-day This Court already held that the payment of the amounts of checks without previously
clearing period which has always been a standard banking practice as testified to by clearing them with the drawee bank especially so where the drawee bank is a foreign
PNB’s own officers, and as provided in its own General Circular No. 52/101/88. To the bank and the amounts involved were large is contrary to normal or ordinary banking
CA, PNB cannot claim from spouses Cheah even if the latter are accommodation parties practice.37 Also, in Associated Bank v. Tan,38 wherein the bank allowed the withdrawal of
under the law as the bank’s own negligence is the proximate cause of the damage it the value of a check prior to its clearing, we said that "[b]efore the check shall have been
sustained. Nevertheless, it also found Ofelia guilty of contributory negligence. Thus, both cleared for deposit, the collecting bank can only ‘assume’ at its own risk x x x that the
parties should be made equally responsible for the resulting loss. check would be cleared and paid out." The delay in the receipt by PNB Buendia Branch of
the November 13, 1992 SWIFT message notifying it of the dishonor of the subject check
is of no moment, because had PNB Buendia Branch waited for the expiration of the
Both parties filed their respective Motions for Reconsideration32 but same were denied in
clearing period and had never released during that time the proceeds of the check, it
a Resolution33 dated December 21, 2005.
would have already been duly notified of its dishonor. Clearly, PNB’s disregard of its
preventive and protective measure against the possibility of being victimized by bad
Hence, these Petitions for Review on Certiorari. checks had brought upon itself the injury of losing a significant amount of money.

Our Ruling It bears stressing that "the diligence required of banks is more than that of a Roman pater
familias or a good father of a family. The highest degree of diligence is expected."39 PNB
The petitions for review lack merit. Hence, we affirm the ruling of the CA. miserably failed to do its duty of exercising extraordinary diligence and reasonable
business prudence. The disregard of its own banking policy amounts to gross negligence,
PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing which the law defines as "negligence characterized by the want of even slight care, acting
period was the proximate cause of the loss.1âwphi1 or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and
intentionally with a conscious indifference to consequences in so far as other persons
may be affected."40 With regard to collection or encashment of checks, suffice it to say
that the law imposes on the collecting bank the duty to scrutinize diligently the checks husband who would be put at risk and not the accommodated party. However, Ofelia
deposited with it for the purpose of determining their genuineness and regularity. "The chose to ignore the same and instead actively participated in immediately withdrawing the
collecting bank, being primarily engaged in banking, holds itself out to the public as the proceeds of the check. Thus, we are one with the CA in ruling that Ofelia’s prior
expert on this field, and the law thus holds it to a high standard of conduct."41 A bank is consultation with PNB officers is not enough to totally absolve her of any liability. In the
expected to be an expert in banking procedures and it has the necessary means to first place, she should have shunned any participation in that palpably shady transaction.
ascertain whether a check, local or foreign, is sufficiently funded.
In any case, the complaint against the spouses Cheah could not be dismissed. As PNB’s
Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the client, Ofelia was the one who dealt with PNB and negotiated the check such that its
principle of solutio indebiti, which is laid down in Article 2154 of the Civil Code: 42 value was credited in her and her husband’s account. Being the ones in privity with PNB,
the spouses Cheah are therefore the persons who should return to PNB the money
Art. 2154. If something is received when there is no right to demand it, and it was unduly released to them.
delivered through mistake, the obligation to return it arises.
All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah
"[T]he indispensable requisites of the juridical relation known as solutio indebiti, are, (a) are equally negligent and should therefore equally suffer the loss. The two must both bear
that he who paid was not under obligation to do so; and (b) that the payment was made the consequences of their mistakes.
by reason of an essential mistake of fact.43
WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R. No.
In the case at bench, PNB cannot recover the proceeds of the check under the principle it 170865 and in G.R. No. 170892 are both DENIED. The assailed August 22, 2005
invokes. In the first place, the gross negligence of PNB, as earlier discussed, can never Decision and December 21, 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
be equated with a mere mistake of fact, which must be something excusable and which 63948 are hereby AFFIRMED in toto.
requires the exercise of prudence. No recovery is due if the mistake done is one of gross
negligence. SO ORDERED.

The spouses Cheah are guilty of contributory negligence and are bound to share the loss
with the bank

"Contributory negligence is conduct on the part of the injured party,

contributing as a legal cause to the harm he has suffered, which falls below the standard
to which he is required to conform for his own protection."44

The CA found Ofelia’s credulousness blameworthy. We agree. Indeed, Ofelia failed to

observe caution in giving her full trust in accommodating a complete stranger and this led
her and her husband to be swindled. Considering that Filipina was not personally known
to her and the amount of the foreign check to be encashed was $300,000.00, a higher
degree of care is expected of Ofelia which she, however, failed to exercise under the
circumstances. Another circumstance which should have goaded Ofelia to be more
circumspect in her dealings was when a bank officer called her up to inform that the Bank
of America check has already been cleared way earlier than the 15-day clearing period.
The fact that the check was cleared after only eight banking days from the time it was
deposited or contrary to what Garin told her that clearing takes 15 days should have
already put Ofelia on guard. She should have first verified the regularity of such hasty
clearance considering that if something goes wrong with the transaction, it is she and her
G.R. No. 178467 had come from the head office; that in order to put the issue to rest, the counsel of the
petitioners had submitted the subject US$ 100 bills to the Bangko Sentral ng Pilipinas
SPS. CRISTINO & EDNA CARBONELL, Petitioners, (BSP) for examination; that the BSP had certified that the four US$100 bills were near
vs. perfect genuine notes;4 and that their counsel had explained by letter their unfortunate
METROPOLITAN BANK AND TRUST COMPANY, Respondent. experience caused by the respondent's release of the fake US dollar bills to them, and
had demanded moral damages of ₱10 Million and exemplary damages.5
DECISION
The petitioners then sent a written notice to the respondent, attaching the BSP
certification and informing the latter that they were giving it five days within which to
BERSAMIN, J.:
comply with their demand, or face court action.6 In response, the respondent's counsel
wrote to the petitioners on March 1996 expressing sympathy with them on their
The petitioners assail the decision promulgated on December 7, 2006, 1 whereby the experience but stressing that the respondent could not absolutely guarantee the
Court of Appeals (CA) affirmed with modification the decision rendered on May 22, genuineness of each and every foreign currency note that passed through its system; that
19982 by the Regional Trial Court, Branch 157, in Pasig City (RTC) dismissing the it had also been a victim like them; and that it had exercised the diligence required in
petitioners' complaint in Civil Case No. 65725 for its lack of merit, and awarded attorney's dealing with foreign currency notes and in the selection and supervision of its employees. 7
fees under the respondent's counterclaim.
Prior to the filing of the suit in the RTC, the petitioners had two meetings with the
Antecedents respondent's representatives. In the course of the two meetings, the latter's
representatives reiterated their sympathy and regret over the troublesome experience that
The petitioners initiated against the respondent Civil Case No. 65725, an action for the petitioners had encountered, and offered to reinstate US$500 in their dollar account,
damages, alleging that they had experienced emotional shock, mental anguish, public and, in addition, to underwrite a round-trip all-expense-paid trip to Hong Kong, but they
ridicule, humiliation, insults and embarrassment during their trip to Thailand because of were adamant and staged a walk-out.8
the respondent's release to them of five US$ 100 bills that later on turned out to be
counterfeit. They claimed that they had travelled to Bangkok, Thailand after withdrawing In its judgment rendered on May 22, 1998,9 the RTC ruled in favor of the respondent,
US$ l ,000.00 in US$ 100 notes from their dollar account at the respondent's Pateros disposing as follows:
branch; that while in Bangkok, they had exchanged five US$ 100 bills into Baht, but only
four of the US$ 100 bills had been accepted by the foreign exchange dealer because the WHEREFORE, in the light of all the foregoing, judgment is hereby rendered:
fifth one was "no good;" that unconvinced by the reason for the rejection, they had asked
a companion to exchange the same bill at Norkthon Bank in Bangkok; that the bank teller
thereat had then informed them and their companion that the dollar bill was fake; that the 1. Dismissing plaintiff’s complaint for lack of merit;
teller had then confiscated the US$ 100 bill and had threatened to report them to the
police if they insisted in getting the fake dollar bill back; and that they had to settle for a 2. On the counterclaim, awarding Metrobank the amount of ₱20,000.00 as
Foreign Exchange Note receipt.3 attorney's fees.

The petitioners claimed that later on, they had bought jewelry from a shop owner by using SO ORDERED.10
four of the remaining US$100 bills as payment; that on the next day, however, they had
been confronted by the shop owner at the hotel lobby because their four US$ 100 bills The petitioners appealed, but the CA ultimately promulgated its assailed decision on
had turned out to be counterfeit; that the shop owner had shouted at them: "You Filipinos, December 7, 2006 affirming the judgment of the RTC with the modification of deleting the
you are all cheaters!;" and that the incident had occurred within the hearing distance of award of attorney's fees, 11 to wit:
fellow travelers and several foreigners.
As to the award of attorneys fees, we agree with appellants that there is simply no factual
The petitioners continued that upon their return to the Philippines, they had confronted the and legal basis thereto.
manager of the respondent's Pateros branch on the fake dollar bills, but the latter had
insisted that the dollar bills she had released to them were genuine inasmuch as the bills
Unquestionably, appellants filed the present case for the humiliation and embarrassment situation where there is duty to act, not inadvertently but wilfully and intentionally, with a
they suffered in Bangkok. They instituted the complaint in their honest belief that they conscious indifference to consequences insofar as other persons may be affected. It
were entitled to damages as a result of appellee's issuance of counterfeit dollar notes. evinces a thoughtless disregard of consequences without exe1iing any effort to avoid
Such being the case, they should not be made answerable to attorney's fees. It is not them. 15
good public policy to put a premium on the right to litigate where such right is exercised in
good faith, albeit erroneously. In order for gross negligence to exist as to warrant holding the respondent liable therefor,
the petitioners must establish that the latter did not exert any effort at all to avoid
WHEREFORE, the appealed decision is AFFIRMED with modification that the award of unpleasant consequences, or that it wilfully and intentionally disregarded the proper
attorney's fees is deleted. protocols or procedure in the handling of US dollar notes and in selecting and supervising
its employees.
SO ORDERED.
The CA and the RTC both found that the respondent had exercised the diligence required
Issues by law in observing the standard operating procedure, in taking the necessary
precautions for handling the US dollar bills in question, and in selecting and supervising
its employees. 16 Such factual findings by the trial court are entitled to great weight and
Hence, this appeal, with the petitioners contending that the CA gravely erred in affirming
respect especially after being affirmed by the appellate court, and could be overturned
the judgment of the RTC. They insist that inasmuch as the business of banking was only upon a showing of a very good reason to warrant deviating from them.
imbued with public interest, the respondent's failure to exercise the degree of diligence
required in handling the affairs of its clients showed that it was liable not just for simple
negligence but for misrepresentation and bad faith amounting to fraud; that the CA erred In this connection, it is significant that the BSP certified that the falsity of the US dollar
in giving weight and relying on the news clippings allegedly showing that the "supernotes" notes in question, which were "near perfect genuine notes," could be detected only with
had deceived even the U.S. Secret Service and Central Intelligence Agency, for such extreme difficulty even with the exercise of due diligence. Ms. Nanette Malabrigo, BSP's
news were not based on facts. 12 Senior Currency Analyst, testified that the subject dollar notes were "highly deceptive"
inasmuch as the paper used for them were similar to that used in the printing of the
genuine notes. She observed that the security fibers and the printing were perfect except
Ruling of the Court
for some microscopic defects, and that all lines were clear, sharp and well defined. 17

The appeal is partly meritorious.

Nonetheless, the petitioners contend that the respondent should be liable for moral and
exemplary damages18 on account of their suffering the unfortunate experience abroad
The General Banking Act of 2000 demands of banks the highest standards of integrity brought about by their use of the fake US dollar bills withdrawn from the latter.
and performance. As such, the banks are under obligation to treat the accounts of their
depositors with meticulous care. 13 However, the banks' compliance with this degree of The contention cannot be upheld.
diligence is to be determined in accordance with the particular circumstances of each
case.
The relationship existing between the petitioners and the respondent that resulted from a
contract of loan was that of a creditor-debtor. 19 Even if the law imposed a high standard
The petitioners argue that the respondent was liable for failing to observe the diligence
on the latter as a bank by vi1iue of the fiduciary nature of its banking business, bad faith
required from it by not doing an act from which the material damage had resulted by
or gross negligence amounting to bad faith was absent. Hence, there simply was no legal
reason of inexcusable lack of precaution in the performance of its duties. 14 Hence, the
basis for holding the respondent liable for moral and exemplary damages. In breach of
respondent was guilty of gross negligence, misrepresentation and bad faith amounting to
contract, moral damages may be awarded only where the defendant acted fraudulently or
fraud.
in bad faith. That was not true herein because the respondent was not shown to have
acted fraudulently or in bad faith. This is pursuant to Article 2220 of the Civil Code, to wit:
The petitioners' argument is unfounded.
Article 2220. Willful injury to property may be a legal ground for awarding moral damages
Gross negligence connotes want of care in the performance of one's duties; it is a if the court should find that, under the circumstances, such damages are justly due. The
negligence characterized by the want of even slight care, acting or omitting to act in a
same rule applies to breaches of contract where defendant acted fraudulently or in which the loss or harm was not the result of a violation of a legal duty. These situations
bad faith. are often called dmimum absque injuria. 26

With the respondent having established that the characteristics of the subject dollar notes In every situation of damnum absque injuria, therefore, the injured person alone bears the
had made it difficult even for the BSP itself as the country's own currency note expert to consequences because the law affords no remedy for damages resulting from an act that
identify the counterfeiting with ease despite adhering to all the properly laid out standard does not amount to a legal injury or wrong. For instance, in BP I Express Card
operating procedure and precautions in the handling of US dollar bills, holding it liable for Corporation v. Court of Appeals ,27 the Court turned down the claim for damages of a
damages in favor of the petitioners would be highly unwarranted in the absence of proof cardholder whose credit card had been cancelled after several defaults in
of bad faith, malice or fraud on its part. That it formally apologized to them and even payment, holding therein that there could be damage without injury where the loss or
offered to reinstate the USD$500.00 in their account as well as to give them the all- harm was not the result of a violation of a legal duty towards the plaintiff. In such situation,
expense-paid round trip ticket to Hong Kong as means to assuage their inconvenience the injured person alone should bear the consequences because the law afforded no
did not necessarily mean it was liable. In civil cases, an offer of compromise is not an remedy for damages resulting from an act that did not
admission of liability, and is inadmissible as evidence against the offeror. 20
amount to a legal injury or wrong.28 Indeed, the lack of malice in the conduct complained
Even without taking into consideration the news clippings to the effect that the US Secret of precluded the recovery of damages.29
Service and Central Intelligence Agency had themselves been deceived by the 1990
series of the US dollar notes infamously known as the "supernotes," the record had Here, although the petitioners suffered humiliation resulting from their unwitting use of the
enough to show in that regard, not the least of which was the testimony of Ms. Malabrigo counterfeit US dollar bills, the respondent, by virtue of its having observed the proper
as BSP's Senior Currency Analyst about the highly deceptive nature of the subject US protocols and procedure in handling the US dollar bills involved, did not violate any legal
dollar notes and the possibility for them to pass undetected. duty towards them. Being neither guilty of negligence nor remiss in its exercise of the
degree of diligence required by law or the nature of its obligation as a banking institution,
Also, the petitioners' allegation of misrepresentation on the part of the respondent was the latter
factually unsupported.1âwphi1 They had been satisfied with the services of the
respondent for about three years prior to the incident in question.21 The incident was but was not liable for damages. Given the situation being one of damnum absque injuria, they
an isolated one. Under the law, moral damages for culpa contractual or breach of contract could not be compensated for the damage sustained.
are recoverable only if the defendant acted fraudulently or in bad faith, or is found guilty of
gross negligence amounting to bad faith, or in wanton disregard of his contractual
WHEREFORE, the Court AFFIRMS the decision promulgated on December 7, 2006;
obligations.22 The breach must be wanton, reckless, malicious or in bad faith, oppressive
and ORDERS the petitioners to pay the costs of suit.
or abusive.23 In order to maintain their action for damages, the petitioners must establish
that their injury resulted from a breach of duty that the respondent had owed to them, that
is, there must be the concurrence of injury caused to them as the plaintiffs and legal SO ORDERED.
responsibility on the part of the respondent. Underlying the award of damages is the
premise that an individual was injured in contemplation of law. In this regard, there must
first be a breach of some duty and the imposition of liability for that breach before
damages may be awarded; and the breach of such duty should be the proximate cause of
the injury. 24 That was not so in this case.

It is true that the petitioners suffered embarrassment and humiliation in Bangkok. Yet, we
should distinguish between damage and injury. In The Orchard Golf & Country Club, Inc.
v. Yu, 25 the Court has fittingly pointed out the distinction, viz.:

x x x Injury is the illegal invasion of a legal right, damage is the loss, hurt, or harm which
results from the injury; and damages are the recompense or compensation awarded for
the damage suffered. Thus, there can be damage without injury in those instances in
G.R. No. 194589, September 21, 2015 2009,5 placing the petitioner bank under receivership and appointed the PDIC
as receiver of the bank pursuant to Section 30 of Republic Act (R.A.) No.
BALAYAN BAY RURAL BANK, INC., REPRESENTED BY ITS STATUTORY 7653.6
LIQUIDATOR, THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, Petitioner, v. NATIONAL LIVELIHOOD DEVELOPMENT After the petitioner bank was placed under receivership, NLDC filed a Motion
CORPORATION, Respondent. for Substitution of Party and Set the Case for Pre-Trial.7 Invoking Section 19,
Rule 3 of the Revised Rules of Court, the NLDC claimed that by virtue of
transfer of interest of the petitioner bank to the PDIC, the latter may be
DECISION
substituted as party or joined with the original party.
PEREZ, J.: The motion was duly opposed by the petitioner bank contending that the PDIC
is not the real party in interest in the instant case because it does not stand to
This is a Petition for Review on Certiorari1 filed by petitioner Balayan Bay Rural be benefited or injured by the judgment in the suit. It argued that the PDIC is
Bank (Batangas), Inc. (petitioner bank), seeking to reverse and set aside the merely the Statutory Receiver/Liquidator of all banks placed by the Monetary
11 June 2010 Order2 of the Regional Trial Court (RTC) of Makati City, Branch Board under receivership and is merely a representative of the petitioner bank
147. In its assailed Order, the RTC granted the Motion for Substitution of which remains as the real party in interest. The substitution of the PDIC as
parties filed by respondent National Livelihood Development Corporation defendant in this case is therefore not proper.8
(NLDC) and ordered that the Philippine Deposit Insurance Corporation (PDIC)
be substituted or joined as co-defendant in Civil Case No. 09-917. The On 11 June 2010, the RTC issued an Order granting the Motion for
dispositive portion of the assailed RTC Order Substitution filed by NLDC and directed that the PDIC be substituted or joined
reads:chanRoblesvirtualLawlibrary as co-defendant in the case. In sustaining the NLDC, the court a quo ruled
that the prosecution or defense of the action must be done thru the liquidator,
WHEREFORE, premises considered, the Motion for Substitution of Part is lest, no suit for or against the insolvent entity would prosper.
hereby GRANTED. Accordingly, PDIC is hereby ordered substituted or joined
as co-defendant in this case.3ChanRoblesVirtualawlibrary Arguing that the substitution is not proper in the instant case since the PDIC
ChanRoblesVirtualawlibrary is not the real party in interest but was merely tasked to conserve the assets
The Facts of the bank for the benefit of its creditors, petitioner bank elevated the matter
before the Court on question of law via this instant Petition for Review
Petitioner bank is a banking institution duly authorized by the Central Bank to on Certiorari.9
engage in banking business before it was placed under receivership by the
Bangko Sentral ng Pilipinas on 26 November 2009. In the interregnum, the RTC issued a Decision10 in Civil Case No. 09-917
dated 18 June 2010 in favor of the NLDC thereby ordering the petitioner bank
NLDC, on the other hand, is a government institution created to promote and to pay the former the amount of P1,603,179.86 representing its unpaid loan
generate the development of livelihood and community-based enterprises by obligation. The RTC disposed in this wise:chanRoblesvirtualLawlibrary
virtue of Executive Order No. 715 (1981). WHEREFORE, premises considered, judgment is hereby rendered in favor of
the [NLDC] and against [petitioner bank], ordering the [petitioner bank] to
On 12 October 2009, NLDC filed a complaint for collection of sum of money pay [NLDC] the amount of P1,603,179.86 inclusive of interest and surcharges
against petitioner bank for the latter's unpaid obligation in the amount of as actual damages and P30,000.00 as attorney's
P1,603,179.86 before the RTC of Makati City. The case was docketed as Civil fees.11ChanRoblesVirtualawlibrary
Case No. 09-917 and was raffled to Branch 147 of the trial court.4 While the petitioner bank made no objection to the afore-quoted ruling, it
maintained that the lower court committed an error of law in issuing the 11
During the pendency of the case before the RTC, the Bangko Sentral ng June 2010 Order.12 For the resolution of the Court is the sole issue
Pilipinas, thru the Monetary Board, issued MIN-70-26 November of:chanRoblesvirtualLawlibrary
 Issue its directive to include the PDIC in the case is erroneous.

