BANKING CASES

1. Salvacion vs. Central Bank, 21 August 1997

2. Ejercito vs. Sandiganbayan, 30 November 2006

3. DBP vs. Arcilla, G.R. No. 161397, 30 June 2005

4. Sps. Larrobis, Jr. vs. Philippine Veterans Bank, 1 October 2004

5. Philippine National Bank vs. Vila, 799 SCRA 90, G.R. No. 213241 August 1, 2016

6. Soriano vs. People, 611 SCRA 191, G.R. No. 162336 February 1, 2010

7. Philippine National Bank vs. Cheah Chee Chong G.R. No. 170865 April 25, 2012

8. 3- Carbonell vs. Metropolitan Bank and Trust Company,825 SCRA 1, G.R. No. 178467
April 26, 2017

9. Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas and the
Monetary Board, G.R. No. 200678, June 04, 2018

10. Peter L. So vs. Philippine Deposit Insurance Commission, G.R. No. 230020, March 19,
2018

11. Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 841 SCRA 436, G.R.
No. 214866 October 2, 2017

12. Philippine Banking Corporation vs. Dy, 685 SCRA 567, G.R. No. 183774 November 14,
20121

13. BPI vs. Sps. Quiaoit, G.R. No. 199562, January 16, 2019

14. Intestate Proceedings – Miguelita Paciones, G.R. No. 214415, October 15, 2018

15. BPI vs. Land Investors, G.R. No. 198237, October 08, 2018
G.R. No. 94723 August 21, 1997 nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen
recovered from Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303,
US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account — China
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and
Banking Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door
Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners,
Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant.
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y
NORTHCOTT, respondents. On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, Criminal
Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4)
counts of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati Civil Case No. 89-
3214 for damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day there
TORRES, JR., J.:
was a scheduled hearing for Bartelli's petition for bail the latter escaped from jail.

In our predisposition to discover the "original intent" of a statute, courts become the unfeeling pillars of
On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of Warrant of
the status quo. Ligle do we realize that statutes or even constitutions are bundles of compromises thrown
Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal
our way by their framers. Unless we exercise vigilance, the statute may already be out of tune and irrelevant
cases were archived in an Order dated February 28, 1989.
to our day.

Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989 granting the
The petition is for declaratory relief. It prays for the following reliefs:
application of herein petitioners, for the issuance of the writ of preliminary attachment. After petitioners
gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the amount of P100,000.00, a Writ of
a.) Immediately upon the filing of this petition, an Order be issued restraining the Preliminary Attachment was issued by the trial court on February 28, 1989.
respondents from applying and enforcing Section 113 of Central Bank Circular No. 960;
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Banking
b.) After hearing, judgment be rendered: Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation
invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. On March 15, 1989,
Deputy Sheriff of Makati Armando de Guzman sent his reply to China Banking Corporation saying that the
1.) Declaring the respective rights and duties of petitioners and respondents; garnishment did not violate the secrecy of bank deposits since the disclosure is merely incidental to a
garnishment properly and legally made by virtue of a court order which has placed the subject deposits
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provisions in custodia legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a
of the Constitution, hence void; because its provision that "Foreign currency deposits letter dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the
shall be exempt from attachment, garnishment, or any other order or process of any dollar deposits or defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or
court, legislative body, government agency or any administrative body whatsoever process of any court, legislative body, government agency or any administrative body, whatsoever.

i.) has taken away the right of petitioners to have the bank deposit of This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter dated April 25,
defendant Greg Bartelli y Northcott garnished to satisfy the judgment 1989 on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been
rendered in petitioners' favor in violation of substantive due process repealed or amended since said section has rendered nugatory the substantive right of the plaintiff to have
guaranteed by the Constitution; the claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as
granted to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows:

ii.) has given foreign currency depositors an undue favor or a class

privilege in violation of the equal protection clause of the Constitution; May 26, 1989