WHETHER OR NOT THE 11 JUNE 2010 RTC ORDER WHICH DIRECTED THE For one, the properties of an insolvent bank are not transferred by operation
SUBSTITUTION OF THE PDIC AS DEFENDANT OR ITS INCLUSION THEREIN AS of law to the statutory receiver/liquidator but rather these assets are just held
CO-DEFENDANT IS CONTRARY TO LAW.ChanRoblesVirtualawlibrary in trust to be distributed to its creditors after the liquidation proceedings in
ChanRoblesVirtualawlibrary accordance with the rules on concurrence and preference of credits.17 The
The Court's Ruling debtors properties are then deemed to have been conveyed to the Liquidator
in trust for the benefit of creditors, stockholders and other persons in
We deny the petition. interest.18 This notwithstanding, any lien or preference to any property shall
be recognized by the Liquidator in favor of the security or lienholder, to the
The instant case involves a disputed claim of sum of money against a closed extent allowed by law, in the implementation of the liquidation plan.19
financial institution. After the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the In addition, the insolvent bank's legal personality is not dissolved by virtue of
trustee of its assets for the equal benefit of all the creditors, including being placed under receivership by the Monetary Board. It must be stressed
depositors.13The assets of the insolvent banking institution are held in here that a bank retains its juridical personality even if placed under
trust for the equal benefit of all creditors, and after its insolvency, one conservatorship; it is neither replaced nor substituted by the conservator who
cannot obtain an advantage or a preference over another by an attachment, shall only take charge of the assets, liabilities and the management of the
execution or otherwise.14 Towards this end, the PDIC, as the statutory institution.20
receiver/liquidator of the bank, is mandated to immediately gather and take
charge of all the assets and liabilities of the institution and administer the It being the fact that the PDIC should not be considered as a substitute or as
same for the benefit of its creditors.15 a co-defendant of the petitioner bank but rather as a representative party or
someone acting in fiduciary capacity, the insolvent institution shall remain in
As the fiduciary of the properties of a closed bank, the PDIC may prosecute or the case and shall be deemed as the real party in interest.21 Nowhere in
defend the case by or against the said bank as a representative party while Section 3, Rule 3 of the Revised Rules of Court is it stated or, at the very least
the bank will remain as the real party in interest pursuant to Section 3, Rule 3 implied, that the representative is likewise deemed as the real party in
of the Revised Rules of Court which provides:chanRoblesvirtualLawlibrary interest.22 The said rule simply states that, in actions which are allowed to be
SEC. 3. Representatives as parties.- Where the action is allowed to be prosecuted or defended by a representative, the beneficiary shall be deemed
prosecuted or defended by a representative or someone acting in a fiduciary the real party in interest and, hence, should be included in the title of the
capacity, the beneficiary shall be included in the title of the case and shall be case.
deemed to be the real party in interest. A representative may be a trustee of
an express trust, a guardian, an executor or administrator, or a party In Manalo v. Court of Appeals,23 the Court validated the right of a bank which
authorized by law or these Rules. An agent acting in his own name and for the was placed under receivership to continue litigating the petition for the
benefit of an undisclosed principal may sue or be sued without joining the issuance of writ of possession and dismissed the position assumed by
principal except when the contract involves things belonging to the petitioner therein that a closed bank cannot maintain a suit against its debtor,
principal.ChanRoblesVirtualawlibrary thus:chanRoblesvirtualLawlibrary
The inclusion of the PDIC as a representative party in the case is therefore Petitioner next casts doubt on the capacity of the respondent to continue
grounded on its statutory role as the fiduciary of the closed bank which, under litigating the petition for the issuance of the writ. He asserts that, being under
Section 3016 of R.A. 7653 (New Central Bank Act), is authorized to conserve liquidation, respondent bank is already a "dead" corporation that cannot
the latter's property for the benefit of its creditors. maintain the suit in the RTC. Hence, no writ may be issued in its favor.

While we agree with the conclusion reached by the RTC that the PDIC should The argument is devoid of merit. A bank which had been ordered closed
be included in Civil Case No. 09-917, its reliance on Section 19, Rule 3 of the by the monetary board retains its juridical personality which can sue
Revise Rules of Court on transfer of interest pendente lite as justification for and be sued through its liquidator. The only limitation being that the
prosecution or defense of the action must be done through the
liquidator. Otherwise, no suit for or against an insolvent entity would
prosper. In such situation, banks in liquidation would lose what justly belongs
to them through a mere technicality.24 (Emphasis
supplied)ChanRoblesVirtualawlibrary
In fine, the legal personality of the petitioner bank is not ipso facto dissolved
by insolvency; it is not divested of its capacity to sue and be sued after it was
ordered by the Monetary Board to cease operation. The law mandated,
however, that the action should be brought through its statutory
liquidator/receiver which in this case is the PDIC. The authority of the PDIC to
represent the insolvent bank in legal actions emanates from the fiduciary
relation created by statute which reposed upon the receiver the task of
preserving and conserving the properties of the insolvent for the benefit of its
creditors.

WHEREFORE, premises considered, the instant petition is hereby DENIED.

SO ORDERED.
G.R. No. 200678, June 04, 2018 In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek
the help of Bangko Sentral. In a letter dated October 9, 2003, Banco Filipino
BANCO FILIPINO SAVINGS AND MORTGAGE asked for financial assistance of more than P3,000,000,000.00 through
BANK, Petitioner, v. BANGKO SENTRAL NG PILIPINAS AND THE emergency loans and credit easement terms.9 In a letter10 dated November
MONETARY BOARD, Respondents. 21, 2003, Bangko Sentral informed Banco Filipino that it should first comply
with certain conditions imposed by Republic Act No. 7653 before financial
assistance could be extended. Banco Filipino was also required to submit a
DECISION
rehabilitation plan approved by Bangko Sentral before emergency loans could
be granted.
LEONEN, J.:
In a letter11 dated April 14, 2004, Banco Filipino submitted its Long-Term
A bank which has been ordered closed by the Bangko Sentral ng Pilipinas Business Plan to Bangko Sentral. It also claimed that Bangko Sentral already
(Bangko Sentral) is placed under the receivership of the Philippine Deposit extended similar arrangements to other banks and that it was still awaiting
Insurance Corporation. As a consequence of the receivership, the closed bank the payment of P18,800,000,000.00 in damage claims, "the entitlement to
may sue and be sued only through its receiver, the Philippine Deposit which the Supreme Court has already decided with finality."12
Insurance Corporation. Any action filed by the closed bank without its receiver
may be dismissed.
In response, Bangko Sentral informed Banco Filipino that its business plan
could not be acted upon since it was neither "confirmed nor approved by
This is a Petition for Review on Certiorari1 assailing the Court of Appeals July [Banco Filipino's Board of Directors]."13
28, 2011 Decision2 and February 16, 2012 Resolution3 in CA-G.R. SP No.
116905, which dismissed Civil Case No. 10-1042 and held that the trial court
On July 8, 2004, Banco Filipino filed a Petition for Revival of Judgment with
had no jurisdiction over Bangko Sentral and the Monetary Board.
the Regional Trial Court of Makati to compel Bangko Sentral to approve its
business plan. The case was docketed as Civil Case No. 04-823 and was
On December 11, 1991, this Court promulgated Banco Filipino Savings & raffled to Branch 62.14
Mortgage Bank v. Monetary Board and Central Bank of the Philippines,4 which
declared void the Monetary Board's order for closure and receivership of
During the pendency of its Petition, Banco Filipino entered into discussions
Banco Filipino Savings & Mortgage Bank (Banco Filipino). This Court also
and negotiations with Bangko Sentral, which resulted to seven (7) revisions in
directed the Central Bank of the Philippines and the Monetary Board to
the business plan. Thus, Banco Filipino filed a Proposal for Settlement dated
reorganize Banco Filipino and to allow it to resume business under the
September 21, 2007 before Branch 62, Regional Trial Court, Makati City to
comptrollership of both the Central Bank and the Monetary Board.5
settle the issues between the parties.15

Banco Filipino subsequently filed several Complaints before the Regional Trial
On April 8, 2009, Banco Filipino submitted its 8th Revised Business Plan to
Court, among them a claim for damages in the total amount of
Bangko Sentral for evaluation.16 In this business plan, Banco Filipino
P18,800,000,000.00.6
requested, among others, a P25,000,000,000.00 income enhancement loan.
Unable to come to an agreement, the parties constituted an Ad Hoc
On June 14, 1993, Congress passed Republic Act No. 7653,7 providing for the Committee composed of representatives from both parties to study and act on
establishment and organization of Bangko Sentral as the new monetary the proposals. The Ad Hoc Committee produced an Alternative Business Plan,
authority. which was accepted by Banco Filipino, but was subject to the Monetary
Board's approval.17
On November 6, 1993, pursuant to this Court's 1991 Banco Filipino Decision,
the Monetary Board issued Resolution No. 427, which allowed Banco Filipino In a letter18 dated December 4, 2009, Bangko Sentral informed Banco Filipino
to resume its business.8 that the Monetary Board issued Resolution No. 1668 granting its request for
the P25,000,000,000.00 Financial Assistance and Regulatory Reliefs to form In a letter31 dated September 13, 2010, CVC Law told Banco Filipino that the
part of its Revised Business Plan and Alternative Business Plan. The approval matter was referred to it as an incident of Civil Case No. 04-823, which it was
was also subject to certain terms and conditions, among which was the handling on behalf of Bangko Sentral. It also informed Banco Filipino that the
withdrawal or dismissal with prejudice to all pending cases filed by Banco latter's rejection of the terms and conditions of Resolution No. 1668 made this
Filipino against Bangko Sentral and its officials.19 The terms also included the Resolution legally unenforceable.
execution of necessary quitclaims and commitments to be given by Banco
Filipino's principal stockholders, Board of Directors, and duly authorized Banco Filipino sent letters32 dated September 22, 2010 and September 28,
officers "not to revive or refile such similar cases in the future."20 2010, questioning the legality of Bangko Sentral's referral to private counsel
and reiterating that the terms and conditions embodied in Resolution No.
In a letter21 dated January 20, 2010, Banco Filipino requested reconsideration 1668 were not meant to be a settlement of its P18,800,000,000.00 damage
of the terms and conditions of the P25,000,000,000.00 Financial Assistance claim against Bangko Sentral.
and Regulatory Reliefs package, noting that the salient features of the
Alternative Business Plan were materially modified.22 However, in a In a letter33 dated October 4, 2010, Bangko Sentral reiterated that its referral
letter23 dated April 8, 2010, Banco Filipino informed Bangko Sentral that it of the matter to CVC Law was due to the matter being incidental to the civil
was constrained to accept the "unilaterally whittled down version of the case pending before the Regional Trial Court.
[P25,000,000,000.00] Financial Assistance Package and Regulatory
Reliefs."24 It, however, asserted that it did not agree with the condition to
On October 20, 2010, Banco Filipino filed a Petition For Certiorari and
dismiss and withdraw its cases since this would require a separate
Mandamus with prayer for issuance of a temporary restraining order and writ
discussion.25
of preliminary injunction34 before Branch 66, Regional Trial Court, Makati City,
docketed as Civil Case No. 10-1042. It assailed the alleged "arbitrary,
In a letter26 dated April 19, 2010, Bangko Sentral informed Banco Filipino that capricious and illegal acts"35 of Bangko Sentral and of the Monetary Board in
it was surprised by the latter's hesitation in accepting the terms and coercing Banco Filipino to withdraw all its present suits in exchange of the
conditions, in particular, the withdrawal of the cases against it, since this approval of its Business Plan. In particular, Banco Filipino alleged that Bangko
condition had already been discussed from the start of the negotiations Sentral and the Monetary Board committed grave abuse of discretion in
between the parties.27 imposing an additional condition in Resolution No. 1668 requiring it to
withdraw its cases and waive all future cases since it was unconstitutional and
In a letter28 dated June 21, 2010, Banco Filipino informed Bangko Sentral that contrary to public policy. It prayed that a writ of mandamus be issued to
it never accepted the condition of the withdrawal of the cases in prior compel Bangko Sentral and the Monetary Board to approve and implement its
negotiations but was willing to discuss this condition as a separate and distinct business plan and release its Financial Assistance and Regulatory Reliefs
matter. package.36

In a letter29 dated August 10, 2010, Bangko Sentral and the Monetary Board, The trial court issued a Notice of Hearing on the prayer for a temporary
through counsel CVC Law, informed Banco Filipino that its rejection of certain restraining order on the same day, setting the hearing on October 27, 2010.37
portions of Resolution No. 1668, particularly its refusal to withdraw all cases
filed against Bangko Sentral, was deemed as a failure to reach a mutually On October 27, 2010, Bangko Sentral and the Monetary Board filed their
acceptable settlement. Motion to Dismiss Ad Cautelam,38 assailing the Regional Trial Court's
jurisdiction over the subject matter and over the persons of Bangko Sentral
In a letter30 dated August 13, 2010, Banco Filipino questioned the legality of and the Monetary Board. Banco Filipino, on the other hand, filed its
referring the matter to private counsel and stated that it had not been notified Opposition39 to this Petition.
of the action taken on the acceptance of its Business Plan.
In its October 28, 2010 Order,40 the Regional Trial Court granted the request furnished Bangko Sentral a copy of the Petition. It also held that Bangko
for the issuance of a temporary restraining order against Bangko Sentral and Sentral's subsequent participation in the preliminary hearing and its receipt of
the Monetary Board. The dispositive portion of this Order read: the summons on October 28, 2010 satisfied the requirements of procedural
due process.48
WHEREFORE, premises considered and pursuant to Rule 58 of the Revised
Rules of Court, Petitioner's prayer for a Temporary Restraining Order is hereby The trial court likewise found that litis pendencia and forum shopping were not
GRANTED. Respondent[s] Ban[gk]o Sentral ng Pilipinas and [t]he Monetary present in the case, that Bangko Sentral's verification and certification of non-
Board, as well as [their] representatives, agents, assigns and/or third person forum shopping were validly signed by the Executive Committee, and that
or entity acting for and [their] behalf are hereby enjoined from (a) employing Banco Filipino's Petition did not fail to state a cause of action.49
acts inimical to the enforcement and implementation of the approv[ed]
Business Plan, (b) continuing and committing acts prejudicial to Petitioner's On November 25, 2010, Bangko Sentral and the Monetary Board filed another
operations, (c) withdrawing or threatening to withdraw the approval of the Petition for Certiorari50 with prayer for temporary restraining order and writ of
Business Plan containing financial assistance, and package of regulatory preliminary injunction with the Court of Appeals, this time assailing the
reliefs, and (d) otherwise enforcing other regulatory measures and abuses November 17, 2010 Order. The case was docketed as CA-G.R. SP No. 116905.
calculated to coerce Banco Filipino Savings and Mortgage Bank into agreeing However, the trial court issued a writ of preliminary injunction on November
to drop and/or withdraw its suits and damage claims against BSP and MB, and 18, 201051 so they filed their Urgent Motion to Admit Attached Amended
to waive future claims against Respondents or their official[s] and employees. Petition52 with the Court of Appeals to include the Issuance.

Further, the Court directs Sheriff Leodel N. Roxas to personally serve a copy In the meantime, or on November 23, 2010, Bangko Sentral and the
of this Order to the herein Respondent Ban[gk]o Sentral ng Pilipinas and [t]he Monetary Board filed a Motion to Admit Attached Supplemental Petition for
Monetary Board. Finally, let this case be set on November 11, 2010 and Certiorari with Application for Interim Relief53 in CA-G.R. SP No. 116627
November 12, 2010 both at 2:00 in the afternoon for hearing on the prayer seeking to include the trial court's October 28, 2010 Order.
for issuance of a Writ of Preliminary Mandatory Injunction.
In its December 28, 2010 Resolution,54 the Court of Appeals granted55 Bangko
SO ORDERED.41 Sentral and the Monetary Board's Urgent Motion to Admit Attached Amended
Petition in CA-G.R. SP No. 116905.
On the same day or on October 28, 2010, summons was served on Bangko
Sentral through a staff member of the Office of the Governor, as certified by Meanwhile, Banco Filipino filed its Opposition dated January 18, 2011 in CA-
the Process Server's Return dated November 4, 2010.42 G.R. SP No. 116905.56

On November 5, 2010, Bangko Sentral and the Monetary Board filed a Petition After oral arguments were held on February 7, 2011,57 the Court of Appeals
For Certiorari with prayer for temporary restraining order and/or writ of issued its February 14, 2011 Resolution58 in CA-G.R. SP No. 116905. It
preliminary injunction43 with the Court of Appeals, assailing the Regional Trial granted the application for a writ of preliminary injunction and enjoined the
Court's October 28, 2010 Order for having been issued without jurisdiction. trial court from conducting further proceedings in Civil Case No. 10-1042
The Petition was docketed as CA-G.R. SP No. 116627.44 pending a decision on the merits.

On November 17, 2010, the trial court issued an Order45 denying the Bangko On February 16, 2011, Banco Filipino filed an Urgent Motion for
Sentral and the Monetary Board's Motion to Dismiss Ad Cautelam, stating that Consolidation59 in CA-G.R. SP No. 116905, requesting for the consolidation of
the acts complained of pertained to Bangko Sentral 's regulatory functions, the two (2) Petitions for Certiorari filed by Bangko Sentral and the Monetary
not its adjudicatory functions.46 It likewise stated that as requested in the Board before the Court of Appeals. On March 1, 2011, it also filed a Motion for
handwritten letter47 dated October 21, 2010 by Bangko Sentral's general Reconsideration60 of the Court of Appeals February 14, 2011 Resolution.
counsel requesting for an advanced copy of Banco Filipino's Petition, it
In its June 2, 2011 Resolution,61 the Court of Appeals in CA-G.R. SP No. Accordingly, the writ of preliminary injunction issued by this Court on
116905 denied Banco Filipino's Motion for Reconsideration, holding that February 14, 2011, enjoining respondent Judge, private respondent and their
special civil actions against quasi-judicial agencies should be filed before the representatives from conducting further proceedings in Civil Case No. 10-
Court of Appeals, not before a trial court.62 The Court of Appeals also denied 1042, is hereby made PERMANENT.
the Urgent Motion for Consolidation for the following reasons:
SO ORDERED.69
1) [I]t would cause not only further congestion of the already congested
docket of the ponente of CA-G.R. SP No. 116627, but also in the delay in the Banco Filipino filed a Motion for Reconsideration,70 which was denied by the
disposition of both cases; 2) the subject matters and issues raised in the Court of Appeals in its February 16, 2012 Resolution.71 Hence, it filed this
instant petition are different from those set forth in CA-G.R. SP No. 116627, Petition72 on April 10, 2012 against Bangko Sentral and the Monetary Board
hence, they can be the subject of separate: petitions; and 3) Since a writ of before this Court.
preliminary injunction was earlier issued, Section 2 (d), Rule VI of the 2009
IRCA requires that the instant petition remain with the
Petitioner claims that it had the authority to file this Petition since the Court of
undersigned ponente for decision on the merits with dispatch.63
Appeals promulgated its January 27, 2012 Decision in CA-G.R. SP No.
118599, finding petitioner's closure and receivership to have been illegal.73 It
On July 28, 2011, the Court of Appeals rendered its Decision64 in CA-G.R. SP argues that to dismiss its Petition now pending before this Court for lack of
No. 116905 granting Bangko Sentral and the Monetary Board's Amended authority from its receiver Philippine Deposit Insurance Corporation would be
Petition. According to the Court of Appeals, the trial court had no jurisdiction "an absurd and unjust situation."74 Petitioner admits, however, that this
over the Petition for Certiorari and Mandamus filed by Banco Filipino since decision was eventually overturned on reconsideration75 in the Court of
special civil actions against quasi-judicial agencies are only cognizable by the Appeals November 21, 2012 Amended Decision.76
Court of Appeals.65 It also found that the trial court gravely abused its
discretion in acquiring jurisdiction over Bangko Sentral and the Monetary
Petitioner points out that there was nothing in the Philippine Deposit
Board by reason of their voluntary appearance in the preliminary hearing
Insurance Corporation Charter or in Republic Act No. 7653 that precludes its
since their counsel had made it clear that the appearance was specifically to
Board of Directors from suing on its behalf. It adds that there was an obvious
question the absence of a service of summons.66
conflict of interest in requiring it to seek Philippine Deposit Insurance
Corporation's authority to file the case considering that Philippine Deposit
The Court of Appeals likewise found that the delegation of authority from Insurance Corporation was under the control of herein respondent Monetary
Banco Filipino's Board of Directors to the Executive Committee to sign Board.77
pleadings on its behalf validated the verification and certification of non-forum
shopping signed only by the Executive Vice Presidents.67 It also ruled that
Petitioner asserts that the trial court had jurisdiction over special civil actions
there was no litis pendencia or forum shopping in the case docketed as Civil
against respondents, accordingly with Merchants Rural Bank of Talavera v.
Case No. 10-1042 despite the pendency of Civil Case No. 04-823 since the
Monetary Board, et al.,78 a decision promulgated by the Court of Appeals in
causes of action and the reliefs prayed for were not the same.68 The
2006.79
dispositive portion of the Court of Appeals July 28, 2011 Decision read:

Petitioner likewise argues that the trial court acquired jurisdiction over
WHEREFORE, the petition is GRANTED. The Order dated November 17, 2010
respondents considering that they were able to participate in the summary
issued by respondent Judge Joselito C. Villarosa of the Regional Trial Court
hearing. It points out that respondents questioned before the trial court the
(RTC), Branch 66, Makati City, in Civil Case No. 10-1042, is ANNULLED and
service of the petition on October 21, 2010 but never actually questioned the
SET ASIDE. In lieu thereof, judgment is hereby rendered. DISMISSING Civil
service of summons on October 28, 2010 until it filed its petition with the
Case No. 10-1042 on the ground of the RTC's lack of jurisdiction over the
Court of Appeals.80 It argues that respondents' private counsel was present
same.
during the raffle of the case on October 21, 2010 and even assisted
respondents' general counsel in receiving copies of the petition that the latter
requested, showing that respondents' due process was never violated.81 It Respondents likewise claim that their filing of their Petition before the Court of
asserts that the Court of Appeals should have dismissed outright respondents' Appeals without a prior motion for reconsideration was justified by certain
Petition for Certiorari for "maliciously omitt[ing]" the handwritten letter dated exceptional circumstances. They mention, among others, the trial court's lack
October 21, 2010 of their general counsel.82 It likewise points out that of jurisdiction, the fact that the issues have already been raised and passed
respondents failed to file a motion for reconsideration before the trial court upon by the trial court, the prejudice to government interest in delaying the
before filing their petition for certiorari with the Court of Appeals.83 case, and their denied due process because of the improper service of
summons.95 They further argue that the only significance of the October 21,
Respondents, on the other hand, counter that the Petition should be dismissed 2010 handwritten letter was to show that respondents were informed that a
outright for being filed without Philippine Deposit Insurance Corporation's Petition was filed, and not that the trial court had. already acquired
authority. It asserts that petitioner was placed under receivership on March jurisdiction over their persons.96
17, 2011, and thus, petitioner's Executive Committee would have had no
authority to sign for or on behalf of petitioner absent the authority of its From the arguments of the parties, this Court is asked to resolve the following
receiver, Philippine Deposit Insurance Corporation.84 They also point out that issues:
both the Philippine Deposit Insurance Corporation Charter and Republic Act
No. 7653 categorically state that the authority to file suits or retain counsels First, whether or not trial courts have jurisdiction to take cognizance of a
for closed banks is vested in the receiver.85 Thus, the verification and petition for certiorari against acts and omissions of the Monetary Board;
certification of non-forum shopping signed by petitioner's Executive
Committee has no legal effect.86
Second, whether or not respondents Bangko Sentral ng Pilipinas and the
Monetary Board should have filed a motion for reconsideration of the trial
Respondents likewise claim that the Court of Appeals did not err in finding court's denial of their motion to dismiss before filing their petition for certiorari
that the trial court had no jurisdiction over respondents. It cited this Court's before the Court of Appeals; and
ruling in United Coconut Planters Bank v. E. Ganzon, Inc.87 and National Water
Resources Board v. A. L. Ang Network,88 where this Court categorically stated
Finally, whether or not the trial court validly acquired jurisdiction over
that special civil cases filed against quasi-judicial agencies must be filed
respondents Bangko Sentral ng Pilipinas and the Monetary Board.
before the Court of Appeals.89 They argue that there was no showing
that Merchants Rural Bank of Talavera was ever upheld by this Court.90 They
contend that petitioner should be estopped from raising the issue of However, before any of these issues can be addressed, this Court must first
jurisdiction considering that during the pendency of this case, or on March 21, resolve the issue of whether or not petitioner Banco Filipino, as a closed bank
2011 and November 20, 2011, it filed two (2) separate petitions for certiorari under receivership, could file this Petition for Review without joining its
against respondent Monetary Board directly before the Court of Appeals.91 statutory receiver, the Philippine Deposit Insurance Corporation, as a party to
the case.
Respondents maintain that the trial court did not acquire jurisdiction over
them since there was no valid service of summons. They argue that when I
they filed their Motion to Dismiss on October 27, 2010, they could not have
validly argued the propriety of the summons on them on October 28, A closed bank under receivership can only sue or be sued through its receiver,
2010.92 They likewise contend that their voluntary appearance in the the Philippine Deposit Insurance Corporation.
summary hearing before the trial court was not a submission to the trial
court's jurisdiction since they consistently manifested that their appearance Under Republic Act No. 7653,97 when the Monetary Board finds a bank
would be special and limited to raise the issues of jurisdiction.93 They also insolvent, it may "summarily and without need for prior hearing forbid the
assert that the service of summons to a staff member of the Office of the institution from doing business in the Philippines and designate the Philippine
Governor General is not equivalent to the service of summons to the Governor Deposit Insurance Corporation as receiver of the banking institution."98
General, making the service of summons ineffective.94
Before the enactment of Republic Act No. 7653, an insolvent bank under In Republic Act No. 7653, this provision is substantially altered. Section 30
liquidation could not sue or be sued except through its liquidator. now states, in part:
In Hernandez v. Rural Bank of Lucena:99
The receiver shall immediately gather and take charge of all the assets and
[A]n insolvent bank, which was under the control of the finance commissioner liabilities of the institution, administer the same for the benefit of its creditors,
for liquidation, was without power or capacity to sue or be sued, prosecute or and exercise the general powers of a receiver under the Revised Rules of
defend, or otherwise function except through the finance commissioner or Court but shall not, with the exception of administrative expenditures, pay or
liquidator.100 commit any act that will involve the transfer or disposition of any asset of the
institution: Provided, That the receiver may deposit or place the funds of the
This Court in Manalo v. Court of Appeals101 reiterated this principle: institution in non-speculative investments. The receiver shall determine as
soon as possible, but not later than ninety (90) days from take-over, whether
the institution may be rehabilitated or otherwise placed in such a condition so
A bank which had been ordered closed by the monetary board retains its
that it may be permitted to resume business with safety to its depositors and
juridical personality which can sue and be sued through its liquidator. The only
creditors and the general public: Provided, That any determination for the
limitation being that the prosecution or defense of the action must be done
resumption of business of the institution shall be subject to prior approval of
through the liquidator. Otherwise, no suit for or against an insolvent entity
the Monetary Board.
would prosper.102

If the receiver determines that the institution cannot be rehabilitated or

Under the old Central Bank Act, or Republic Act No. 265,103 as
permitted to resume business in accordance with the next preceding
amended,104 the same principle applies to the receiver appointed by the
paragraph, the Monetary Board shall notify in writing the board of directors of
Central Bank. The law explicitly stated that a receiver shall "represent the
its findings and direct the receiver to proceed with the liquidation of the
[insolvent] bank personally or through counsel as he [or she] may retain in all
institution. The receiver shall:
actions or proceedings for or against the institution." Section 29 of the old law
states:
(1) file ex parte with the proper regional trial court, and without requirement
of prior notice or any other action, a petition for assistance in the liquidation
Section 29. Proceedings upon insolvency. — Whenever, upon examination by
of the institution pursuant to a liquidation plan adopted by the Philippine
the head of the appropriate supervising or examining department or his
Deposit Insurance Corporation for general application to all closed banks. In
examiners or agents into the condition of any bank or non-bank financial
case of quasi-banks, the liquidation plan shall be adopted by the Monetary
intermediary performing quasi-banking functions, it shall be disclosed that the
Board. Upon acquiring jurisdiction, the court shall, upon motion by the
condition of the same is one of insolvency, or that its continuance in business
receiver after due notice, adjudicate disputed claims against the institution,
would involve probable loss to its depositors or creditors, it shall be the duty
assist the enforcement of individual liabilities of the stockholders, directors
of the department head concerned forthwith, in writing, to inform the
and officers, and decide, on other issues as may be material to implement the
Monetary Board of the facts. The Board may, upon finding the statements of
liquidation plan adopted. The receiver shall pay the cost of the proceedings
the department head to be true, forbid the institution to do business in the
from the assets of the institution.
Philippines and designate an official of the Central Bank or a person of
recognized competence in banking or finance, as receiver to immediately take
charge of its assets and liabilities, as expeditiously as possible collect and (2) convert the assets of the institution to money, dispose of the same to
gather all the assets and administer the same for the benefit of its creditors, creditors and other parties, for the purpose of paying the debts of such
and represent the bank personally or through counsel as he [or she] may institution in accordance with the rules on concurrence and preference of
retain in all actions or proceedings for or against the institution, exercising all credit under the Civil Code of the Philippines and he may, in the name of the
the powers necessary for these purposes including, but not limited to, institution, and with the assistance of counsel as he may retain, institute such
bringing and foreclosing mortgages in the name of the bank or non-bank actions as may be necessary to collect and recover accounts and assets of, or
financial intermediary performing quasi-banking functions. defend any action against, the institution. The assets of an institution under
receivership or liquidation shall be deemed in custodia legis in the hands of capacity, the beneficiary shall be included in the title of the case and shall be
the receiver and shall, from the moment the institution was placed under such deemed to be the real party in interest. A representative may be a trustee of
receivership or liquidation, be exempt from any order of garnishment, levy, an express trust, a guardian, an executor or administrator, or a party
attachment, or execution. (Emphasis supplied) authorized by law or these Rules. An agent acting in his own name and for the
benefit of an undisclosed principal may sue or be sued without joining the
The relationship between the Philippine Deposit Insurance Corporation and a principal except when the contract involves things belonging to the principal.
closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653 directs
the receiver of a closed bank to "immediately gather and take charge of all The inclusion of the PDIC as a representative party in the case is therefore
the assets and liabilities of the institution" and "administer the same for the grounded on its statutory role as the fiduciary of the closed bank which, under
benefit of its creditors."105 Section 30 of R.A. 7653 (New Central Bank Act), is authorized to conserve the
latter's property for the benefit of its creditors.110 (Citation omitted)
The law likewise grants the receiver "the general powers of a receiver under
the Revised Rules of Court."106 Under Rule 59, Section 6 of the Rules of Court, For this reason, Republic Act No. 3591,111 or the Philippine Deposit Insurance
"a receiver shall have the power to bring and defend, in such capacity, actions Corporation Charter, as amended,112 grants Philippine Deposit Insurance
in his [or her] own name."107 Thus, Republic Act No. 7653 provides that the Corporation the following powers as a receiver:
receiver shall also "in the name of the institution, and with the assistance of
counsel as [it] may retain, institute such actions as may be necessary to (c) In addition to the powers of a receiver pursuant to existing laws, the
collect and recover accounts and assets of, or defend any action against, the Corporation is empowered to:
institution."108 Considering that the receiver has the power to take charge
of all the assets of the closed bank and to institute for or defend any action
(1) bring suits to enforce liabilities to or recoveries of the closed bank;
against it, only the receiver, in its fiduciary capacity, may sue and be sued on
behalf of the closed bank.
....
In Balayan Bay Rural Bank v. National Livelihood Development
Corporation,109 this Court explained that a receiver of a closed bank is tasked (6) hire or retain private counsels as may be necessary;
with the duty to hold the assets and liabilities in trust for the benefit of the
bank's creditors. ....

As fiduciary of the insolvent bank, Philippine Deposit Insurance Corporation (9) exercise such other powers as are inherent and necessary for the effective
conserves and manages the assets of the bank to prevent the assets' discharge of the duties of the Corporation as a receiver.113
dissipation. This includes the power to bring and defend any action that
threatens to dissipate the closed bank's assets. Balayan Bay Rural Balayan Bay Rural Bank summarized, thus:
Bank explained that Philippine Deposit Insurance Corporation does so, not as
the real party-in-interest, but as a representative party, thus: [T]he legal personality of the petitioner bank is not ipso facto dissolved by
insolvency; it is not divested of its capacity to sue and be sued after it was
As the fiduciary of the properties of a closed bank, the PDIC may prosecute or ordered by the Monetary Board to cease operation. The law mandated,
defend the case by or against the said bank as a representative party while however, that the action should be brought through its statutory
the bank will remain as the real party in interest pursuant to Section 3, Rule 3 liquidator/receiver which in this case is the PDIC. The authority of the PDIC to
of the Revised Rules of Court which provides: represent the insolvent bank in legal actions emanates from the fiduciary
relation created by statute which reposed upon the receiver the task of
SEC. 3. Representatives as parties. — Where the action is allowed to be preserving and conserving the properties of the insolvent for the benefit of its
prosecuted or defended by a representative or someone acting in a fiduciary creditors.114
Petitioner contends that it was not a closed bank at the time of the filing of Philippine Deposit Insurance Corporation also safeguards the interests of the
this Petition on April 10, 2012 since the Court of Appeals January 27, 2012 depositors in all legal proceedings. Most bank depositors are ordinary people
Decision, docketed as CA-G.R. SP No. 118599, found the closure to have been who have entrusted their money to banks in the hopes of growing their
illegal.115 savings. When banks become insolvent, depositors are secure in the
knowledge that they can still recoup some part of their savings through
This Court of Appeals Decision, however, was not yet final since the Monetary Philippine Deposit Insurance Corporation.121 Thus, Philippine Deposit
Board filed a timely motion for reconsideration.116 There is also nothing in its Insurance Corporation's participation in all suits involving the insolvent bank is
dispositive portion which states that it was immediately executory.117 Through necessary and imbued with the public interest.
its November 21, 2012 Amended Decision, the Court of Appeals reversed its
January 27, 2012 Decision,118 confirming petitioner's status as a closed bank In any case, petitioner's verification and certification of non-forum shopping
under receivership. It was, therefore, erroneous for petitioner to presume that was signed by its Executive Vice Presidents Maxy S. Abad and Atty. Francisco
it was not a closed bank on April 10, 2012 when it filed its Petition with this A. Rivera, as authorized by its Board of Directors.122 Under Section 10(b) of
Court considering that there was no final declaration yet on the matter. the Philippine Deposit Insurance Corporation Charter, as amended:

Petitioner should have attempted to comply after the promulgation of the b. The Corporation as receiver shall control, manage and administer the
November 21, 2012 Amended Decision. Its substantial compliance would have affairs of the closed bank. Effective immediately upon takeover as receiver of
cured the initial defect of its Petition. such bank, the powers, functions and duties, as well as all allowances,
remunerations and prerequisites of the directors, officers, and stockholders of
Petitioner likewise claims that there was "an obvious conflict of interest"119 if it such bank are suspended, and the relevant provisions of the Articles of
was required to sue respondents only through Philippine Deposit Insurance Incorporation and By-laws of the closed bank are likewise deemed
Corporation, considering that respondent Monetary Board appointed Philippine suspended.123 (Emphasis supplied)
Deposit Insurance Corporation as petitioner's receiver. This is a fact, however,
that petitioner failed to address when it filed its Petition, signifying that When petitioner was placed under receivership, the powers of its Board of
petitioner had no intention of complying with the law when it filed its Petition Directors and its officers were suspended. Thus, its Board of Directors could
or anytime after. not have validly authorized its Executive Vice Presidents to file the suit on its
behalf. The Petition, not having been properly verified, is considered an
It was speculative on petitioner's part to presume that it could file this Petition unsigned pleading.124 A defect in the certification of non-forum shopping is
without joining its receiver on the ground that Philippine Deposit Insurance likewise fatal to petitioner's cause.125
Corporation might not allow the suit. At the very least, petitioner should have
shown that it attempted to seek Philippine Deposit Insurance Corporation's Considering that the Petition was filed by signatories who were not validly
authorization to file suit. It was possible that Philippine Deposit Insurance authorized to do so, the Petition does not produce any legal effect.126 Being an
Corporation could have granted its permission to be joined in the suit. If it had unauthorized pleading, this Court never validly acquired jurisdiction over the
refused to allow petitioner to file its suit, petitioner still had a remedy case. The Petition, therefore, must be dismissed.
available to it. Under Rule 3, Section 10 of the Rules of Court,120 petitioner
could have made Philippine Deposit Insurance Corporation an unwilling co- II
petitioner and be joined as a respondent to this case.
Even assuming that the Petition did not suffer from procedural infirmities, it
Petitioner's suit concerned its Business Plan, a matter that could have affected must still be denied for lack of merit.
the status of its insolvency. Philippine Deposit Insurance Corporation's
participation would have been necessary, as it had the duty to conserve
Unless otherwise provided for by law and the Rules of Court, petitions for
petitioner's assets and to examine any possible liability that petitioner might
certiorari against a quasi-judicial agency are cognizable only by the Court of
undertake under the Business Plan.
Appeals. The Regional Trial Court had no jurisdiction over the Petition for This does not mean, however, that Bangko Sentral only exercises quasi-
Certiorari filed by petitioner against respondents. judicial functions. As an administrative agency, it likewise exercises "powers
and/or functions which may be characterized as administrative, investigatory,
Pursuant to Article XII, Section 20 of the Constitution,127 Congress constituted regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as may
Bangko Sentral128 as an independent central monetary authority. As an be conferred by the Constitution or by statute."131
administrative agency, it is vested with quasi-judicial powers, which it
exercises through the Monetary Board. In United Coconut Planters Bank v. E. In this case, the issue between the parties was whether the trial court had
Ganzon, Inc.:129 jurisdiction over petitions for certiorari against Bangko Sentral and the
Monetary Board. Rule 65, Section 4 of the Rules of Court provides:
A quasi-judicial agency or body is an organ of government other than a court
and other than a legislature, which affects the rights of private parties through Section 4. Where and when petition to be filed. — The petition shall be filed
either adjudication or rule-making. The very definition of an administrative not later than sixty (60) days from notice of the judgment, order or
agency includes its being vested with quasi-judicial powers. The ever resolution. In case a motion for reconsideration or new trial is timely filed,
increasing variety of powers and functions given to administrative agencies whether such motion is required or not, the sixty (60) day period shall be
recognizes the need for the active intervention of administrative agencies in counted from notice of the denial of said motion.
matters calling for technical knowledge and speed in countless controversies
which cannot possibly be handled by regular courts. A "quasi-judicial function" The petition shall be filed in the Supreme Court or, if it relates to the acts or
is a term which applies to the action, discretion, etc., of public administrative omissions of a lower court or of a corporation, board, officer or person, in the
officers or bodies, who are required to investigate facts, or ascertain the Regional Trial Court exercising jurisdiction over the territorial area as defined
existence of facts, hold hearings, and draw conclusions from them, as a basis by the Supreme Court. It may also be filed in the Court of Appeals whether or
for their official action and to exercise discretion of a judicial nature. not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it
is in aid of its appellate jurisdiction. If it involves the acts or omissions of a
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial agency, unless otherwise provided by law or these Rules, the
quasi-judicial powers or functions. As aptly observed by the Court of Appeals, petition shall be filed in and cognizable only by the Court of Appeals.
the BSP Monetary Board is an independent central monetary authority and a (Emphasis supplied)
body corporate with fiscal and administrative autonomy, mandated to provide
policy directions in the areas of money, banking and credit. It has power to The Rules of Court categorically provide that petitions for certiorari involving
issue subpoena, to sue for contempt those refusing to obey the subpoena acts or omissions of a quasi-judicial agency "shall be filed in and cognizable
without justifiable reason, to administer oaths and compel presentation of only by the Court of Appeals."
books, records and others, needed in its examination, to impose fines and
other sanctions and to issue cease and desist order. Section 37 of Republic
As previously discussed, respondent Bangko Sentral exercises a myriad of
Act No. 7653, in particular, explicitly provides that the BSP Monetary Board
functions, including those that may not be necessarily exercised by a quasi-
shall exercise its discretion in determining whether administrative sanctions
judicial agency. It is settled, however, that it exercises its quasi judicial
should be imposed on banks and quasi-banks, which necessarily implies that
functions through respondent Monetary Board. Any petition for certiorari
the BSP Monetary Board must conduct some form of investigation or hearing
against an act or omission of Bangko Sentral, when it acts through the
regarding the same. 130
Monetary Board, must be filed with the Court of Appeals. Thus, this Court
in Vivas v. Monetary Board and Philippine Deposit Insurance
Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions, Corporation132 held that the proper remedy to question a resolution of the
resolutions, and orders are the decisions, resolutions, and orders of a quasi- Monetary Board is through a petition for certiorari filed with the Court of
judicial agency. Any action filed against the Monetary Board is an action Appeals.
against a quasi-judicial agency.
The Court of Appeals, therefore, did not err in dismissing the case before the No appeal may be taken from:
Regional Trial Court since the trial court did not have jurisdiction over the
Petition for Certiorari filed by petitioner against respondents. ....

This Court cannot subscribe to petitioner's contention that a Court of Appeals (c) An interlocutory order;
decision already provided for an exception to Rule 65. A Court of Appeals
decision, no matter how persuasive or well written, does not function as stare
....
decisis.133 Neither can a Court of Appeals decision amend the Rules of
Court.134 As it stands, Rule 65 and jurisprudence hold that petitions for
certiorari against the Monetary Board must be filed with the Court of Appeals. In all the above instances where the judgment or final order is not appealable,
the aggrieved party may file an appropriate special civil action under Rule 65.
III
It would appear that the Revised Rules of Court allow a direct filing of a
petition for certiorari of an interlocutory order without need of a motion for
While this Petition is considered dismissed, this Court takes the opportunity to
reconsideration. However, in Estate of Salvador Serra Serra v. Primitivo
address other lingering procedural issues raised by the parties in their
Hernaez,139 a case decided after the Rules of Court were revised in 1997:
pleadings.

The settled rule is that a motion for reconsideration is a sine qua non
Petitioner assails respondents' failure to file a motion for reconsideration of
condition for the filing of a petition for certiorari. The purpose is to grant an
the trial court's denial of its motion to dismiss before filing a petition for
opportunity to public respondent to correct any actual or perceived error
certiorari with the Court of Appeals.135
attributed to it by the re-examination of the legal and factual circumstances of
the case.140
Rule 65, Section 1 of the Rules of Court requires that there be "no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law"
This rule evolved from several labor cases of this Court. Estate of Salvador
available before a petition for certiorari can be filed. An order denying a
Serra Serra cited Interorient Maritime Enterprises v. National Labor Relations
motion to dismiss is merely an interlocutory order of the court as it does not
Commission141 as basis for this rule, which in turn, cited Palomado v. National
finally dispose of a case.136 In BA Finance Corporation v. Pineda,137 a case
Labor Relations Commission142 and Pure Foods Corporation v. National Labor
citing the 1964 Rules of Court:
Relations Commission.143 This Court, in formulating the rule in Palomado,
declared:
It must be remembered that, normally, when an interlocutory order is sought
to be reviewed or annulled by means of any of the extra legal remedies of
The unquestioned rule in this jurisdiction is that certiorari will lie only if there
prohibition or certiorari, it is required that a motion for reconsideration of the
is no appeal or any other plain, speedy and adequate remedy in the ordinary
question[ed] order must first be filed, such being considered a speedy and
course of law against the acts of public respondent. In the instant case, the
adequate remedy at law which must first be resorted to as a condition
plain and adequate remedy expressly provided by [Sec. 9, Rule X, New Rules
precedent for filing of any of such proceedings (Secs. 1 and 2, Rule 65, Rules
of the National Labor Relations Commission] was a motion for reconsideration
of Court).138
of the assailed decision, based on palpable or patent errors, to be made under
oath and filed within ten (10) calendar days from receipt of the questioned
In contrast, Rule 41, Section 1(c) of the Revised Rules of Court now provides: decision.144

Section 1. Subject of appeal. — An appeal may be taken from a judgment or Pure Foods Corporation, on the other hand, stated:
final order that completely disposes of the case, or of a particular matter
therein when declared by these Rules to be appealable.
In the present case, the plain and adequate remedy expressly provided by law Certiorari.148 They were, thus, excused from filing the requisite motion for
was a motion for reconsideration of the assailed decision and the resolution reconsideration.
thereof, which was not only expected to be but would actually have provided
adequate and more speedy remedy than the present petition for certiorari. Considering that there is sufficient basis to dismiss this Petition outright, this
This remedy was actually sought to be availed of by petitioner when it filed a Court finds it unnecessary to address the other issues raised.
motion for reconsideration albeit beyond the 10-day reglementary period. For
all intents and purposes, petitioner cannot now be heard to say that there was
In sum, this Court holds that petitioner did not have the legal capacity to file
no plain, speedy and adequate remedy available to it and that it must,
this Petition absent any authorization from its statutory receiver, Philippine
therefore, be allowed to seek relief by certiorari. This contention is not only
Deposit Insurance Corporation. Even assuming that the Petition could be
untenable but would even place a premium on a party's negligence or
given due course, it would still be denied. The Court of Appeals did not err in
indifference in availing of procedural remedies afforded by law.145
dismissing the action pending between the parties before the trial court since
special civil actions against quasi-judicial agencies must be filed with the
In labor cases, it was necessary to first file a motion for reconsideration before Court of Appeals.
resorting to a petition for certiorari since the National Labor Relations
Commission's rules of procedure provided for this remedy. The same rule has
WHEREFORE, the Petition is DISMISSED on the ground of petitioner's lack
since applied to civil cases through Estate of Salvador Serra Serra, regardless
of capacity to sue.
of the absence of a provision in the Rules of Court requiring a motion for
reconsideration even for interlocutory orders.
SO ORDERED.
Thus, the general rule, in all cases; "is that a motion for reconsideration is
a sine qua non condition for the filing of a petition for certiorari."146 There are,
however, recognized exceptions to this rule, namely:

(a) where the order is a patent nullity, as where the Court a quo had no
jurisdiction; (b) where the questions raised in the certiorari proceeding have
been duly raised and passed upon by the lower court, or are the same as
those raised and passed upon in the lower court; (c) where there is an urgent
necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject
matter of the action is perishable; (d) where, under the circumstances, a
motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in
a criminal case, relief from an order of arrest is urgent and the granting of
such relief by the trial court is improbable; (g) where the proceedings in the
lower court are a nullity for lack of due process; (h) where the proceedings
[were] ex parte or in which the petitioner had no opportunity to object; and
(i) where the issue raised is one purely of law or where public interest is
involved.147 (Citations omitted)

In this instance, the trial court had no jurisdiction over the petition filed by
petitioner against respondents, an issue which respondents properly asserted
before the Court of Appeals when they filed their Petition for
 G.R. No. 230020, March 19, 2018 RTC Ruling

PETER L. SO, Petitioner, v. PHILIPPINE DEPOSIT INSURANCE In its November 7, 2016 assailed Decision, the RTC upheld the factual findings
CORPORATION, Respondent. and conclusions of the PDIC. According to the RTC, based on the records, the
PDIC correctly denied petitioner's claim for insurance on the ground of
DECISION splitting of deposits which is prohibited by law.12

TIJAM, J.: It also declared that, pursuant to its Charter (RA 3591), PDIC is empowered
to determine and pass upon the validity of the insurance deposits claims, it
being the deposit insurer. As such, when it rules on such claims, it is
This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court,
exercising a quasi-judicial function. Thus, it was held that petitioner's remedy
assailing the Decision2 dated November 7, 2016 and Order3 dated February
to the dismissal of his claim is to file a petition for certiorari with the Court of
17, 2017 of the Regional Trial Court (RTC) of Makati, Branch 138, in Special
Appeals under Section 4,13 Rule 65, stating that if the petition involves the
Civil Case No. 16-031, which dismissed Peter L. So's (petitioner's) Petition
acts or omissions of a quasi-judicial agency, unless otherwise provided by law
for Certiorari4 on the ground of lack of jurisdiction.
or the rules, it shall be filed in and cognizable only by the Court of Appeals
(CA).14
Factual Antecedents
In addition, the RTC also cited Section 2215 of Republic Act (RA) No. 3591, as
Petitioner opened an account with the Cooperative Rural Bank Bulacan (CRBB) amended, which essentially states that only the CA shall issue temporary
on April 17, 2013, amounting to P300,000, for which he was assigned the restraining orders, preliminary injunctions or preliminary mandatory
Special Incentive Savings Account (SISA) No. 05-15712-1.5 injunctions against the PDIC for any action under the said Act.