iii.) has provided a safe haven for criminals like the herein respondent Ms. Erlinda S. Carolino
Greg Bartelli y Northcott since criminals could escape civil liability for 12 Pres. Osmena Avenue
their wrongful acts by merely converting their money to a foreign South Admiral Village
currency and depositing it in a foreign currency deposit account with Paranaque, Metro Manila
an authorized bank.
Dear Ms. Carolino:
The antecedent facts:
This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113,
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen CB Circular No. 960 (1983).
Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989 and was able to rape the child once on February 4, and The cited provision is absolute in application. It does not admit of any exception, nor has
three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living the same been repealed nor amended.
 The purpose of the law is to encourage dollar accounts within the country's banking In support of the complaint, plaintiffs presented as witnesses the minor Karen E.
system which would help in the development of the economy. There is no intention to Salvacion, her father, Federico N. Salvacion, Jr., a certain Joseph Aguilar and a certain
render futile the basic rights of a person as was suggested in your subject letter. The law Liberato Madulio, who gave the following testimony:
may be harsh as some perceive it, but it is still the law. Compliance is, therefore,
enjoined.
Karen took her first year high school in St. Mary's Academy in Pasay City but has recently
transferred to Arellano University for her second year.
Very truly yours,
In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square,
(SGD) AGAPITO S. FAJARDO with her friend Edna Tangile whiling away her free time. At about 3:30 p.m. while she
Director1 was finishing her snack on a concrete bench in front of Plaza Fair, an American
approached her. She was then alone because Edna Tangile had already left, and she was
about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve summons by
publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs. Greg Bartelli y Northcott."
Summons with the complaint was a published in the Manila Times once a week for three consecutive weeks. The American asked her name and introduced himself as Greg Bartelli. He sat beside her
Greg Bartelli failed to file his answer to the complaint and was declared in default on August 7, 1989. After when he talked to her. He said he was a Math teacher and told her that he has a sister
hearing the case ex-parte, the court rendered judgment in favor of petitioners on March 29, 1990, the who is a nurse in New York. His sister allegedly has a daughter who is about Karen's age
dispositive portion of which reads: and who was with him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-
5)
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant,
ordering the latter: The American asked Karen what was her favorite subject and she told him it's Pilipino. He
then invited her to go with him to his house where she could teach Pilipino to his niece.
He even gave her a stuffed toy to persuade her to teach his niece. (Id., pp. 5-6)
1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages;

They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendant's
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E.
house along Kalayaan Avenue. (Id., p. 6)
Salvacion the amount of P150,000.00 each or a total of P300,000.00 for both of them;

When they reached the apartment house, Karen noticed that defendant's alleged niece
3. To pay plaintiffs exemplary damages of P100,000.00; and
was not outside the house but defendant told her maybe his niece was inside. When
Karen did not see the alleged niece inside the house, defendant told her maybe his niece
4. To pay attorney's fees in an amount equivalent to 25% of the total amount of damages was upstairs, and invited Karen to go upstairs. (Id., p. 7)
herein awarded;
Upon entering the bedroom defendant suddenly locked the door. Karen became nervous
5. To pay litigation expenses of P10,000.00; plus because his niece was not there. Defendant got a piece of cotton cord and tied Karen's
hands with it, and then he undressed her. Karen cried for help but defendant strangled
her. He took a packing tape and he covered her mouth with it and he circled it around her
6. Costs of the suit. head. (Id., p. 7)