On the same year, however, petitioner learned that CRBB closed its The RTC disposed, thus:
operations and was placed under Philippine Deposit Insurance Corporation's
(PDIC's) receivership. This prompted petitioner, together with other
WHEREFORE, in view of the foregoing, for lack of jurisdiction, the petition
depositors, to file an insurance claim with the PDIC on November 8, 2013.6
for certiorari filed by the petitioner is hereby DISMISSED.

Acting upon such claim, PDIC sent a letter/notice dated November 22, 2013,
SO ORDERED.16
requiring petitioner to submit additional documents, which petitioner averred
of having complied with.7
In its February 17, 2017 Order, the RTC denied petitioner's motion for
reconsideration.
Upon investigation, the PDIC found that petitioner's account originated from
and was funded by the proceeds of a terminated SISA (mother account),
jointly owned by a certain Reyes family.8 Thus, based on the determination Hence, this petition, filed directly to this Court on pure question of law.
that petitioner's account was among the product of the splitting of the said
mother account which is prohibited by law, PDIC denied petitioner's claim for Issue
payment of deposit insurance.9 Petitioner filed a Request for Reconsideration,
which was likewise denied by the PDIC on January 6, 2016.10 Does the RTC have jurisdiction over a petition for certiorari filed under Rule
65, assailing the PDIC's denial of a deposit insurance claim?
Aggrieved, petitioner filed a Petition for Certiorari11 under Rule 65 before the
RTC. Our Ruling
The petition lacks merit. tasked to promote and safeguard the interests of the depositing public by way
of providing permanent and continuing insurance coverage on all insured
There is no controversy as to the proper remedy to question the PDIC's denial deposits, and in helping develop a sound and stable banking system at all
of petitioner's deposit insurance claim. Section 4(f) of its Charter, as times, PDIC shall pay all legitimate deposits held by bona fide depositors and
amended, clearly provides that: provide a mechanism by which depositors may seek reconsideration from its
decision, denying a deposit insurance claim. Further, it bears stressing that as
stated in Section 4(f) of its Charter, as amended, PDIC's action, such as
xxx
denying a deposit insurance claim, is considered as final and executory and
may be reviewed by the court only through a petition for certiorari on the
The actions of the Corporation taken under this section shall be final ground of grave abuse of discretion.
and executory, and may not be restrained or set aside by the court,
except on appropriate petition for certiorari on the ground that the
Considering the foregoing, the legislative intent in creating the PDIC as a
action was taken in excess of jurisdiction or with such grave abuse of
quasi-judicial agency is clearly manifest.
discretion as to amount to a lack or excess of jurisdiction. The petition
for certiorari may only be filed within thirty (30) days from notice of denial of
claim for deposit insurance. (emphasis supplied) In the case of Lintang Bedol v. Commission on Elections,18 cited in Carlito C.
Encinas v. PO1 Alfredo P. Agustin, Jr. and PO1 Joel S. Caubang,19 this Court
explained the nature of a quasi-judicial agency, viz.:
The issue, however, is which court has jurisdiction over such petition.

Quasi-judicial or administrative adjudicatory power on the other hand is the

Petitioner's stance is that the petition for certiorari, questioning PDIC's action,
power of the administrative agency to adjudicate the rights of persons before
denying a deposit insurance claim should be filed with the RTC, arguing in this
it. It is the power to hear and determine questions of fact to which the
manner: PDIC is not a quasi-judicial agency and it does not possess any
legislative policy is to apply and to decide in accordance with the standards
quasi-judicial power under its Charter; It merely performs fact-finding
laid down by the law itself in enforcing and administering the same law. The
functions based on its regulatory power. As such, applying Section 4, Rule 65
administrative body exercises its quasi-judicial power when it performs in a
of the Rules of Court, as amended by A.M. 07-7-12-SC, which in part states
judicial manner an act which is essentially of an executive or administrative
that if the petition relates to an act or omission of a corporation, such as the
nature, where the power to act in such manner is incidental to or reasonably
PDIC, it shall be filed with the RTC exercising jurisdiction over the territorial
necessary for the performance of the executive or administrative duty
area as defined by this Court; Also, Batas Pambansa Blg. 129 or the Judiciary
entrusted to it. In carrying out their quasi-judicial functions the
Reorganization Act provides that this Court, the CA, and the RTC have original
administrative officers or bodies are required to investigate facts or
concurrent jurisdiction over petitions for certiorari, prohibition, and
ascertain the existence of facts, hold hearings, weigh evidence, and
mandamus. Applying the principle of hierarchy of courts, the RTC indeed has
draw conclusions from them as basis for their official action and
jurisdiction over such petition for certiorari.
exercise of discretion in a judicial nature.
We do not agree.
The Court has laid down the test for determining whether an administrative
body is exercising judicial or merely investigatory functions: adjudication
On June 22, 1963, PDIC was created under RA 3591 as an insurer of deposits signifies the exercise of the power and authority to adjudicate upon
in all banks entitled to the benefits of insurance under the said Act to promote the rights and obligations of the parties. Hence, if the only purpose of an
and safeguard the interests of the depositing public.17 As such, PDIC has the investigation is to evaluate the evidence submitted to an agency based on the
duty and authority to determine the validity of and grant or deny deposit facts and circumstances presented to it, and if the agency is not authorized to
insurance claims. Section 16(a) of its Charter, as amended, provides that make a final pronouncement affecting the parties, then there is an absence
PDIC shall commence the determination of insured deposits due the of judicial discretion and judgment. (emphasis supplied)
depositors of a closed bank upon its actual take over of the closed bank. Also,
Section 1 of PDIC's Regulatory Issuance No. 2011-03, provides that as it is
Thus, the legislative intent in creating PDIC as a quasi-judicial agency is Finally, the new amendment in PDIC's Charter under RA 10846, specifically
clearly manifest. Indeed, PDIC exercises judicial discretion and judgment in Section 5(g) thereof, confirms such conclusion, viz.:
determining whether a claimant is entitled to a deposit insurance claim, which
determination results from its investigation of facts and weighing of evidence The actions of the Corporation taken under Section 5(g) shall be final and
presented before it. Noteworthy also is the fact that the law considers PDIC's executory, and may only be restrained or set aside by the Court of
action as final and executory and may be reviewed only on the ground of Appeals, upon appropriate petition for certiorari on the ground that the
grave abuse of discretion. action was taken in excess of jurisdiction or with such grave abuse of
discretion as to amount to a lack or excess of jurisdiction. The petition
That being established, We proceed to determine where such petition for certiorari may only be filed within thirty (30) days from notice of denial of
for certiorari should be filed. In this matter, We cite the very provision claim for deposit insurance. (Emphasis Ours)
invoked by the petitioner, i.e., Section 4, Rule 65 of the Rules, as amended by
A.M. No. 07-7-12-SC: As it stands, the controversy as to which court has jurisdiction over a petition
for certiorari filed to question the PDIC's action is already settled. Therefore,
Sec. 4. When and where to file the petition. - The petition shall be filed not We find no reversible error from the findings and conclusion of the court a
later than sixty (60) days from notice of the judgment, order or resolution. In quo.
case a motion for reconsideration or new trial is timely filed, whether such
motion is required or not, the petition shall be filed not later than sixty (60) WHEREFORE, the instant petition is DENIED for lack of merit. SO
days counted from the notice of the denial of the motion. ORDERED.

If the petition relates to an act or an omission of a municipal trial court or of a

corporation, a board, an officer or a person, it shall be filed with the Regional
Trial Court exercising jurisdiction over the territorial area as defined by the
Supreme Court. It may also be filed with the Court of Appeals or with the
Sandiganbayan, whether or not the same is in aid of the court's appellate
jurisdiction. If the petition involves an act or an omission of a quasi-
judicial agency, unless otherwise provided by law or these rules, the
petition shall be filed with and be cognizable only by the Court of
Appeals. (emphasis supplied)

Clearly, a petition for certiorari, questioning the PDIC's denial of a deposit

insurance claim should be filed before the CA, not the RTC. This further finds
support in Section 22 of the PDIC's Charter, as amended, which states that:

Section 22. No court, except the Court of Appeals, shall issue any
temporary restraining order, preliminary injunction or preliminary mandatory
injunction against the Corporation for any action under this Act. xxx.

This prohibition shall apply in all cases, disputes or controversies instituted by

a private party, the insured bank, or any shareholder of the insured bank.
xxx.

xxxx
 G.R. No. 216914, December 06, 2016 xxxx

SUBIDO PAGENTE CERTEZA MENDOZA AND BINAY LAW Also the bank accounts of the law office linked to the family, the Subido
OFFICES, Petitioner, v. THE COURT OF APPEALS, HON. ANDRES B. Pagente Certeza Mendoza & Binay Law Firm, where the Vice President's
REYES, JR., IN HIS CAPACITY AS PRESIDING JUSTICE OF THE COURT daughter Abigail was a former partner.4
OF APPEALS, AND THE ANTI-MONEY LAUNDERING COUNCIL,
REPRESENTED BY ITS MEMBERS, HON. AMANDO M. TETANGCO, JR., The following day, 26 February 2015, SPCMB wrote public respondent,
GOVERNOR OF THE BANGKO SENTRAL NG PILIPINAS, HON. TERESITA Presiding Justice of the CA, Andres B. Reyes, Jr.:
J. HERBOSA, CHAIRPERSON OF THE SECURITIES AND EXCHANGE
COMMISSION, AND HON. EMMANUEL F. DOOC, INSURANCE
The law firm of Subido Pagente Certeza Mendoza and Binay was surprised to
COMMISSIONER OF THE INSURANCE COMMISSION, Respondents.
receive a call from Manila Times requesting for a comment regarding a
[supposed petition] filed by the Republic of the Philippines represented by the
DECISION Anti-Money Laundering Council before the Court of Appeals seeking to
examine the law office's bank accounts.
PEREZ, J.:
To verify the said matter, the law office is authorizing its associate Atty. Jose
Challenged in this petition for certiorari1 and prohibition under Rule 65 of the Julius R. Castro to inquire on the veracity of said report with the Court of
Rules of Court is the constitutionality of Section 11 of Republic Act (R.A.) No. Appeals. He is likewise authorized to secure copies of the relevant documents
9160, the Anti-Money Laundering Act, as amended, specifically the Anti- of the case, such as the petition and orders issued, if such a case exists.
Money Laundering Council's authority to file with the Court of Appeals (CA) in
this case, an ex-parte application for inquiry into certain bank deposits and As this is a matter demanding serious and immediate attention, the Firm
investments, including related accounts based on probable cause. respectfully manifests that if no written response is received within 24-hours
from receipt of this letter, we shall be at liberty to assume that such a case
In 2015, a year before the 2016 presidential elections, reports abounded on exists and we shall act accordingly.
the supposed disproportionate wealth of then Vice President Jejomar Binay
and the rest of his family, some of whom were likewise elected public officers. Hoping for your immediate action.
The Office of the Ombudsman and the Senate conducted investigations2 and
inquiries3 thereon ostensibly based on their respective powers delineated in
the Constitution. Respectfully yours,
For the Firm
From various news reports announcing the inquiry into then Vice President
Binay's bank accounts, including accounts of members of his family, petitioner CLARO F. CERTEZA5
Subido Pagente Certeza Mendoza & Binay Law Firm (SPCMB) was most
concerned with the article published in the Manila Times on 25 February 2015
entitled "Inspect Binay Bank Accounts" which read, in pertinent part: Within twenty four (24) hours, Presiding Justice Reyes wrote SPCMB denying
its request, thus:
xxx The Anti-Money Laundering Council (AMLC) asked the Court of Appeals
(CA) to allow the [C]ouncil to peek into the bank accounts of the Binays, their Anent your request for a comment on a supposed petition to inquire into your
corporations, and a law office where a family member was once a law office's bank accounts, please be informed that a petition of this nature is
partner. strictly confidential in that when processing the same, not even the handling
staff members of the Office of the Presiding Justice know or have any
knowledge who the subject bank account holders are, as well as the bank
accounts involved. 1. IT VIOLATES THE PERSON'S RIGHT TO DUE PROCESS; AND

Please be informed further that clearly under the rules, the Office of the
Presiding Justice is strictly mandated not to disclose, divulge, or communicate
to anyone directly or indirectly, in any manner or by any means, the fact of IT VIOLATES THE PERSON'S RIGHT TO PRIVACY.
the filing of any petition brought before this Court by the Anti-Money 2.
Laundering Council, its contents and even its entry in the logbook.

Trusting that you find satisfactory the foregoing explanation.6 B. EVEN ASSUMING ARGUENDO THAT THE ANTI-MONEY LAUNDERING
ACT IS CONSTITUTIONAL, THE RESPONDENTS COMMITTED GRAVE
By 8 March 2015, the Manila Times published another article entitled, "CA ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
orders probe of Binay's assets" reporting that the appellate court had issued a JURISDICTION CONSIDERING THAT:cralawlawlibrary
Resolution granting the ex-parte application of the AMLC to examine the bank
accounts of SPCMB:
1. THE REFUSAL OF RESPONDENT PRESIDING JUSTICE TO PROVIDE
The Court of Appeals (CA) has officially issued an order for examination of PETITIONER WITH A COPY OF THE EX-PARTE APPLICATION FOR BANK
Vice President Jejomar Binay's bank accounts. EXAMINATION FILED BY RESPONDENT AMLC AND ALL OTHER
PLEADINGS, MOTIONS, ORDERS, RESOLUTIONS, AND PROCESSES
ISSUED BY THE RESPONDENT COURT OF APPEALS IN RELATION
In granting the petition of the Anti-Money Laundering Council (AMLC), the CA
THERETO VIOLATES PETITIONER'S RIGHT TO DUE PROCESS;
also ordered the inspection of the bank deposits of Binay's wife, children, and
a law office connected to him.

xxx xxx xxx

2. A CARTE BLANCHE AUTHORITY TO EXAMINE ANY AND ALL
The bank accounts of the law office linked to Binay - the Subido Pagente TRANSACTIONS PERTAINING TO PETITIONER'S BANK ACCOUNTS
Certeza Mendoza & Binay where Binay's daughter, Makati City (Metro VIOLATES THE ATTORNEY-CLIENT PRIVILEGE WHICH IS SACROSANCT
Manila) Rep. Mar-len Abigail Binay was a partner, are also included in the IN THE LEGAL PROFESSION;
probe, the sources said.7

Forestalled in the CA thus alleging that it had no ordinary, plain, speedy, and
adequate remedy to protect its rights and interests in the purported ongoing 3. A BLANKET AUTHORITY TO EXAMINE PETITIONER'S BANK ACCOUNTS,
unconstitutional examination of its bank accounts by public respondent Anti- INCLUDING ANY AND ALL TRANSACTIONS THEREIN FROM ITS OPENING
Money Laundering Council (AMLC), SPCMB undertook direct resort to this UP TO THE PRESENT, PARTAKES THE NATURE OF A GENERAL WARRANT
Court via this petition for certiorari and prohibition on the following grounds: THAT IS CLEARLY INTENDED TO AID A MERE FISHING EXPEDITION;

A. THE ANTI-MONEY LAUNDERING ACT IS UNCONSTITUTIONAL INSOFAR

AS IT ALLOWS THE EXAMINATION OF A BANK ACCOUNT WITHOUT
ANY NOTICE TO THE AFFECTED PARTY:cralawlawlibrary 4. THERE IS NOTHING IN THE ANTI-MONEY LAUNDERING ACT THAT
ALLOWS OR JUSTIFIES THE WITHHOLDING OF INFORMATION AND/OR
 6. A criminal complaint is not a pre-requisite to a bank inquiry order.
ANY COURT RECORDS OR PROCEEDINGS PERTAINING TO AN
EXAMINATION OF A BANK ACCOUNT, ESPECIALLY IF THE COURT HAS
In their Reply, SPCMB maintains that the ex-parte proceedings authorizing
ALREADY GRANTED THE AUTHORITY TO CONDUCT THE EXAMINATION;
inquiry of the AMLC into certain bank deposits and investments is
unconstitutional, violating its rights to due process and privacy.

Before anything else, we here have an original action turning on three crucial
5. THE PETITIONER DID NOT COMMIT, NOR HAS THE PETITIONER BEEN matters: (1) the petition reaches us from a letter of the Presiding Justice of
IMPLEADED IN ANY COMPLAINT INVOLVING ANY PREDICATE CRIME the CA in response to a letter written by SPCMB; (2) SPCMB's bank account
THAT WOULD JUSTIFY AN INQUIRY INTO ITS BANK ACCOUNTS; AND has been reported to be a related account to Vice President Binay's
investigated by the AMLC for anti-money laundering activities; and (3) the
constitutionality of Section 11 of the AMLA at its recent amendment has not
been squarely raised and addressed.
7. THE EXAMINATION OF THE PETITIONER'S BANK ACCOUNTS IS A FORM
OF POLITICAL PERSECUTION OR HARASSMENT.8 To obviate confusion, we act on this petition given that SPCMB directly assails
the constitutionality of Section 11 of the AMLA where it has been widely
reported that Vice President Binay's bank accounts and all related accounts
In their Comment, the AMLC, through the Office of the Solicitor General therewith are subject of an investigation by the AMLC. In fact, subsequent
(OSG), points out a supposed jurisdictional defect of the instant petition, i.e., events from the filing of this petition have shown that these same bank
SPCMB failed to implead the House of Representatives which enacted the accounts (including related accounts) were investigated by the Ombudsman
AMLA and its amendments. In all, the OSG argues for the dismissal of the and both Houses of the Legislature. However, at the time of the filing of this
present petition, highlighting that the AMLC's inquiry into bank deposits does petition, SPCMB alleged that its accounts have been inquired into but not
not violate due process nor the right to privacy: subjected to a freeze order under Section 10 of the AMLA. Thus, as previously
noted, with its preclusion of legal remedies before the CA which under the
AMLA issues the ex-parte bank inquiry and freeze orders, Sections 10 and 11,
1. Section 11's allowance for AMLC's ex-parte application for an inquiry into
respectively, SPCMB establishes that it has no plain, speedy and adequate
particular bank deposits and investments is investigative, not adjudicatory;
remedy in the ordinary course of law to protect its rights and interests from
the purported unconstitutional intrusion by the AMLC into its bank accounts.
2. The text of Section 11 itself provides safeguards and limitations on the
allowance to the AMLC to inquire into bank deposits: (a) issued by the CA
The foregoing shall be addressed specifically and bears directly on the
based on probable cause; and (b) specific compliance to the requirements of
disposition of the decision herein.
Sections 2 and 3, Article III of the Constitution;

Additionally, we note that the OSG did not question how this petition reaches
3. The ex-parte procedure for investigating bank accounts is necessary to
us from a letter of the appellate court's Presiding Justice, only that,
achieve a legitimate state objective;
procedurally, SPCMB should have impleaded Congress.

4. There is no legitimate expectation of privacy as to the bank records of a

On the sole procedural issue of whether SPCMB ought to have impleaded
depositor;
Congress, the contention of the OSG though novel is untenable. All cases
questioning the constitutionality of a law does not require that Congress be
5. The examination of, and inquiry, into SPCMB's bank accounts does not impleaded for their resolution. The requisites of a judicial inquiry are
violate Attorney-Client Privilege; and elementary:
1. There must be an actual case or controversy; party; For purposes of this section, 'related accounts' shall refer to accounts, the
funds and sources of which originated from and/or are materially linked to the
2. The question of constitutionality must be raised by the proper party; monetary instrument(s) or property(ies) subject of the freeze order(s).

3. The constitutional question must be raised at the earliest possible A court order ex parte must first be obtained before the AMLC can inquire into
opportunity; and these related Accounts: Provided, That the procedure for the ex
parte application of the ex parte court order for the principal account shall be
the same with that of the related accounts.
4. The decision of the constitutional question must be necessary to the
determination of the case itself.9
The authority to inquire into or examine the main account and the related
accounts shall comply with the requirements of Article III, Sections 2 and 3 of
The complexity of the issues involved herein require us to examine the
the 1987 Constitution, which are hereby incorporated by reference.10
assailed provision vis-a-vis the constitutional proscription against violation of
due process. The statute reads:
The due process clause of the Constitution reads:
SEC. 11. Authority to Inquire into Bank Deposits. - Notwithstanding the
provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as SECTION 1. No person shall be deprived of life, liberty or property without due
amended; Republic Act No. 8791; and other laws, the AMLC may inquire into process of law, nor shall any person be denied the equal protection of the
or examine any particular deposit or investment, including related accounts, laws. 11
with any banking institution or non-bank financial institution upon order of
any competent court based on an ex parte application in cases of violations of The right to due process has two aspects: (1) substantive which deals with
this Act, when it has been established that there is probable cause that the the extrinsic and intrinsic validity of the law; and (2) procedural which delves
deposits or investments, including related accounts involved, are related to an into the rules government must follow before it deprives a person of its life,
unlawful activity as defined in Section 3(i) hereof or a money laundering liberty or property.12
offense under Section 4 hereof; except that no court order shall be required in
cases involving activities defined in Section 3(i)(1), (2), and (12) hereof, and As presently worded, Section 11 of the AMLA has three elements: (1) ex-
felonies or offenses of a nature similar to those mentioned in Section 3(i)(1), parte application by the AMLC; (2) determination of probable cause by the
(2), and (12), which are punishable under the penal laws of other countries, CA; and (3) exception of court order in cases involving unlawful activities
and terrorism and conspiracy to commit terrorism as defined and penalized defined in Sections 3(i)(1), (2), and (12).
under Republic Act No. 9372.
As a brief backgrounder to the amendment to Section 11 of the AMLA, the
The Court of Appeals shall act on the application to inquire into or examine text originally did not specify for an ex-parte application by the AMLC for
any deposit or investment with any banking institution or non-bank financial authority to inquire into or examine certain bank accounts or investments.
institution within twenty-four (24) hours from filing of the application. The extent of this authority was the topic of Rep. of the Phils. v. Hon. Judge
Eugenio, Jr., et al. (Eugenio)13 where the petitioner therein, Republic of the
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas may, in Philippines, asseverated that the application for that kind of order under the
the course of a periodic or special examination, check the compliance of a questioned section of the AMLA did not require notice and
covered institution with the requirements of the AMLA and its implementing hearing. Eugenio schooled us on the AMLA, specifically on the provisional
rules and regulations. remedies provided therein to aid the AMLC in enforcing the law:
It is evident that Section 11 does not specifically authorize, as a general rule, that probable cause exists that any monetary instrument or property is in any
the issuance ex-parte of the bank inquiry order. We quote the provision in way related to an unlawful activity as defined in Section 3(i) hereof, may issue
full: a freeze order which shall be effective immediately. The freeze order
shall be for a period of twenty (20) days unless extended by the court.
SEC. 11. Authority to Inquire into Bank Deposits. — Notwithstanding the
provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as Although oriented towards different purposes, the freeze order under Section
amended, Republic Act No. 8791, and other laws, the AMLC may inquire into 10 and the bank inquiry order under Section 11 are similar in that they are
or examine any particular deposit or investment with any banking institution extraordinary provisional reliefs which the AMLC may avail of to effectively
or non bank financial institution upon order of any competent court in cases of combat and prosecute money laundering offenses. Crucially, Section 10 uses
violation of this Act, when it has been established that there is probable specific language to authorize an ex parte application for the provisional relief
cause that the deposits or investments are related to an unlawful therein, a circumstance absent in Section 11. If indeed the legislature had
activity as defined in Section 3(i) hereof or a money laundering intended to authorize ex parte proceedings for the issuance of the bank
offense under Section 4 hereof, except that no court order shall be inquiry order, then it could have easily expressed such intent in the law, as it
required in cases involving unlawful activities defined in Sections did with the freeze order under Section 10.
3(i)1, (2) and (12).
Even more tellingly, the current language of Sections 10 and 11 of the AMLA
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may was crafted at the same time, through the passage of R.A. No. 9194. Prior to
inquire into or examine any deposit of investment with any banking institution the amendatory law, it was the AMLC, not the Court of Appeals, which had
or non bank financial institution when the examination is made in the course authority to issue a freeze order, whereas a bank inquiry order always then
of a periodic or special examination, in accordance with the rules of required, without exception, an order from a competent court. It was through
examination of the BSP. (Emphasis supplied) the same enactment that ex parte proceedings were introduced for the first
time into the AMLA, in the case of the freeze order which now can only be
Of course, Section 11 also allows the AMLC to inquire into bank accounts issued by the Court of Appeals. It certainly would have been convenient,
without having to obtain a judicial order in cases where there is probable through the same amendatory law, to allow a similar ex parte procedure in
cause that the deposits or investments are related to kidnapping for ransom, the case of a bank inquiry order had Congress been so minded. Yet nothing in
certain violations of the Comprehensive Dangerous Drugs Act of 2002, the provision itself, or even the available legislative record, explicitly points to
hijacking and other violations under R.A. No. 6235, destructive arson and an ex parte judicial procedure in the application for a bank inquiry order,
murder. Since such special circumstances do not apply in this case, there is no unlike in the case of the freeze order.
need for us to pass comment on this proviso. Suffice it to say, the proviso
contemplates a situation distinct from that which presently confronts us, and That the AMLA does not contemplate ex parte proceedings in applications for
for purposes of the succeeding discussion, our reference to Section 11 of the bank inquiry orders is confirmed by the present implementing rules and
AMLA excludes said proviso. regulations of the AMLA, promulgated upon the passage of R.A. No. 9194.
With respect to freeze orders under Section 10, the implementing rules do
In the instances where a court order is required for the issuance of the bank expressly provide that the applications for freeze orders be filed ex parte, but
inquiry order, nothing in Section 11 specifically authorizes that such court no similar clearance is granted in the case of inquiry orders under Section 11.
order may be issued ex parte. It might be argued that this silence does not These implementing rules were promulgated by the Bangko Sentral ng
preclude the ex parte issuance of the bank inquiry order since the same is not Pilipinas, the Insurance Commission and the Securities and Exchange
prohibited under Section 11. Yet this argument falls when the immediately Commission, and if it was the true belief of these institutions that inquiry
preceding provision, Section 10, is examined. orders could be issued ex parte similar to freeze orders, language to that
effect would have been incorporated in the said Rules. This is stressed not
because the implementing rules could authorize ex parte applications for
SEC 10. Freezing of Monetary Instrument or Property. — The Court of
inquiry orders despite the absence of statutory basis, but rather because the
Appeals, upon application ex parte by the AMLC and after determination
framers of the law had no intention to allow such ex parte applications.
Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC to On the other hand, a bank inquiry order under Section 11 does not
enforce the provisions of the AMLA specifically authorize ex parte applications necessitate any form of physical seizure of property of the account holder.
with respect to freeze orders under Section 10 but make no similar What the bank inquiry order authorizes is the examination of the particular
authorization with respect to bank inquiry orders under Section 11. deposits or investments in banking institutions or non-bank financial
institutions. The monetary instruments or property deposited with such banks
The Court could divine the sense in allowing ex parte proceedings under or financial institutions are not seized in a physical sense, but are examined
Section 10 and in proscribing the same under Section 11. A freeze order on particular details such as the account holder's record of deposits and
under Section 10 on the one hand is aimed at preserving monetary transactions. Unlike the assets subject of the freeze order, the records to be
instruments or property in any way deemed related to unlawful activities as inspected under a bank inquiry order cannot be physically seized or hidden by
defined in Section 3(i) of the AMLA. The owner of such monetary instruments the account holder. Said records are in the possession of the bank and
or property would thus be inhibited from utilizing the same for the duration of therefore cannot be destroyed at the instance of the account holder alone as
the freeze order. To make such freeze order anteceded by a judicial that would require the extraordinary cooperation and devotion of the bank.15
proceeding with notice to the account holder would allow for or lead to the
dissipation of such funds even before the order could be issued. (Citations At the stage in which the petition was filed before us, the inquiry into certain
omitted.) bank deposits and investments by the AMLC still does not contemplate any
form of physical seizure of the targeted corporeal property. From this cite, we
Quite apparent from the foregoing is that absent a specific wording in the proceed to examine whether Section 11 of the law violates procedural due
AMLA allowing for ex-parte proceedings in orders authorizing inquiry and process.
examination by the AMLC into certain bank deposits or investments, notice to
the affected party is required. As previously stated, the AMLA now specifically provides for an ex-
parte application for an order authorizing inquiry or examination into bank
Heeding the Court's observance in Eugenio that the remedy of the Republic deposits or investments which continues to pass constitutional muster.
then lay with the legislative, Congress enacted Republic Act No. 10167
amending Section 11 of the AMLA and specifically inserted the word ex- Procedural due process is essentially the opportunity to be heard.16 In this
parte appositive of the nature of this provisional remedy available to the AMLC case, at the investigation stage by the AMLC into possible money laundering
thereunder. offenses, SPCMB demands that it have notice and hearing of AMLC's
investigation into its bank accounts.
It is this current wording of Section 11 which SPCMB posits as unconstitutional
and purportedly actually proscribed in Eugenio. We are not unaware of the obiter in Eugenio17 and cited by SPCMB, voicing
misgivings on an interpretation of the former Section 11 of the AMLA allowing
We do not subscribe to SPCMB's position. for ex-parte proceedings in bank inquiry orders, to wit:

Succinctly, Section 11 of the AMLA providing for ex-parte application and There certainly is fertile ground to contest the issuance of an ex-parte order.
inquiry by the AMLC into certain bank deposits and investments does not Section 11 itself requires that it be established that "there is probable cause
violate substantive due process, there being no physical seizure of property that the deposits or investments are related to unlawful activities," and it
involved at that stage. It is the preliminary and actual seizure of the bank obviously is the court which stands as arbiter whether there is indeed such
deposits or investments in question which brings these within reach of the probable cause. The process of inquiring into the existence of probable cause
judicial process, specifically a determination that the seizure violated due would involve the function of determination reposed on the trial court.
process.14 In fact, Eugenio delineates a bank inquiry order under Section 11 Determination clearly implies a function of adjudication on the part of the trial
from a freeze order under Section 10 on both remedies' effect on the direct court, and not a mechanical application of a standard pre-determination by
objects, i.e. the bank deposits and investments: some other body. The word "determination" implies deliberation and is, in
normal legal contemplation, equivalent to "the decision of a court of justice."
The court receiving the application for inquiry order cannot simply take the exercise of ministerial functions. At such stage, the executive
AMLC's word that probable cause exists that the deposits or investments are authority has the power: (a) to make a technical assessment of the
related to an unlawful activity. It will have to exercise its own determinative completeness and sufficiency of the extradition papers; (b) to
function in order to be convinced of such fact. The account holder would be outrightly deny the request if on its face and on the face of the
certainly capable of contesting such probable cause if given the supporting documents the crimes indicated are not extraditable; and
opportunity to be apprised of the pending application to inquire into (c) to make a determination whether or not the request is politically
his account; hence a notice requirement would not be an empty motivated, or that the offense is a military one which is not
spectacle. It may be so that the process of obtaining the inquiry order may punishable under non-military penal legislation. Hence, said process
become more cumbersome or prolonged because of the notice requirement, may be characterized as an investigative or inquisitorial process in
yet we fail to see any unreasonable burden cast by such circumstance. After contrast to a proceeding conducted in the exercise of an
all, as earlier stated, requiring notice to the account holder should not, in any administrative body's quasi-judicial power.
way, compromise the integrity of the bank records subject of the inquiry
which remain in the possession and control of the bank. (Emphasis supplied) In administrative law, a quasi-judicial proceeding involves: (a) taking and
evaluation of evidence; (b) determining facts based upon the evidence
On that score, the SPCMB points out that the AMLC 's bank inquiry is presented; and (c) rendering an order or decision supported by the facts
preliminary to the seizure and deprivation of its property as in a freeze order proved. Inquisitorial power, which is also known as examining or investigatory
under Section 10 of the AMLA which peculiarity lends itself to a sui generis power, is one of the determinative powers of an administrative body which
proceeding akin to the evaluation process in extradition proceedings better enables it to exercise its quasi-judicial authority. This power allows the
pronounced in Secretary of Justice v. Hon. Lantion.18 Under the extradition administrative body to inspect the records and premises, and investigate the
law, the Secretary of Foreign Affairs is bound to make a finding that the activities, of persons or entities coming under its jurisdiction, or to require
extradition request and its supporting documents are sufficient and complete disclosure of information by means of accounts, records, reports, testimony of
in form and substance before delivering the same to the Secretary of Justice. witnesses, production of documents, or otherwise.
We ruled:
The power of investigation consists in gathering, organizing, and analyzing
[L]ooking at the factual milieu of the case before us, it would appear that evidence, which is a useful aid or tool in an administrative agency's
there was failure to abide by the provisions of Presidential Decree No. 1069. performance of its rule-making or quasi-judicial functions. Notably,
For while it is true that the extradition request was delivered to the investigation is indispensable to prosecution.19 (Emphasis supplied, citations
Department of Foreign Affairs on June 17, 1999, the following day or less than omitted)
24 hours later, the Department of Justice received the request, apparently
without the Department of Foreign affairs discharging its duty thoroughly The submission of AMLC requires a determination whether the AMLC is an
evaluating the same and its accompanying documents. xxx. administrative body with quasi-judicial powers; corollary thereto, a
determination of the jurisdiction of the AMLC.
xxxx
Lim v. Gamosa20 is enlightening on jurisdiction and the requirement of a
[T]he record cannot support the presumption of regularity that the specific grant thereof in the enabling law. We declared that the creation of the
Department of Foreign Affairs thoroughly reviewed the extradition request and National Commission on Indigenous Peoples (NCIP) by the Indigenous Peoples
supporting documents and that it arrived at a well-founded judgment that the Rights Act (IPRA) did not confer it exclusive and original, nor primary
request and its annexed documents satisfy the requirements of law. XXX. jurisdiction, in all claims and disputes involving rights of IPs and ICCs where
no such specific grant is bestowed.
The evaluation process, just like the extradition proceedings, proper
belongs to a class by itself. It is sui generis. It is not a criminal In this instance, the grant of jurisdiction over cases involving money
investigation, but it is also erroneous to say that it is purely an laundering offences is bestowed on the Regional Trial Courts and the
Sandiganbayan as the case may be. In fact, Rule 5 of the IRR is laundering offences, shall file the necessary information before the Regional
entitled Jurisdiction of Money Laundering Cases and Money Laundering Trial Courts or the Sandiganbayan;22
Investigation Procedures:
3. The RTCs or the Sandiganbayan shall try all cases on money laundering, as
Rule 5.a. Jurisdiction of Money Laundering Cases. The Regional Trial may be applicable.23
Courts shall have the jurisdiction to try all cases on money laundering. Those
committed by public officers and private persons who are in conspiracy with Nowhere from the text of the law nor its Implementing Rules and Regulations
such public officers shall be under the jurisdiction of the Sandiganbayan. can we glean that the AMLC exercises quasi-judicial functions whether the
actual preliminary investigation is done simply at its behest or conducted by
Rule 5.b. Investigation of Money Laundering Offenses. - The AMLC shall the Department of Justice and the Ombudsman.
investigate:
Again, we hark back to Lantion citing Ruperto v. Torres,23-a where the Court
(1) suspicious transactions; had occasion to rule on the functions of an investigatory body with the sole
(2) covered transactions deemed suspicious after an investigation conducted power of investigation:
by the AMLC;
(3) money laundering activities; and [Such a body] does not exercise judicial functions and its power is limited to
(4) other violations of the AMLA, as amended. investigating facts and making findings in respect thereto. The Court laid
down the test of determining whether an administrative body is exercising
The confusion on the scope and parameters of the AMLC's investigatory judicial functions or merely investigatory functions: Adjudication signifies the
powers and whether such seeps into and approximates a quasi-judicial exercise of power and authority to adjudicate upon the rights and obligations
agency's inquisitorial powers lies in the AMLC's investigation and consequent of the parties before it. Hence, if the only purpose for investigation is to
initial determination of whether certain activities are constitutive of anti- evaluate evidence submitted before it based on the facts and Circumstances
money laundering offenses. presented to it, and if the agency is not authorized to make a final
pronouncement affecting the parties, then there is an absence of judicial
The enabling law itself, the AMLA, specifies the jurisdiction of the trial courts, discretion and judgment.
RTC and Sandiganbayan, over money laundering cases, and delineates the
investigative powers of the AMLC. adjudicate in regard to the rights and obligations of both the Requesting State
and the prospective extraditee. Its only power is to determine whether the
Textually, the AMLA is the first line of defense against money laundering in papers comply with the requirements of the law and the treaty and, therefore,
compliance with our international obligation. There are three (3) stages of sufficient to be the basis of an extradition petition. Such finding is thus merely
determination, two (2) levels of investigation, falling under three (3) initial and not final. The body has no power to determine whether or not the
jurisdictions: extradition should be effected. That is the role of the court. The body's power
is limited to an initial finding of whether or not the extradition petition can be
filed in court.
1. The AMLC investigates possible money laundering offences and initially
determines whether there is probable cause to charge any person with a
money laundering offence under Section 4 of the AMLA, resulting in the filing It is to be noted, however, that in contrast to ordinary investigations, the
of a complaint with the Department of Justice or the Office of the evaluation procedure is characterized by certain peculiarities. Primarily, it sets
Ombudsman;21 into motion the wheels of the extradition process. Ultimately, it may result in
the deprivation of liberty of the prospective extraditee. This deprivation can be
effected at two stages: First, the provisional arrest of the prospective
2. The DOJ or the Ombudsman conducts the preliminary investigation
extraditee pending the submission of the request. This is so because the
proceeding and if after due notice and hearing finds probable cause for money
Treaty provides that in case of urgency, a contracting party may request the
provisional arrest of the person sought pending presentation of the request petitioner Shu had filed a complaint before the NBI charging respondents
(Paragraph [1], Article 9, RP-US Extradition Treaty), but he shall be therein with falsification of two (2) deeds of real estate mortgage submitted to
automatically discharged after 60 days if no request is submitted (Paragraph the Metropolitan Bank and Trust Company (Metrobank). After its investigation,
4). Presidential Decree No. 1069 provides for a shorter period of 20 days after the NBI came up with a Questioned Documents Report No. 746-1098 finding
which the arrested person could be discharged (Section 20[d]). Logically, that the signatures of petitioner therein which appear on the questioned deeds
although the Extradition Law is silent on this respect, the provisions only are not the same as the standard sample signatures he submitted to the NBI.
mean that once a request is forwarded to the Requested State, the Ruling on the specific issue raised by respondent therein that they had been
prospective extraditee may be continuously detained, or if not, subsequently denied due process during the NBI investigation, we stressed that the
rearrested (Paragraph [5], Article 9, RP-US Extradition Treaty), for he will only functions of this agency are merely investigatory and informational in nature:
be discharged if no request is submitted. Practically, the purpose of this
detention is to prevent his possible flight from the Requested State. Second, [The NBI] has no judicial or quasi-judicial powers and is incapable of granting
the temporary arrest of the prospective extraditee during the pendency of the any relief to any party. It cannot even determine probable cause. The NBI is
extradition petition in court (Section 6, Presidential Decree No. 1069). an investigative agency whose findings are merely recommendatory. It
undertakes investigation of crimes upon its own initiative or as public welfare
Clearly, there is an impending threat to a prospective extraditee's liberty as may require in accordance with its mandate. It also renders assistance when
early as during the evaluation stage. It is not only an imagined threat to his requested in the investigation or detection of crimes in order to prosecute the
liberty, but a very imminent one. persons responsible.

Because of these possible consequences, we conclude that the evaluation Since the NBI's findings were merely recommendatory, we find that no denial
process is akin to an administrative agency conducting an investigative of the respondent's due process right could have taken place; the NBI's
proceeding, the consequences of which are essentially criminal since such findings were still subject to the prosecutor's and the Secretary of Justice's
technical assessment sets off or commences the procedure for, and actions for purposes of finding the existence of probable cause. We find it
ultimately, the deprivation of liberty of a prospective extraditee, As described significant that the specimen signatures in the possession of Metrobank were
by petitioner himself, this is a "tool" for criminal law enforcement. In essence, submitted by the respondents for the consideration of the city prosecutor and
therefore, the evaluation process partakes of the nature of a criminal eventually of the Secretary of Justice during the preliminary investigation
investigation. In a number of cases, we had occasion to make available to a proceedings. Thus, these officers had the opportunity to examine these
respondent in an administrative case or investigation certain constitutional signatures.
rights that are ordinarily available only in criminal prosecutions. Further, as
pointed out by Mr. Justice Mendoza during the oral arguments, there are The respondents were not likewise denied their right to due process when the
rights formerly available only at the trial stage that had been advanced to an NBI issued the questioned documents report. We note that this report merely
earlier stage in the proceedings, such as the right to counsel and the right stated that the signatures appearing on the two deeds and in the petitioner's
against self-incrimination.24 (Citations omitted) submitted sample signatures were not written by one and the same person.
Notably, there was no categorical finding in the questioned documents report
In contrast to the disposition in Lantion that the evaluation process before the that the respondents falsified the documents. This report, too, was procured
Department of Foreign Affairs is akin to an administrative agency conducting during the conduct of the NBI's investigation at the petitioner's request for
investigative proceedings with implications on the consequences of criminal assistance in the investigation of the alleged crime of falsification. The report
liability, i.e., deprivation of liberty of a prospective extraditee, the sole is inconclusive and does not prevent the respondents from securing a
investigative functions of the AMLC finds more resonance with the separate documents examination by handwriting experts based on their own
investigative functions of the National Bureau of Investigation (NBI). evidence. On its own, the NBI's questioned documents report does not directly
point to the respondents' involvement in the crime charged. Its significance is
That the AMLC does not exercise quasi-judicial powers and is simply an that, taken together with the other pieces of evidence submitted by the
investigatory body finds support in our ruling in Shu v. Dee.25 In that case, parties during the preliminary investigation, these evidence could be sufficient
for purposes of finding probable cause — the action that the Secretary of Likewise devoid of cogency is petitioner's argument that the testimonies of
Justice undertook in the present case. Galarion and Hanopol are inadmissible as to him since he was not granted the
opportunity of cross-examination.
As carved out in Shu, the AMLC functions solely as an investigative body in
the instances mentioned in Rule 5.b.26 Thereafter, the next step is for the It is a fundamental principle that the accused in a preliminary investigation
AMLC to file a Complaint with either the DOJ or the Ombudsman pursuant to has no right to cross-examine the witnesses which the complainant may
Rule 6.b. present. Section 3, Rule 112 of the Rules of Court expressly provides that the
respondent shall only have the right to submit a counter-affidavit, to examine
Even in the case of Estrada v. Office of the Ombudsman,27 where the conflict all other evidence submitted by the complainant and, where the fiscal sets a
arose at the preliminary investigation stage by the Ombudsman, we ruled that hearing to propound clarificatory questions to the parties or their witnesses, to
the Ombudsman's denial of Senator Estrada's Request to be furnished copies be afforded an opportunity to be present but without the right to examine or
of the counter-affidavits of his co-respondents did not violate Estrada's cross-examine. Thus, even if petitioner was not given the opportunity to
constitutional right to due process where the sole issue is the existence of cross-examine Galarion and Hanopol at the time they were presented to
probable cause for the purpose of determining whether an information should testify during the separate trial of the case against Galarion and Roxas, he
be filed and does not prevent Estrada from requesting a copy of the counter- cannot assert any legal right to cross-examine them at the preliminary
affidavits of his co-respondents during the pre-trial or even during trial. We investigation precisely because such right was never available to him. The
expounded on the nature of preliminary investigation proceedings, thus: admissibility or inadmissibility of said testimonies should be ventilated before
the trial court during the trial proper and not in the preliminary investigation.
It should be underscored that the conduct of a preliminary investigation is
only for the determination of probable cause, and "probable cause merely Furthermore, the technical rules on evidence are not binding on the fiscal who
implies probability of guilt and should be determined in a summary manner. A has jurisdiction and control over the conduct of a preliminary investigation. If
preliminary investigation is not a part of the trial and it is only in a trial where by its very nature a preliminary investigation could be waived by the accused,
an accused can demand the full exercise of his rights, such as the right to we find no compelling justification for a strict application of the evidentiary
confront and cross-examine his accusers to establish his innocence." Thus, the rules. In addition, considering that under Section 8, Rule 112 of the Rules of
rights of a respondent in a preliminary investigation are limited to those Court, the record of the preliminary investigation does not form part of the
granted by procedural law. record of the case in the Regional Trial Court, then the testimonies of Galarion
and Hanopol may not be admitted by the trial court if not presented in
evidence by the prosecuting fiscal. And, even if the prosecution does present
A preliminary investigation is defined as an inquiry or proceeding for the
such testimonies, petitioner can always object thereto and the trial court can
purpose of determining whether there is sufficient ground to engender a well
rule on the admissibility thereof; or the petitioner can, during the trial,
founded belief that a crime cognizable by the Regional Trial Court has been
petition said court to compel the presentation of Galarion and Hanopol for
committed and that the respondent is probably guilty thereof, and should be
purposes of cross-examination. (Citations and emphasis omitted)
held for trial. The quantum of evidence now required in preliminary
investigation is such evidence sufficient to "engender a well founded belief' as
to the fact of the commission of a crime and the respondent's probable guilt Plainly, the AMLC's investigation of money laundering offenses and its
thereof A preliminary investigation is not the occasion for the full and determination of possible money laundering offenses, specifically its inquiry
exhaustive display of the parties' evidence; it is for the presentation of such into certain bank accounts allowed by court order, does not transform it into
evidence only as may engender a well-grounded belief that an offense has an investigative body exercising quasi-judicial powers. Hence, Section 11 of
been committed and that the accused is probably guilty thereof. We are in the AMLA, authorizing a bank inquiry court order, cannot be said to violate
accord with the state prosecutor's findings in the case at bar that there exists SPCMB's constitutional right to procedural due process.
prima facie evidence of petitioner's involvement in the commission of the
crime, it being sufficiently supported by the evidence presented and the facts We now come to a determination of whether Section 11 is violative of the
obtaining therein. constitutional right to privacy enshrined in Section 2, Article III of the
Constitution. SPCMB is adamant that the CA's denial of its request to be The Court's construction of Section 11 of the AMLA is undoubtedly influenced
furnished copies of AMLC's ex-parte application for a bank inquiry order and by right to privacy considerations. If sustained, petitioner's argument that a
all subsequent pleadings, documents and orders filed and issued in relation bank account may be inspected by the government following an ex parte
thereto, constitutes grave abuse of discretion where the purported blanket proceeding about which the depositor would know nothing would have
authority under Section 11: (1) partakes of a general warrant intended to aid significant implications on the right to privacy, a right innately cherished by all
a mere fishing expedition; (2) violates the attorney-client privilege; (3) is not notwithstanding the legally recognized exceptions thereto. The notion that the
preceded by predicate crime charging SPCMB of a money laundering offense; government could be so empowered is cause for concern of any individual
and (4) is a form of political harassment [of SPCMB's] clientele. who values the right to privacy which, after all, embodies even the right to be
"let alone," the most comprehensive of rights and the right most valued by
We shall discuss these issues jointly since the assailed Section 11 incorporates civilized people.
by reference that "[t]he authority to inquire into or examine the main and the
related accounts shall comply with the requirements of Article III, Sections 2 One might assume that the constitutional dimension of the right to privacy, as
and 3 of the 1987 Constitution." On this point, SPCMB asseverates that "there applied to bank deposits, warrants our present inquiry. We decline to do so.
is nothing in the AMLA that allows or justifies the withholding of information Admittedly, that question has proved controversial in American
and/or any court records or proceedings pertaining to an examination of a jurisprudence. Notably, the United States Supreme Court in U.S. v.
bank account, especially if the court has already granted the authority to Miller held that there was no legitimate expectation of privacy as to
conduct the examination." the bank records of a depositor. Moreover, the text of our Constitution
has not bothered with the triviality of allocating specific rights
The theme of playing off privacy rights and interest against that of the state's peculiar to bank deposits.
interest in curbing money laundering offenses is recurring.28
However, sufficient for our purposes, we can assert there is a right to privacy
The invoked constitutional provisions read: governing bank accounts in the Philippines, and that such right finds
application to the case at bar. The source of such right is statutory, expressed
as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955.
SEC. 2. The right of the people to be secure in their persons, houses, papers,
The right to privacy is enshrined in Section 2 of that law, to wit:
and effects against unreasonable searches and seizures of whatever nature
and for any purpose shall be inviolable, and no search warrant or warrant of
arrest shall issue except upon probable cause to be determined personally by SECTION 2. All deposits of whatever nature with banks or banking
the judge after examination under oath or affirmation of the complainant and institutions in the Philippines including investments in bonds issued
the witnesses he may produce, and particularly describing the place to be by the Government of the Philippines, its political subdivisions and its
searched and the person or things to be seized. 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
SEC. 3. (1) The privacy of communication and correspondence shall be
permission of the depositor, or in cases of impeachment, or upon order of a
inviolable except upon lawful order of the court, or when public policy or order
competent court in cases of bribery or dereliction of duty of public officials, or
requires otherwise as prescribed by law.
in cases where the money deposited or invested is the subject matter of the
litigation.
(2) Any evidence obtained in violation of this or the preceding section shall be
inadmissible for any purpose in any proceeding.
Because of the Bank Secrecy Act, the confidentiality of bank deposits remains
a basic state policy in the Philippines. Subsequent laws, including the AMLA,
Once again, Eugenio 29
offers guidance: may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank
deposits still lies as the general rule. It falls within the zones of privacy
recognized by our laws. The framers of the 1987 Constitution likewise
recognized that bank accounts are not covered by either the right to statute, all bank deposits are absolutely confidential, and that nature is
information under Section 7, Article III or under the requirement of full public unaltered even by the legislated exceptions referred to above. There is
disclosure under Section 28, Article II. Unless the Bank Secrecy Act is disfavor towards construing these exceptions in such a manner that would
repealed or amended, the legal order is obliged to conserve the absolutely authorize unlimited discretion on the part of the government or of any party
confidential nature of Philippine bank deposits. seeking to enforce those exceptions and inquire into bank deposits. If there
are doubts in upholding the absolutely confidential nature of bank deposits
Any exception to the rule of absolute confidentiality must be specifically against affirming the authority to inquire into such accounts, then such doubts
legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions must be resolved in favor of the former. Such a stance would persist unless
whereby these bank accounts may be examined by "any person, government Congress passes a law reversing the general state policy of preserving the
official, bureau or office"; namely when: (1) upon written permission of the absolutely confidential nature of Philippine bank accounts. (Citations omitted,
depositor; (2) in cases of impeachment; (3) the examination of bank accounts emphasis supplied)
is upon order of a competent court in cases of bribery or dereliction of duty of
public officials; and (4) the money deposited or invested is the subject matter From the foregoing disquisition, we extract the following principles:
of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt
Practices Act, has been recognized by this Court as constituting an additional 1. The Constitution did not allocate specific rights peculiar to bank deposits;
exception to the rule of absolute confidentiality, and there have been other
similar recognitions as well.
2. The general rule of absolute confidentiality is simply statutory,30i.e. not
specified in the Constitution, which has been affirmed in jurisprudence;31
The AMLA also provides exceptions to the Bank Secrecy Act. Under Section
11, the AMLC may inquire into a bank account upon order of any competent
3. Exceptions to the general rule of absolute confidentiality have been carved
court in cases of violation of the AMLA, it having been established that there is
out by the Legislature which legislation have been sustained, albeit subjected
probable cause that the deposits or investments are related to unlawful
to heightened scrutiny by the courts;32 and
activities as defined in Section 3(i) of the law, or a money laundering offense
under Section 4 thereof. Further, in instances where there is probable cause
that the deposits or investments are related to kidnapping for ransom, certain 4. One such legislated exception is Section 11 of the AMLA.
violations of the Comprehensive Dangerous Drugs Act of 2002, hijacking and
other violations under R.A. No. 6235, destructive arson and murder, then The warning in Eugenio that an ex-parte proceeding authorizing the
there is no need for the AMLC to obtain a court order before it could inquire government to inspect certain bank accounts or investments without notice to
into such accounts. the depositor would have significant implications on the right to privacy still
does not preclude such a bank inquiry order to be allowed by specific
It cannot be successfully argued the proceedings relating to the bank inquiry legislation as an exception to the general rule of absolute confidentiality of
order under Section 11 of the AMLA is a "litigation" encompassed in one of the bank deposits.
exceptions to the Bank Secrecy Act which is when "the money deposited or
invested is the subject matter of the litigation." The orientation of the bank We thus subjected Section 11 of the AMLA to heightened scrutiny and found
inquiry order is simply to serve as a provisional relief or remedy. As earlier nothing arbitrary in the allowance and authorization to AMLC to undertake an
stated, the application for such does not entail a full-blown trial. inquiry into certain bank accounts or deposits. Instead, we found that it
provides safeguards before a bank inquiry order is issued, ensuring adherence
Nevertheless, just because the AMLA establishes additional exceptions to the to the general state policy of preserving the absolutely confidential nature of
Bank Secrecy Act it does not mean that the later law has dispensed with the Philippine bank accounts:
general principle established in the older law that "[a]ll deposits of whatever
nature with banks or banking institutions in the Philippines x x x are hereby (1) The AMLC is required to establish probable cause as basis for its ex-
considered as of an absolutely confidential nature." Indeed, by force of parte application for bank inquiry order;
(2) The CA, independent of the AMLC's demonstration of probable cause, itself commissions of an unlawful activity (or money laundering) that the office of
makes a finding of probable cause that the deposits or investments are the Ombudsman has already determined to exist, but on whether the bank
related to an unlawful activity under Section 3(i) or a money laundering accounts, assets, or other monetary instruments sought to be frozen are in
offense under Section 4 of the AMLA; any way related to any of the illegal activities enumerated under R.A. 9160,
as amended. Otherwise stated, probable cause refers to the sufficiency of the
(3) A bank inquiry court order ex-parte for related accounts is preceded by a relation between an unlawful activity and the property or monetary
bank inquiry court order ex-parte for the principal account which court instrument which is the focal point of Section 10 of RA No. 9160, as amended.
order ex-parte for related accounts is separately based on probable cause that xxx. (Emphasis supplied)
such related account is materially linked to the principal account inquired into;
and Second. As regards SPCMB's contention that the bank inquiry order is in the
nature of a general warrant, Eugenio already declared that Section 11, even
(4) The authority to inquire into or examine the main or principal account and with the allowance of an ex parte application therefor, "is not a search warrant
the related accounts shall comply with the requirements of Article III, Sections or warrant of arrest as it contemplates a direct object but not the seizure of
2 and 3 of the Constitution. persons or property."34 It bears repeating that the ''bank inquiry order" under
Section 11 is a provisional remedy to aid the AMLC in the enforcement of the
AMLA.
The foregoing demonstrates that the inquiry and examination into the bank
account are not undertaken whimsically and solely based on the investigative
discretion of the AMLC. In particular, the requirement of demonstration by the Third. Contrary to the stance of SPCMB, the bank inquiry order does not
AMLC, and determination by the CA, of probable cause emphasizes the limits contemplate that SPCMB be first impleaded in a money laundering case
of such governmental action. We will revert to these safeguards under Section already filed before the courts:
11 as we specifically discuss the CA's denial of SPCMB's letter request for
information concerning the purported issuance of a bank inquiry order We are unconvinced by this proposition, and agree instead with the then
involving its accounts. Solicitor General who conceded that the use of the phrase "in cases of' was
unfortunate, yet submitted that it should be interpreted to mean "in the event
First. The AMLC and the appellate court are respectively required to there are violations" of the AMLA, and not that there are already cases
demonstrate and ascertain probable cause. Ret. Lt. Gen. Ligot, et al. v. pending in court concerning such violations. If the contrary position is
Republic of the Philippines,33 which dealt with the adjunct provisional remedy adopted, then the bank inquiry order would be limited in purpose as a tool in
of freeze order under Section 10 of the AMLA, defined probable cause, thus: aid of litigation of live cases, and wholly inutile as a means for the
government to ascertain whether there is sufficient evidence to sustain an
intended prosecution of the account holder for violation of the AMLA. Should
The probable cause required for the issuance of a freeze order differs from the
that be the situation, in all likelihood the AMLC would be virtually deprived of
probable cause required for the institution of a criminal action, xxx.
its character as a discovery tool, and thus would become less circumspect in
filing complaints against suspect account holders. After all, under such set-up
As defined in the law, the probable cause required for the issuance of a freeze the preferred strategy would be to allow or even encourage the indiscriminate
order refers to "such facts and circumstances which would lead a reasonably filing of complaints under the AMLA with the hope or expectation that the
discreet, prudent or cautious man to believe that an unlawful activity and/or evidence of money laundering would somehow .surface during the trial. Since
money laundering offence is about to be, is being or has been committed and the AMLC could not make use of the bank inquiry order to determine whether
that the account or any monetary instrument or property subject there is evidentiary basis to prosecute the suspected malefactors, not filing
thereof sought to be frozen is in any way related to said unlawful any case at all would not be an alternative. Such unwholesome set-up should
activity and/or money laundering offense." not come to pass. Thus Section 11 cannot be interpreted in a way that would
emasculate the remedy it has established and encourage the unfounded
In other words, in resolving the issue of whether probable cause exits, the initiation of complaints for money laundering.35 (Citation omitted)
CA's statutorily-guided determination's focus is not on the probable
Guided as we are by prior holdings, and bound as we are by the requirements Rule 10.c.3. Within twenty-four (24) hours from receipt of the freeze order,
for issuance of a bank inquiry order under Section 11 of the AMLA, we are the covered institution concerned shall submit to the Court of Appeals and the
hard pressed to declare that it violates SPCMB's right to privacy. AMLC, by personal delivery, a detailed written return on the freeze order,
specifying all the pertinent and relevant information which shall include the
Nonetheless, although the bank inquiry order ex-parte passes constitutional following:
muster, there is nothing in Section 11 nor the implementing rules and
regulations of the AMLA which prohibits the owner of the bank account, as in (a) the account numbers;
his instance SPCMB, to ascertain from the CA, post issuance of the bank (b) the names of the account owners or holders;
inquiry order ex-parte, if his account is indeed the subject of an examination. (c) the amount of the monetary instrument, property or related accounts as of
Emphasized by our discussion of the safeguards under Section 11 preceding the time they were frozen;
the issuance of such an order, we find that there is nothing therein which (d) all relevant information as to the nature of the monetary instrument or
precludes the owner of the account from challenging the basis for the issuance property;
thereof. (e) any information on the related accounts pertaining to the monetary
instrument or property subject of the freeze order; and
The present controversy revolves around the issue of whether or not the (f) the time when the freeze thereon took effect.
appellate court, through the Presiding Justice, gravely abused its discretion
when it effectively denied SPCMB's letter-request for confirmation that the Rule 10.d. Upon receipt of the freeze order issued by the Court of Appeals
AMLC had applied (ex-parte) for, and was granted, a bank inquiry order to and upon verification by the covered institution that the related accounts
examine SPCMB's bank accounts relative to the investigation conducted on originated from and/or are materially linked to the monetary instrument or
Vice-President Binay's accounts. property subject of the freeze order, the covered institution shall freeze these
related accounts wherever these may be found.
We recall the Presiding Justice's letter to SPCMB categorically stating that
"under the rules, the Office of the Presiding Justice is strictly mandated not to The return of the covered institution as required under Rule 10.c.3 shall
disclose, divulge, or communicate to anyone directly or indirectly, in any include the fact of such freezing and an explanation as to the grounds for the
manner or by any means, the fact of the filing of the petition brought before identification of the related accounts.
[the Court of Appeals] by the [AMLC], its contents and even its entry in the
logbook." Note that the letter did not cite the aforementioned rules that were If the related accounts cannot be determined within twenty-four (24) hours
supposedly crystal clear to foreclose ambiguity. Note further that Rules 10.c.3 from receipt of the freeze order due to the volume and/or complexity of the
and 10.d of the IRR on Authority to File Petitions for Freeze Order provides transactions or any other justifiable factor(s), the covered institution shall
that: effect the freezing of the related accounts, monetary instruments and
properties as soon as practicable and shall submit a supplemental return
Rule 10.c. Duty of Covered Institutions upon receipt thereof. — thereof to the Court of Appeals and the AMLC within twenty-four (24) hours
from the freezing of said related accounts, monetary instruments and
Rule 10.c.1. Upon receipt of the notice of the freeze order, the covered properties.
institution concerned shall immediately freeze the monetary instrument or
property and related accounts subject thereof. The foregoing rule, in relation to what Section 11 already provides, signifies
that ex-parte bank inquiry orders on related accounts may be questioned
Rule 10.c.2. The covered institution shall likewise immediately furnish a copy alongside, albeit subsequent to, the issuance of the initial freeze order of the
of the notice of the freeze order upon the owner or holder of the monetary subject bank accounts. The requirements and procedure for the issuance of
instrument or property or related accounts subject thereof. the order, including the return to be made thereon lay the grounds for judicial
review thereof. We expound.
An act of a court or tribunal can only be considered tainted with grave abuse In enacting the amendment to Section II of the AMLC, the legislature saw it fit
of discretion when such act is done in a capricious or whimsical exercise of to place requirements before a bank inquiry order may be issued. We
judgment as is equivalent to lack of jurisdiction. It is well-settled that the discussed these requirements as basis for a valid exception to the general rule
abuse of discretion to be qualified as "grave" must be so patent or gross as to on absolute confidentiality of bank accounts. However, these very safe guards
constitute an evasion of a positive duty or a virtual refusal to perform the duty allow SPCMB, post issuance of the ex-parte bank inquiry order, legal bases to
or to act at all in contemplation of law.36 In this relation, case law states that question the propriety of such issued order, if any. To emphasize, this
not every error in the proceedings, or every erroneous conclusion of law or allowance to the owner of the bank account to question the bank inquiry order
fact, constitutes grave abuse of discretion.37 The degree of gravity, as above- is granted only after issuance of the freeze order physically seizing the subject
described, must be met. bank account. It cannot be undertaken prior to the issuance of the freeze
order.
That the propriety of the issuance of the bank inquiry order is a justiciable
issue brooks no argument. A justiciable controversy refers to an existing case While no grave abuse of discretion could be ascribed on the part of the
or controversy that is appropriate or ripe for judicial determination, not one appellate court when it explained in its letter that petitions of such nature "is
that is conjectural or merely anticipatory.38 strictly confidential in that when processing the same, not even the
handling staff members of the Office of the Presiding Justice know or have any
As previously adverted to in our discussion on the right to privacy, the clash of knowledge who the subject bank account holders are, as well as the bank
privacy rights and interest against that of the government's is readily accounts involved," it was incorrect when it declared that "under the rules, the
apparent. However, the statutorily enshrined general rule on absolute Office of the Presiding Justice is strictly mandated not to disclose, divulge, or
confidentiality of bank accounts remains. Thus, the safeguards instituted in communicate to anyone directly or indirectly, in any manner or by any means,
Section II of the AMLA and heretofore discussed provide for certain well the fact of the filing of any petition brought before [the Court of Appeals] by
defined limits, as in the language of Baker v. Carr, "judicially discoverable the Anti-Money Laundering Council, its contents and even its entry in the
standards" for determining the validity of the exercise of such discretion by logbook." As a result, the appellate court effectively precluded and prevented
the appellate court in denying the letter-request of SPCMB.39 In short, Section SPCMB of any recourse, amounting to a denial of SPCMB's letter request.
II itself provides the basis for the judicial inquiry and which the owner of the
bank accounts subject of the AMLC inquiry may invoke. We cannot overemphasize that SPCMB, as the owner of the bank account
which may be the subject of inquiry of the AMLC, ought to have a legal
Undeniably, there is probable and preliminary governmental action against remedy to question the validity and propriety of such an order by the
SPCMB geared towards implementation of the AMLA directed at SPCMB's appellate court under Section 11 of the AMLA even if subsequent to the
property, although there is none, as yet, physical seizure thereof, as in issuance of a freeze order. Moreover, given the scope of inquiry of the AMLC,
freezing of bank accounts under Section 10 of the AMLA.40 Note, however, reaching and including even related accounts, which inquiry into specifies a
that the allowance to question the bank inquiry order we carve herein is tied proviso that: "[t]hat the procedure for the ex-parte application of the ex-
to the appellate court's issuance of a freeze order on the principal accounts. parte court order for the principal account shall be the same with that of the
Even in Eugenio, while declaring that the bank inquiry order under Section II related accounts," SPCMB should be allowed to question the government
then required prior notice of such to the account owner, we recognized that intrusion. Plainly, by implication, SPCMB can demonstrate the absence of
the determination of probable cause by the appellate court to issue the bank probable cause, i.e. that it is not a related account nor are its accounts
inquiry order can be contested. As presently worded and how AMLC functions materially linked to the principal account being investigated.41
are designed under the AMLA, the occasion for the issuance of the freeze
order upon the actual physical seizure of the investigated and inquired into In BSB Group, Inc. v. Go,42 we recounted the objective of the absolute
bank account, calls into motions the opportunity for the bank account owner confidentiality rule which is protection from unwarranted inquiry or
to then question, not just probable cause for the issuance of the freeze order investigation if the purpose of such inquiry or investigation is merely to
under Section I 0, but, to begin with, the determination of probable cause for determine the existence and nature, as well as the amount of the deposit in
an ex-parte bank inquiry order into a purported related account under Section any given bank account:
II.
xxx. There is, in fact, much disfavor to construing these primary and Mr. Marcos: But under our rules of procedure and under the Civil Code, the
supplemental exceptions in a manner that would authorize unbridled attachment or garnishment of money deposited is allowed. Let us assume for
discretion, whether governmental or otherwise, in utilizing these exceptions as instance that there is a preliminary attachment which is for garnishment or for
authority for unwarranted inquiry into bank accounts. It is then perceivable holding liable all moneys deposited belonging to a certain individual, but such
that the present legal order is obliged to conserve the absolutely confidential attachment or garnishment will bring out into the open the value of such
nature of bank deposits. deposit. Is that prohibited by... the law?

The measure of protection afforded by the law has been explained in China Mr. Ramos: It is only prohibited to the extent that the inquiry... is made only
Banking Corporation v. Ortega. That case principally addressed the issue of for the purpose of satisfying a tax liability already declared for the protection
whether the prohibition against an examination of bank deposits precludes of the right in favor of the government; but when the object is merely to
garnishment in satisfaction of a judgment. Ruling on that issue in the inquire whether he has a deposit or not for purposes of taxation, then this is
negative, the Court found guidance in the relevant portions of the legislative fully covered by the law. x x x
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 Mr. Marcos: The law prohibits a mere investigation into the existence and the
in R.A. No. 1405 actually aims at protection from unwarranted inquiry or amount of the deposit.
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
Mr. Ramos: Into the very nature of such deposit. x x x (Citations omitted)
any given bank account. Thus,

What is reflected by the foregoing disquisition is that the law plainly prohibits
x x x The lower court did not order an examination of or inquiry into the
a mere investigation into the existence and the amount of the deposit. We
deposit of B&B Forest Development Corporation, as contemplated in the law.
relate the principle to SPCMB's relationship to the reported principal account
It merely required Tan Kim Liong to inform the court whether or not the
under investigation, one of its clients, former Vice President Binay. SPCMB as
defendant B&B Forest Development Corporation had a deposit in the China
the owner of one of the bank accounts reported to be investigated by the
Banking Corporation only for purposes of the garnishment issued by it, so that
AMLC for probable money laundering offenses should be allowed to pursue
the bank would hold the same intact and not allow any withdrawal until
remedies therefrom where there are legal implications on the inquiry into its
further order. It will be noted from the discussion of the conference committee
accounts as a law firm. While we do not lapse into conjecture and cannot take
report on Senate Bill No. 351 and House Bill No. 3977 which later became
up the lance for SPCMB on probable violation of the attorney-client privilege
Republic Act No. 1405, that it was not the intention of the lawmakers to place
based on pure speculation, the extent of information obtained by the AMLC
banks deposits beyond the reach of execution to satisfy a final judgment
concerning the clients of SPCMB has not been fully drawn and sufficiently
Thus:
demonstrated. At the same time, the owner of bank accounts that could be
x x x Mr. Marcos: Now, for purposes of the record, I should like the Chairman
potentially affected has the right to challenge whether the requirements for
of the Committee on Ways and Means to clarify this further. Suppose an
issuance of the bank inquiry order were indeed complied with given that such
individual has a tax case. He is being held liable by the Bureau of Internal
has implications on its property rights. In this regard, SPCMB's obeisance to
Revenue [(BIR)] or, say, P1,000.00 worth of tax liability, and because of this
promulgated rules on the matter could have afforded it a remedy, even post
the deposit of this individual [has been] attached by the [BIR].
issuance of the bank inquiry order.

Mr. Ramos: The attachment will only apply after the court has pronounced
Rule 10.b. of the IRR defines probable cause as "such facts and circumstances
sentence declaring the liability of such person. But where the primary aim is
which would lead a reasonably discreet, prudent or cautious man to believe
to determine whether he has a bank deposit in order to bring about a proper
that an unlawful activity and/or a money laundering offense is about to be, is
assessment by the [BIR], such inquiry is not allowed by this proposed law.
being or has been committed and that the account or any monetary
instrument or property sought to be frozen is in any way related to said
unlawful activity and/or money laundering offense." Evidently, the provision
only refers to probable cause for freeze orders under Section 10 of the AMLA. SEC. 54. Notice of freeze order.- The Court shall order that notice of the
From this we note that there is a glaring lacunae in our procedural rules freeze order be served personally, in the same manner provided for the
concerning the bank inquiry order under Section 11. Despite the advent of RA service of the asset preservation order in Section 14 of this Rule, upon the
No. 10167, amending Section 11 of the AMLA, we have yet to draft additional respondent or any person acting in his behalf and such covered institution or
rules corresponding to the ex-parte bank inquiry order under Section 11. A.M. government agency. The court shall notify also such party in interest as
No. 05-11-04-SC entitled "Rule of Procedure in Cases of Civil Forfeiture, Asset may have appeared before the court. (Emphasis supplied)
Preservation, and Freezing of Monetary Instrument, Property, or Proceeds
Representing, Involving, or Relating to an Unlawful Activity or Money We relate this Section 54 to the already cited Rule 10.d of the IRR
Laundering Offense Under Republic Act No. 9160, as Amended," only covers
what is already provided in the title. As we have already noted, the bank
Rule 10.d. Upon receipt of the freeze order issued by the Court of Appeals
inquiry order must likewise be governed by rules specific to its issuance where
and upon verification by the covered institution that the related accounts
the AMLC regularly invokes this provision and which, expectedly clashes with
originated from and/or are materially linked to the monetary instrument or
the rights of bank account holders.
property subject of the freeze order, the covered institution shall freeze these
related accounts wherever these may be found.
Apart from Section 2, Rule IV of the 2009 Internal Rules of the CA (IRCA)
reads:
The return of the covered institution as required under Rule 10.c.3
shall include the fact of such freezing and an explanation as to the
SEC. 2. Action by the Presiding Justice or Executive Justice. — When a grounds for the identification of the related accounts.
petition involves an urgent matter, such as an application for writ of habeas
corpus, amparo or habeas data or for temporary restraining order, and
If the related accounts cannot be determined within twenty-four (24)
there is no way of convening the Raffle Committee or calling any of its
hours from receipt of the freeze order due to the volume and/or
members, the Presiding Justice or the Executive Justice, as the case may be,
complexity of the transactions or any other justifiable factor(s), the
or in his/her absence, the most senior Justice present, may conduct the raffle
covered institution shall effect the freezing of the related accounts,
or act on the petition, subject to raffle in the latter case on the next working
monetary instruments and properties as soon as practicable and shall
day in accordance with Rule III hereof.
submit a supplemental return thereof to the Court of Appeals and the
AMLC within twenty-four (24) hours from the freezing of said related
(AMLA cases are limited to the first three most senior Justices as accounts, monetary instruments and properties. (Emphasis supplied)
stated in the law and are raffled by the Chairmen of the First, Second
and Third Divisions to the members of their Divisions only.)
demonstrating that the return of the Freeze Order must provide an
explanation as to the grounds for the identification of the related accounts, or
Nothing in the IRCA justifies the disallowance to SPCMB of information and/or the requirement of notice to a party in interest affected thereby whose bank
court records or proceedings pertaining to the possible bank inquiry order accounts were examined. This necessarily contemplates the procedure for a
covering its bank deposits or investment. prior bank inquiry order which we ought to provide for.

We note that the Presiding Justice's reply to the request for comment of For exact reference, we cite A.M. No. 05-11-04-SC, Title VIII on Petitions for
SPCMB on the existence of a petition for bank inquiry order by the AMLC Freeze Order in the CA which certain pertinent provisions we adopt and apply
covering the latter's account only contemplates the provisions of Section 10 of suppletorily as a separate Title on Petitions for Bank Inquiry Order:
the AMLA, its IRR and the promulgated rules thereon. Such immediate and
definitive foreclosure left SPCMB with no recourse on how to proceed from
TITLE VIII
what it perceived to be violation of its rights as owner of the bank account
PETITIONS FOR FREEZE ORDER IN THE COURT OF APPEALS
examined. The reply of the Presiding Justice failed to take into consideration
Section 54 of A.M. No. 05-11-04-SC on Notice of Freeze Order which reads:
SEC. 43. Applicability. - This Rule shall apply to petitions for freeze order in SEC. 51. Action by the Court of Appeals.- All members of the Division of the
the Court of Appeals. The 2002 Internal Rules of the Court of Appeals, as Court to which the assigned justice belongs shall act on the petition within
amended, shall apply suppletorily in all other aspects. twenty-four hours after its filing. However, if one member of the Division is
not available, the assigned justice and the other justice present shall act on
xxxx the petition. If only the assigned justice is present, he shall act alone. The
action of the two justices or of the assigned justice alone, as the case may be,
shall be forthwith promulgated and thereafter submitted on the next working
SEC. 46. Contents of the petition. - The petition shall contain the following
day to the absent member or members of the Division for ratification,
allegations:
modification or recall.

(a) The name and address of the respondent; If the Court is satisfied from the verified allegations of the petition that there
exists probable cause that the monetary instrument, property, or proceeds
are in any way related to or involved in any unlawful activity as defined in
(b) A specific description with particularity of the monetary instrument, Section 3(i) of Republic Act No. 9160, as amended by Republic Act No. 9194,
property or proceeds, their location, the name of the owner, holder, it shall issue ex parte a freeze order as hereinafter provided.
lienholder or possessor, if known;
If the Court finds no substantial merit in the petition, it shall dismiss the
(c) The grounds relied upon for the issuance of a freeze order; and petition outright, stating the specific reasons for such dismissal.

(d) The supporting evidence showing that the subject monetary instrument, When the unanimous vote of the three justices of the Division cannot be
property, or proceeds are in any way related to or involved in an obtained, the Presiding Justice or the Executive Justice shall designate two
unlawful activity as defined under Section 3(i) of Republic Act No. 9160, justices by raffle from among the other justices of the first three divisions to
as amended by Republic Act No. 9194. sit temporarily with them forming a special division of five justices. The
The petition shall be filed in seven clearly legible copies and shall be concurrence of a majority of such special division shall be required for the
accompanied by clearly legible copies of supporting documents duly pronouncement of a judgment or resolution.
subscribed under oath.
SEC. 52. Issuance, form and contents of the freeze order - The freeze order
shall:
xxxx

SEC. 49. Confidentiality; prohibited disclosure. - The logbook and the entries (a) issue in the name of the Republic of the Philippines represented by the
therein shall be kept strictly confidential and maintained under the Anti-Money Laundering Council;
responsibility of the Presiding Justice or the Executive Justices, as the case
may be. No person, including Court personnel, shall disclose, divulge or
(b) describe with particularity the monetary instrument, property or
communicate to anyone directly or indirectly, in any manner or by any means,
proceeds frozen, as well as the names of their owner or owners; and
the fact of the filing of the petition for freeze order, its contents and its entry
in the logbook except to those authorized by the Court. Violation shall
constitute contempt of court. (c) direct the person or covered institution to immediately freeze the
subject monetary instrument, property or proceeds or its related web of
xxxx accounts.

SEC. 53. Freeze order.

 on grave abuse of discretion. Among others, the AMLC can demonstrate that it
(a) Effectivity; post issuance hearing. - The freeze order shall be effective has established probable cause for its issuance, or if the situation
immediately for a period of twenty days. Within the twenty-day period, contemplates a denial of an application for a bank inquiry order into a related
the court shall conduct a summary hearing, with notice to the parties, account, the AMLC can establish that the account targeted is indeed a related
to determine whether or not to modify or lift the freeze order, or extend account. The resolution on these factual and legal issues ought to be
its effectivity as hereinafter provided. reviewable, albeit post issuance of the Freeze Order, akin to the provision of
an Appeal to the Supreme Court under Section 57 of A.M. No. 05-11-04-SC.
(b) Extension. - On motion of the petitioner filed before the expiration of
twenty days from issuance of a freeze order, the court may for good Palpably, the requirement to establish probable cause is not a useless
cause extend its effectivity for a period not exceeding six months. supposition. To establish and demonstrate the required probable cause before
issuance of the bank inquiry and the freeze orders is a screw on which the
AMLC's intrusive functions turns. We are hard pressed to justify a
SEC. 54. Notice of freeze order.- The Court shall order that notice of the disallowance to an aggrieved owner of a bank account to avail of remedies.
freeze order be served personally, in the same manner provided for the
service of the asset preservation order in Section 14 of this Rule, upon the That there are no specific rules governing the bank inquiry order does not
respondent or any person acting in his behalf and such covered institution or signify that the CA cannot confirm to the actual owner of the bank account
government agency. The court shall notify also such party in interest as may reportedly being investigated whether it had in fact issued a bank inquiry
have appeared before the court. order for covering its accounts, of course after the issuance of the Freeze
Order. Even in Ligot,43 we held that by implication, where the law did not
SEC. 55. Duty of respondent, covered institution or government agency upon specify, the owner of the "frozen" property may move to lift the freeze order
receipt of freeze order. - Upon receipt of a copy of the freeze order, the issued under Section 10 of the AMLA if he can show that no probable cause
respondent, covered institution or government agency shall immediately exists or the 20-day period of the freeze order has already lapsed without any
desist from and not allow any transaction, withdrawal, deposit, transfer, extension being requested from and granted by the CA. Drawing a parallel,
removal, conversion, other movement or concealment the account such a showing of the absence of probable cause ought to be afforded SPCMB.
representing, involving or relating to the subject monetary instrument,
property, proceeds or its related web of accounts. Ligot clarifies that "probable cause refers to the sufficiency of the relation
between an unlawful activity and the property or monetary instrument which
SEC. 56. Consolidation with the pending civil forfeiture proceedings - After the is the focal point of Section 10 of the AMLA, as amended." This same probable
post-issuance hearing required in Section 53, the Court shall forthwith remand cause is likewise the focal point in a bank inquiry order to further determine
the case and transmit the records to the regional trial court for consolidation whether the account under investigation is linked to unlawful activities and/or
with the pending civil forfeiture proceeding. money laundering offense. Thus, the specific applicability of Sections 52, 53,
54 and 57 Title VIII of A.M. No. 05-11-04-SC covering the following: (1)
SEC. 57. Appeal.- Any party aggrieved by the decision or ruling of the court Issuance, Form and Content of the Freeze Order; (2) Effectivity of the Freeze
may appeal to the Supreme Court by petition for review on certiorari under Order and Post Issuance Hearing thereon; (3) Notice of the Freeze Order; and
Rule 45 of the Rules of Court. The appeal shall not stay the enforcement of (4) Appeal from the Freeze Order as separate Rules for Petitions to Question
the subject decision or final order unless the Supreme Court directs otherwise. the Bank Inquiry Order. And as held in Eugenio which now applies to the
present Section 11 of the AMLA:
A reverse situation affords us a clearer picture of the arbitrary and total
preclusion of SPCMB to question the bank inquiry order of the appellate court. Although oriented towards different purposes, the freeze order under Section
In particular, in an occasion where the appellate court denies the AMLC's ex- 10 and the bank inquiry order under Section 11 are similar in that they are
parte application for a bank inquiry order under Section 11, the AMLC can extraordinary provisional reliefs which the AMLC may avail of to effectively
question this denial and assail such an order by the appellate court before us combat and prosecute money laundering offenses. Crucially, Section 10 uses
specific language to authorize an ex parte application for the provisional relief for its very inclusion into the investigation and the corresponding freezing of
therein, a circumstance absent in Section 11. xxx.44 its account in the process.

The cited rules cover and approximate the distinction made by Eugenio in As noted in Eugenio, such an allowance accorded the account holder who
declaring that the bank inquiry order is not a search warrant, and yet there wants to contest the issuance of the order and the actual investigation by the
are instituted requirements for the issuance of these orders given that such is AMLC, does not cast an unreasonable burden since the bank inquiry order has
now allowed ex-parte: already been issued. Further, allowing for notice to the account holder should
not, in any way, compromise the integrity of the bank records subject of the
The Constitution and the Rules of Court prescribe particular requirements inquiry which remain in the possession and control of the bank. The account
attaching to search warrants that are not imposed by the AMLA with respect holder so notified remains unable to do anything to conceal or cleanse his
to bank inquiry orders. A constitutional warrant requires that the judge bank account records of suspicious or anomalous transactions, at least not
personally examine under oath or affirmation the complainant and the without the whole hearted cooperation of the bank, which inherently has no
witnesses he may produce, such examination being in the form of searching vested interest to aid the account holder in such manner. Rule 10.c.46 of the
questions and answers. Those are impositions which the legislative did not IRR provides for Duty of the Covered Institution receiving the Freeze Order.
specifically prescribe as to the bank inquiry order under the AMLA and we Such can likewise be made applicable to covered institutions notified of a bank
cannot find sufficient legal basis to apply them to Section 11 of the AMLA. inquiry order.
Simply put, a bank inquiry order is not a search warrant or warrant of arrest
as it contemplates a direct object but not the seizure of persons or property. On the other hand, a scenario where SPCMB or any account holder under
examination later shows that the bank inquiry order was without the required
Even as the Constitution and the Rules of Court impose a high procedural probable cause, the information obtained through the account reverts to, and
standard for the determination of probable cause for the issuance of search maintains, its confidentiality. In short, any and all information obtained
warrants which Congress chose not to prescribe for the bank inquiry order therein by the AMLC remains confidential, as if no examination or inquiry on
under the AMLA, Congress nonetheless disallowed ex parte applications for the bank account or investments was undertaken. The foregoing consequence
the inquiry order. We can discern that in exchange for these procedural can be added as a Section in the Rules entitled "Effect of absence of probable
standards normally applied to search warrants, Congress chose instead to cause."
legislate a right to notice and a right to be heard — characteristics of judicial
proceedings which are not ex parte. Absent any demonstrable constitutional All told, we affirm the constitutionality of Section 11 of the AMLA allowing
infirmity, there is no reason for us to dispute such legislative policy choices. 45 the ex-parte application by the AMLC for authority to inquire into, and
examine, certain bank deposits and investments.
Thus, as an ex-parte bank inquiry order which Congress has now specifically
allowed, the owner of a bank account post issuance of the freeze order has an Section 11 of the AMLA providing for the ex-parte bank deposit inquiry is
opportunity under the Rules to contest the establishment of probable cause. constitutionally firm for the reasons already discussed. The ex-parte inquiry
shall be upon probable cause that the deposits or investments are related to
Again, we cannot avoid the requirement-limitation nexus in Section 11. As it an unlawful activity as defined in Section 3(i) of the law or a money
affords the government authority to pursue a legitimate state interest to laundering offense under Section 4 of the same law. To effect the limit on
investigate money laundering offenses, such likewise provides the limits for the ex-parte inquiry, the petition under oath for authority to inquire, must,
the authority given. Moreover, allowance to the owner of the bank account, akin to the requirement of a petition for freeze order enumerated in Title VIII
post issuance of the bank inquiry order and the corresponding freeze order, of of A.M. No. 05-11-04-SC, contain the name and address of the respondent;
remedies to question the order, will not forestall and waylay the government's the grounds relied upon for the issuance of the order of inquiry; and the
pursuit of money launderers. That the bank inquiry order is a separate from supporting evidence that the subject bank deposit are in any way related to or
the freeze order does not denote that it cannot be questioned. The involved in an unlawful activity.
opportunity is still rife for the owner of a bank account to question the basis
If the CA finds no substantial merit in the petition, it shall dismiss the petition
outright stating the specific reasons for such denial. If found meritorious and
there is a subsequent petition for freeze order, the proceedings shall be
governed by the existing Rules on Petitions for Freeze Order in the CA. From
the issuance of a freeze order, the party aggrieved by the ruling of the court
may appeal to the Supreme Court by petition for review on certiorari under
Rule 45 of the Rules of Court raising all pertinent questions of law and issues,
including the propriety of the issuance of a bank inquiry order. The appeal
shall not stay the enforcement of the subject decision or final order unless the
Supreme Court directs otherwise. The CA is directed to draft rules based on
the foregoing discussions to complement the existing A.M. No. 05-11-04-SC
Rule of Procedure in Cases of Civil Forfeiture, Asset Preservation, and
Freezing of Monetary Instrument, Property, or Proceeds Representing,
Involving, or Relating to an Unlawful Activity or Money Laundering Offense
under Republic Act No. 9160, as Amended for submission to the Committee
on the Revision of the Rules of Court and eventual approval and promulgation
of the Court en banc.

WHEREFORE, the petition is DENIED. Section 11 of Republic Act No. 9160, as

amended, is declared VALID and CONSTITUTIONAL.

SO ORDERED.

G.R. No. 214866 (2017)

APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, INC., ASIA

WIDE REFRESHMENTS CORPORATION, MEDCO ASIA INVESTMENT
CORPORATION, ZEST-O CORPORATION, HARMONY BANCSHARES HOLDINGS, In due course, PDIC submitted its initial receivership report to the Monetary Board which
INC., EXCALIBUR HOLDINGS, INC., and ALFREDO M. YAO, Petitioners contained its finding that EIB can be rehabilitated or permitted to resume
vs. business; provided, that a bidding for its rehabilitation would be conducted, and that the
BANGKO SENTRAL NG PILIPINAS DEPOSIT CORPORATION, and PHILIPPINE following conditions would be met: (a) there are qualified interested banks that will comply
INSURANCE, Respondents with the parameters for rehabilitation of a closed bank, capital strengthening, liquidity,
sustainability and viability of operations, and strengthening of bank governance; and
DECISION (b) all parties (including creditors and stockholders) agree to the rehabilitation and the
revised payment terms and conditions of outstanding liabilities.11 Accordingly, the
Monetary Board issued Resolution No. 1317 on August 9, 2012 noting PDIC's initial
PERLAS-BERNABE, J.:
report, and its request to extend the period within which to submit the final determination
of whether or not EIB can be rehabilitated. Pursuant to the rehabilitation efforts, a public
Before the Court is a petition for review on certiorari 1 filed by petitioners Apex Bancrights bidding was scheduled by PDIC on October 18, 2012, but the same failed as no bid was
Holdings, Inc., Lead Bancfund Holdings, Inc, Asia Wide Refreshments Corporation, submitted. A re-bidding was then set on March 20, 2013 which also did not materialize as
Medco Asia Investment Corporation, Zest-O Corporation, Harmony Bancshares Holdings, no bids were submitted.12
Inc., Excalibur Holdings, Inc., and Alfredo M. Yao (petitioners) assailing the
Decision2 dated January 21, 2014 and the Resolution3 dated October 10, 2014 of
On April 1, 2013, PDIC informed BSP that EIB can hardly be rehabilitated.13 Based on
the Court of Appeals in CA-G.R. SP No. 129674, which affirmed Resolution No. 571
PDIC's report that EIB was insolvent, the Monetary Board passed Resolution No. 571 on
dated April 4, 2013 of the Monetary Board of respondent Bangko Sentral ng April 4, 2013 directing PDIC to proceed with the liquidation of EIB.14
Pilipinas (BSP) ordering the liquidation of the Export and Industry Bank (EIB).
On April 29, 2013, petitioners, who are stockholders representing the majority stock of
The Facts
EIB,15 filed a petition for certiorari 16 before the CA challenging Resolution No. 571. In
essence, petitioners blame PDIC for the failure to rehabilitate EIB, contending that
Sometime in July 2001, EIB entered into a three-way merger with Urban Bank, Inc. (UBI) PDIC: (a) imposed unreasonable and oppressive conditions which delayed or frustrated
and Urbancorp Investments, Inc. (UII) in an attempt to rehabilitate UBI which was then the transaction between BDO and EIB; (b) frustrated EIB's efforts to increase its liquidity
under receivership.4 In September 2001, following the said merger, EIB itself encountered when PDIC disapproved EIB's proposal to sell its MRT bonds to a private third party and,
financial difficulties which prompted respondent the Philippine Deposit Insurance instead, required EIB to sell the same to government entities; (c) imposed impossible and
Corporation (PDIC) to extend financial assistance to it. However, EIB still failed to unnecessary bidding requirements; and (d) delayed the public bidding which dampened
overcome its financial problems, thereby causing PDIC to release in May 2005 additional investors' interest.17
financial assistance to it, conditioned upon the infusion by EIB stockholders of additional
capital whenever EIB' s adjusted Risk Based Capital Adequacy Ratio falls below 12.5%.
In defense, PDIC countered18 that petitioners were already estopped from assailing the
Despite this, EIB failed to comply with the BSP's capital requirements, causing EIB's
placement of EIB under receivership and its eventual liquidation since they had already
stockholders to commence the process of selling the bank.5
surrendered full control of the bank to the BSP as early as April 26, 2012.19 For its part,
BSP maintained20 that it had ample factual and legal bases to order EIB's liquidation.21
Initially, Banco de Oro (BDO) expressed interest in acquiring EIB. However, certain
issues derailed the acquisition, including BDO's unwillingness to assume certain liabilities The CA Ruling
of EIB, particularly the claim of the Pacific Rehouse Group against it. In the end, BDO's
acquisition of EIB did not proceed and the latter's financial condition worsened. Thus, in a
letter6 dated April 26, 2012, EIB 's president and chairman voluntarily turned-over the full In a Decision22 dated January 21, 2014, the CA dismissed the petition for lack of merit. It
control of EIB to BSP, and informed the latter that the former will declare a bank holiday ruled that the Monetary Board did not gravely abuse its discretion in ordering the
on April 27, 2012.7 liquidation of EIB pursuant to the PDIC's findings that the rehabilitation of the bank is no
longer feasible. In this regard, the CA held that there is nothing in Section 30 of RA 7653
that requires the Monetary Board to make its own independent factual determination on
On April 26, 2012, the BSP, through the Monetary Board, issued Resolution No.
the bank's viability before ordering its liquidation. According to the CA, the law only
6868 prohibiting EIB from doing business in the Philippines and placing it under the
provides that the Monetary Board "shall notify in writing the board of directors of its
receivership of PDIC, in accordance with Section 30 of Republic Act No. (RA) 7653,
otherwise known as "The New Central Bank Act."9 Accordingly, PDIC took over EIB.10
findings and direct the receiver to proceed with the liquidation of the institution,"23 which it The receiver shall immediately gather and take charge of all the assets and liabilities of
did in this case. the institution, administer the same for the benefit of its creditors, and exercise the
general powers of a receiver under the Revised Rules of Court x x x[.]
Undaunted, petitioners moved for reconsideration24 which was, however, denied by the
CA in its Resolution25 dated October 10, 2014; hence, this petition. If the receiver determines that the institution cannot be rehabilitated or permitted to
resume business in accordance with the next preceding paragraph, the Monetary Board
The Issue Before the Court shall notify in writing the board of directors of its findings and direct the receiver to
proceed with the liquidation of the institution. The receiver shall:
The sole issue before the Court is whether or not the CA correctly ruled that the Monetary
Board did not gravely abuse its discretion in issuing Resolution No. 571 which directed xxxx
the PDIC to proceed with the liquidation of EIB.
The actions of the Monetary Board taken under this section or under Section 29 of this
The Court's Ruling Act shall be final and executory, and may not be restrained or set aside by the court
except on petition for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
The petition is without merit. Section 30 of RA 7653 provides for the proceedings in the jurisdiction. The petition for certiorari may only be filed by the stockholders of record
receivership and liquidation of banks and quasi-banks, the pertinent portions of which representing the majority of the capital stock within ten (10) days from receipt by the
read:
board of directors of the institution of the order directing receivership, liquidation or
conservatorship.
Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the
head of the supervising or examining department, the Monetary Board finds that a bank
The designation of a conservator under Section 29 of this Act or the appointment of a
or quasi-bank:
receiver under this section shall be vested exclusively with the Monetary
Board.1âwphi1 Furthermore, the designation of a conservator is not a precondition to the
(a) is unable to pay its liabilities as they become due in the ordinary designation of a receiver. (Emphases and underscoring supplied)
course of business: Provided, That this shall not include inability to pay
caused by extraordinary demands induced by financial panic in the
It is settled that "[t]he power and authority of the Monetary Board to close banks and
banking community;
liquidate them thereafter when public interest so requires is an exercise of the police
power of the State. Police power, however, is subject to judicial inquiry. It may not be
(b) has insufficient realizable assets, as determined by the Bangko exercised arbitrarily or unreasonably and could be set aside if it is either capricious,
Sentral, to meet its liabilities; or discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due process
and equal protection clauses of the Constitution."26 Otherwise stated and as culled from
(c) cannot continue in business without involving probable losses to its the above provision, the actions of the Monetary Board shall be final and executory and
depositors or creditors; or may not be restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such grave abuse of
(d) has willfully violated a cease and desist order under Section 37 that discretion as to amount to lack or excess of jurisdiction. "There is grave abuse of
has become final, involving acts or transactions which amount to fraud discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty
or a dissipation of the assets of the institution; in which cases, the enjoined by law or to act in contemplation of law as when the judgment rendered is not
Monetary Board may summarily and without need for prior hearing forbid based on law and evidence but on caprice, whim and despotism."27
the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking In line with the foregoing considerations, the Court agrees with the CA that the Monetary
institution. Board did not gravely abuse its discretion in ordering the liquidation of EIB through its
Resolution No. 571.
xxxx
To recount, after the Monetary Board issued Resolution No. 686 which placed EIB under receivership and liquidation of closed financial institutions, upon a factual determination of
the receivership of PDIC, the latter submitted its initial findings to the Monetary Board, the latter's insolvency.32 Thus, following the maxim verba legis non est recedendum -
stating that EIB can be rehabilitated or permitted to resume business; provided, that a which means "from the words of a statute there should be no departure" - a statute that is
bidding for its rehabilitation would be conducted, and that the following conditions would clear, plain, and free from ambiguity must be given its literal meaning and applied without
be met: (a) there are qualified interested banks that will comply with the parameters for any attempted interpretation,33 as in this case.
rehabilitation of a closed bank, capital strengthening, liquidity, sustainability and viability
of operations, and strengthening of bank governance; and (b) all parties (including In sum, the Monetary Board's issuance of Resolution No. 571 ordering the liquidation of
creditors and stockholders) agree to the rehabilitation and the revised payment terms and EIB cannot be considered to be tainted with grave abuse of discretion as it was amply
conditions of outstanding liabilities.28 However, the foregoing conditions for EIB 's supported by the factual circumstances at hand and made in accordance with prevailing
rehabilitation "were not met because the bidding and re-bidding for the bank's law and jurisprudence. To note, the "actions of the Monetary Board in proceedings on
rehabilitation were aborted since none of the pre-qualified Strategic Third Party Investors insolvency are explicitly declared by law to be 'final and executory.' They may not be set
(STPI) submitted a letter of interest to participate in the bidding,"29 thereby resulting in the aside, or restrained, or enjoined by the courts, except upon 'convincing proof that the
PDIC's finding that EIB is already insolvent and must already be liquidated - a finding action is plainly arbitrary and made in bad faith,"[['34]] which is absent in this case.
which eventually resulted in the Monetary Board's issuance of Resolution No. 571.
WHEREFORE, the petition is hereby DENIED. The Decision dated January 21, 2014 and
In an attempt to forestall EIB's liquidation, petitioners insist that the Monetary Board must the Resolution dated October 10, 2014 of the Court of Appeals in CA-G.R. SP No.
first make its own independent finding that the bank could no longer be rehabilitated - 129674 are hereby AFFIRMED.
instead of merely relying on the findings of the PDIC - before ordering the liquidation of a
bank.30
SO ORDERED.
Such position is untenable.

As correctly held by the CA, nothing in Section 30 of RA 7653 requires the BSP, through
the Monetary Board, to make an· independent determination of whether a bank may still
be rehabilitated or not. As expressly stated in the afore-cited provision, once the receiver
determines that rehabilitation is no longer feasible, the Monetary Board is simply
obligated to: (a) notify in writing the bank's board of directors of the same; and (b) direct
the PDIC to proceed with liquidation, viz.:

If the receiver determines that the institution cannot be rehabilitated or permitted to

resume business in accordance with the next preceding paragraph, the Monetary Board
shall notify in writing the board of directors of its findings and direct the receiver to
proceed with the liquidation of the institution. x x x.

x x x x31

Suffice it to say that if the law had indeed intended that the Monetary Board make a
separate and distinct factual determination before it can order the liquidation of a bank or
quasi-bank, then there should have been a provision to that effect. There being none, it
can safely be concluded that the Monetary Board is not so required when the PDIC has
already made such determination. It must be stressed that the BSP (the umbrella agency G.R. No. 183774 : November 14, 2012
of the Monetary Board), in its capacity as government regulator of banks, and the PDIC,
as statutory receiver of banks under RA 7653, are the principal agencies mandated by PHILIPPINE BANKING CORPORATION, Petitioner, v. ARTURO DY,
law to determine the financial viability of banks and quasi-banks, and facilitate the BERNARDO DY, JOSE DELGADO AND CIPRIANA DELGADO, Respondents.
 DECISION enable them (the Dys) to use the said properties as collateral for their loan
application with Philbank and thereafter, pay the true consideration of
PERLAS-BERNABE, J.: P17.00/sq.m. for Lot No. 6966. However, after receiving the loan proceeds,
the Dys reneged on their agreement, prompting Sps. Delgado to cause the
annotation of an adverse claim on the Dys' titles and to inform Philbank of the
This Petition for Review on Certiorari assails the January 30, 2008
simulation of the sale. Sps. Delgado, thus, prayed for the dismissal of the
Decision1ςrνll of the Court of Appeals (CA) in CA-G.R. CV No. 51672, which
complaint, with a counterclaim for damages and a cross-claim against the Dys
set aside the October 5, 1994 Decision2ςrνll of the Regional Trial Court of
for the payment of the balance of the purchase price plus damages.
Cebu City, Branch 22 (RTC) and directed the Register of Deeds of Cebu City to
cancel Transfer Certificate of Title (TCT) Nos. 517683ςrνll and
519014ςrνll in the names of respondents Arturo Dy and Bernardo Dy (Dys) For their part, the Dys denied knowledge of the alleged transaction between
and to issue the corresponding TCTs in the name of respondent Cipriana cross-claimants Sps. Delgado and buyer. They claimed to have validly
Delgado (Cipriana). acquired the subject property from Sps. Delgado and paid the full
consideration therefor as the latter even withdrew their adverse claim and
never demanded for the payment of any unpaid balance.
The Factual Antecedents

On the other hand, Philbank filed its Answer8ςrνll asserting that it is an

Cipriana was the registered owner of a 58,129-square meter (sq.m.) lot,
innocent mortgagee for value without notice of the defect in the title of the
denominated as Lot No. 6966, situated in Barrio Tongkil, Minglanilla, Cebu,
Dys. It filed a cross-claim against Sps. Delgado and the Dys for all the
covered by TCT No. 18568. She and her husband, respondent Jose Delgado
damages that may be adjudged against it in the event they are declared seller
(Jose), entered into an agreement with a certain Cecilia Tan (buyer) for the
and purchaser in bad faith, respectively.
sale of the said property for a consideration of P10.00/sq.m. It was agreed
that the buyer shall make partial payments from time to time and pay the
balance when Cipriana and Jose (Sps. Delgado) are ready to execute the deed In answer to the cross-claim, Sps. Delgado insisted that Philbank was not a
of sale and transfer the title to her. mortgagee in good faith for having granted the loan and accepted the
mortgage despite knowledge of the simulation of the sale to the Dys and for
failure to verify the nature of the buyers physical possession of a portion of
At the time of sale, the buyer was already occupying a portion of the property
Lot No. 6966. They thereby prayed for the cancellation of the mortgage in
where she operates a noodle (bihon) factory while the rest was occupied by
Philbank's favor.
tenants which Sps. Delgado undertook to clear prior to full payment. After
paying the total sum of P147,000.00 and being then ready to pay the balance,
the buyer demanded the execution of the deed, which was refused. Subsequently, Sps. Delgado amended their cross-claim against the Dys to
Eventually, the buyer learned of the sale of the property to the Dys and its include a prayer for the nullification of the deeds of absolute sale in the
subsequent mortgage to petitioner Philippine Banking Corporation (Philbank), latter's favor and the corresponding certificates of title, and for the
prompting the filing of the Complaint5ςrνll for annulment of certificate of consequent reinstatement of Ciprianas title.9ςrνll
title, specific performance and/or reconveyance with damages against Sps.
Delgado, the Dys and Philbank. The complaints against the Dys and Philbank were subsequently withdrawn.
On the other hand, both the buyer and Sps. Delgado never presented any
In their Answer, Sps. Delgado, while admitting receipt of the partial payments evidence in support of their respective claims. Hence, the RTC limited itself to
made by the buyer, claimed that there was no perfected sale because the the resolution of the claims of Sps. Delgado, Philbank and the Dys against one
latter was not willing to pay their asking price of P17.00/sq.m. They also another.
interposed a cross-claim against the Dys averring that the deeds of absolute
sale in their favor dated June 28, 19826ςrνll and June 30, The RTC Ruling
19827ςrνll covering Lot No. 6966 and the adjoining Lot No. 4100-A (on
which Sps. Delgado's house stands), were fictitious and merely intended to
In the Decision10ςrνll dated October 5, 1994, the RTC dismissed the cross- For his part, Arturo Dy filed a Petition-in-Intervention13ςrνll arguing that
claims of Sps. Delgado against the Dys and Philbank. It noted that other than while the deeds of absolute sale over the two properties were admittedly
Sps. Delgado's bare allegation of the Dys' supposed non-payment of the full simulated, the simulation was only a relative one involving a false statement
consideration for Lot Nos. 6966 and 4100-A, they failed to adduce competent of the price. Hence, the parties are still bound by their true agreement. The
evidence to support their claim. On the other hand, the Dys presented a cash same was opposed/objected to by both Philbank14ςrνll and Sps.
voucher11ςrνll dated April 6, 1983 duly signed by Sps. Delgado Delgado15ςrνll as improper, considering that the CA judgment had long
acknowledging receipt of the total consideration for the two lots. become final and executory as to the Dys who neither moved for
reconsideration nor appealed the CA Decision.
The RTC also observed that Sps. Delgado notified Philbank of the purported
simulation of the sale to the Dys only after the execution of the loan and The Ruling of the Court
mortgage documents and the release of the loan proceeds to the latter,
negating their claim of bad faith. Moreover, they subsequently notified the The petition is meritorious.
bank of the Dys' full payment for the two lots mortgaged to it.
At the outset, the Court takes note of the fact that the CA Decision nullifying
The CA Ruling the questioned contracts of sale between Sps. Delgado and the Dys had
become final and executory. Accordingly, the Petition-in-Intervention filed by
However, on appeal, the CA set aside12ςrνll the RTC's decision and ordered Arturo Dy, which seeks to maintain the subject contracts' validity, can no
the cancellation of the Dys' certificates of title and the reinstatement of longer be entertained. The cancellation of the Dys' certificates of title over the
Cipriana's title. It ruled that there were no perfected contracts of sale between disputed properties and the issuance of new TCTs in favor of Cipriana must
Sps. Delgado and the Dys in view of the latter's admission that the deeds of therefore be upheld.
sale were purposely executed to facilitate the latter's loan application with
Philbank and that the prices indicated therein were not the true consideration. However, Philbank's mortgage rights over the subject properties shall be
Being merely simulated, the contracts of sale were, thus, null and void, maintained. While it is settled that a simulated deed of sale is null and void
rendering the subsequent mortgage of the lots likewise void. and therefore, does not convey any right that could ripen into a valid
title,16ςrνll it has been equally ruled that, for reasons of public
The CA also declared Philbank not to be a mortgagee in good faith for its policy,17ςrνll the subsequent nullification of title to a property is not a
failure to ascertain how the Dys acquired the properties and to exercise ground to annul the contractual right which may have been derived by a
greater care when it conducted an ocular inspection thereof. It thereby purchaser, mortgagee or other transferee who acted in good faith.18ςrνll
canceled the mortgage over the two lots.
The ascertainment of good faith or lack of it, and the determination of
The Petition whether due diligence and prudence were exercised or not, are questions of
fact19ςrνll which are generally improper in a petition for review on certiorari
In the present petition, Philbank insists that it is a mortgagee in good faith. It under Rule 45 of the Rules of Court (Rules) where only questions of law may
further contends that Sps. Delgado are estopped from denying the validity of be raised. A recognized exception to the rule is when there are conflicting
the mortgage constituted over the two lots since they participated in inducing findings of fact by the CA and the RTC,20ςrνll as in this case.
Philbank to grant a loan to the Dys.
Primarily, it bears noting that the doctrine of "mortgagee in good faith" is
On the other hand, Sps. Delgado maintain that Philbank was not an innocent based on the rule that all persons dealing with property covered by a Torrens
mortgagee for value for failure to exercise due diligence in transacting with Certificate of Title are not required to go beyond what appears on the face of
the Dys and may not invoke the equitable doctrine of estoppel to conceal its the title. This is in deference to the public interest in upholding the
own lack of diligence. indefeasibility of a certificate of title as evidence of lawful ownership of the
land or of any encumbrance thereon.21ςrνll In the case of banks and other
financial institutions, however, greater care and due diligence are required favor of Philbank as to hold otherwise would effectively sanction their blatant
since they are imbued with public interest, failing which renders the bad faith to Philbank's detriment.
mortgagees in bad faith. Thus, before approving a loan application, it is a
standard operating practice for these institutions to conduct an ocular Accordingly, in the interest of public policy, fair dealing, good faith and justice,
inspection of the property offered for mortgage and to verify the genuineness the Court accords Philbank the rights of a mortgagee in good faith whose lien
of the title to determine the real owner(s) thereof.22ςrνll The apparent to the securities posted must be respected and protected. In this regard,
purpose of an ocular inspection is to protect the "true owner" of the property Philbank is entitled to have its mortgage carried over or annotated on the
as well as innocent third parties with a right, interest or claim thereon from a titles of Cipriana Delgado over the said properties.
usurper who may have acquired a fraudulent certificate of title
thereto.23ςrνll
WHERFORE, the assailed January 30, 2008 Decision of the Court of Appeals in
CA-G.R. CV No. 51672 is hereby AFFIRMED with MODIFICATION upholding the
In this case, while Philbank failed to exercise greater care in conducting the mortgage rights of petitioner Philippine Banking Corporation over the subject
ocular inspection of the properties offered for mortgage,24ςrνll its omission properties.ςrαlαωlιbrαr
did not prejudice any innocent third parties. In particular, the buyer did not
pursue her cause and abandoned her claim on the property. On the other
SO ORDERED.
hand, Sps. Delgado were parties to the simulated sale in favor of the Dys
which was intended to mislead Philbank into granting the loan application.
Thus, no amount of diligence in the conduct of the ocular inspection could Endnotes:
have led to the discovery of the complicity between the ostensible mortgagors
(the Dys) and the true owners (Sps. Delgado). In fine, Philbank can hardly be
deemed negligent under the premises since the ultimate cause of the
mortgagors' (the Dys') defective title was the simulated sale to which Sps.
Delgado were privies.

Indeed, a finding of negligence must always be contextualized in line with the

attendant circumstances of a particular case. As aptly held in Philippine
National Bank v. Heirs of Estanislao Militar,25ςrνll "the diligence with which
the law requires the individual or a corporation at all times to govern a
particular conduct varies with the nature of the situation in which one is
placed, and the importance of the act which is to be performed."26ςrνll Thus,
without diminishing the time-honored principle that nothing short of
extraordinary diligence is required of banks whose business is impressed with
public interest, Philbank's inconsequential oversight should not and cannot
serve as a bastion for fraud and deceit.

To be sure, fraud comprises "anything calculated to deceive, including all acts,

omissions, and concealment involving a breach of legal duty or equitable duty,
trust, or confidence justly reposed, resulting in damage to another, or by
which an undue and unconscientious advantage is taken of
another."27ςrνll In this light, the Dys' and Sps. Delgado's deliberate
simulation of the sale intended to obtain loan proceeds from and to prejudice
Philbank clearly constitutes fraudulent conduct. As such, Sps. Delgado cannot
now be allowed to deny the validity of the mortgage executed by the Dys in