SO ORDERED. Then, defendant suddenly pushed Karen towards the bed which was just near the door.
He tied her feet and hands spread apart to the bed posts. He knelt in front of her and
The heinous acts of respondent Greg Bartelli which gave rise to the award were related in graphic detail by inserted his finger in her sex organ. She felt severe pain. She tried to shout but no sound
the trial court in its decision as follows: could come out because there were tapes on her mouth. When defendant withdrew his
finger it was full of blood and Karen felt more pain after the withdrawal of the finger. (Id.,
p. 8)
The defendant in this case was originally detained in the municipal jail of Makati but was
able to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati
to the Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati, He then got a Johnson's Baby Oil and he applied it to his sex organ as well as to her sex
Branch 136, where he was charged with four counts of Rape and Serious Illegal Detention organ. After that he forced his sex organ into her but he was not able to do so. While he
(Crim. Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel, was doing it, Karen found it difficult to breathe and she perspired a lot while feeling
summons was served upon defendant by publication in the Manila Times, a newspaper of severe pain. She merely presumed that he was able to insert his sex organ a little,
general circulation as attested by the Advertising Manager of the Metro Media Times, Inc., because she could not see. Karen could not recall how long the defendant was in that
the publisher of the said newspaper. Defendant, however, failed to file his answer to the position. (Id. pp. 8-9)
complaint despite the lapse of the period of sixty (60) days from the last publication;
hence, upon motion of the plaintiffs, through counsel, defendant was declared in default After that, he stood up and went to the bathroom to wash. He also told Karen to take a
and plaintiffs were authorized to present their evidence ex parte. shower and he untied her hands. Karen could only hear the sound of the water while the
defendant, she presumed, was in the bathroom washing his sex organ. When she took a should the neighbors call for the police and the defendant see her in different clothes, he
shower more blood came out from her. In the meantime, defendant changed the might kill her. At that time she was wearing a T-shirt of the American because the latter
mattress because it was full of blood. After the shower, Karen was allowed by defendant washed her dress. (Id., p. 16)
to sleep. She fell asleep because she got tired crying. The incident happened at about
4:00 p.m. Karen had no way of determining the exact time because defendant removed
Afterwards, defendant arrived and he opened the door. He asked her if she had asked for
her watch. Defendant did not care to give her food before she went to sleep. Karen woke
help because there were many policemen outside and she denied it. He told her to
up at about 8:00 o'clock the following morning. (Id., pp. 9-10)
change her clothes, and she did change to the one she was wearing on Saturday. He
instructed her to tell the police that she left home and willingly; then he went downstairs
The following day, February 5, 1989, a Sunday, after a breakfast of biscuit and coke at but he locked the door. She could hear people conversing but she could not understand
about 8:30 to 9:00 a.m. defendant raped Karen while she was still bleeding. For lunch, what they were saying. (Id., p. 19)
they also took biscuit and coke. She was raped for the second time at about 12:00 to
2:00 p.m. In the evening, they had rice for dinner which defendant had stored
When she heard the voices of many people who were conversing downstairs, she knocked
downstairs; it was he who cooked the rice that is why it looks like "lugaw". For the third
repeatedly at the door as hard as she could. She heard somebody going upstairs and
time, Karen was raped again during the night. During those three times defendant
when the door was opened, she saw a policeman. The policeman asked her name and the
succeeded in inserting his sex organ but she could not say whether the organ was
reason why she was there. She told him she was kidnapped. Downstairs, he saw about
inserted wholly.
five policemen in uniform and the defendant was talking to them. "Nakikipag-areglo po sa
mga pulis," Karen added. "The policeman told him to just explain at the precinct. (Id., p.
Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands 20)
and feet nor put a tape on her mouth anymore but she did not cry for help for fear that
she might be killed; besides, all the windows and doors were closed. And even if she
They went out of the house and she saw some of her neighbors in front of the house.
shouted for help, nobody would hear her. She was so afraid that if somebody would hear
They rode the car of a certain person she called Kuya Boy together with defendant, the
her and would be able to call the police, it was still possible that as she was still inside the
policeman, and two of her neighbors whom she called Kuya Bong Lacson and one Ate
house, defendant might kill her. Besides, the defendant did not leave that Sunday, ruling
Nita. They were brought to Sub-Station I and there she was investigated by a policeman.
out her chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989,
At about 2:00 a.m., her father arrived, followed by her mother together with some of
pp. 12-14)
their neighbors. Then they were brought to the second floor of the police headquarters.
(Id., p. 21)
On February 6, 1989, Monday, Karen was raped three times, once in the morning for
thirty minutes after a breakfast of biscuits; again in the afternoon; and again in the
At the headquarters, she was asked several questions by the investigator. The written
evening. At first, Karen did not know that there was a window because everything was
statement she gave to the police was marked as Exhibit A. Then they proceeded to the
covered by a carpet, until defendant opened the window for around fifteen minutes or
National Bureau of Investigation together with the investigator and her parents. At the
less to let some air in, and she found that the window was covered by styrofoam and
NBI, a doctor, a medico-legal officer, examined her private parts. It was already 3:00 in
plywood. After that, he again closed the window with a hammer and he put the
the early morning of the following day when they reached the NBI. (TSN, Aug. 15, 1989,
styrofoam, plywood, and carpet back. (Id., pp. 14-15)
p. 22) The findings of the medico-legal officer has been marked as Exhibit B.

That Monday evening, Karen had a chance to call for help, although defendant left but
She was studying at the St. Mary's Academy in Pasay City at the time of the incident but
kept the door closed. She went to the bathroom and saw a small window covered by
she subsequently transferred to Apolinario Mabini, Arellano University, situated along Taft
styrofoam and she also spotted a small hole. She stepped on the bowl and she cried for
Avenue, because she was ashamed to be the subject of conversation in the school. She
help through the hole. She cried: "Maawa no po kayo so akin. Tulungan n'yo akong
first applied for transfer to Jose Abad Santos, Arellano University along Taft Avenue near
makalabas dito. Kinidnap ako!" Somebody heard her. It was a woman, probably a
the Light Rail Transit Station but she was denied admission after she told the school the
neighbor, but she got angry and said she was "istorbo". Karen pleaded for help and the
true reason for her transfer. The reason for their denial was that they might be implicated
woman told her to sleep and she will call the police. She finally fell asleep but no
in the case. (TSN, Aug. 15, 1989, p. 46)
policeman came. (TSN, Aug. 15, 1989, pp. 15-16)

xxx xxx xxx

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. When he woke up, he again got some food
but he always kept the door locked. As usual, she was merely fed with biscuit and coke. After the incident, Karen has changed a lot. She does not play with her brother and sister
On that day, February 7, 1989, she was again raped three times. The first at about 6:30 anymore, and she is always in a state of shock; she has been absent-minded and is
to 7:00 a.m., the second at about 8:30 — 9:00, and the third was after lunch at 12:00 ashamed even to go out of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be
noon. After he had raped her for the second time he left but only for a short while. Upon restless or sad, (Id., p. 11) The father prays for P500,000.00 moral damages for Karen
his return, he caught her shouting for help but he did not understand what she was for this shocking experience which probably, she would always recall until she reaches old
shouting about. After she was raped the third time, he left the house. (TSN, Aug. 15, age, and he is not sure if she could ever recover from this experience. (TSN, Sept. 24,
1989, pp. 16-17) She again went to the bathroom and shouted for help. After shouting 1989, pp. 10-11)
for about five minutes, she heard many voices. The voices were asking for her name and
she gave her name as Karen Salvacion. After a while, she heard a voice of a woman
saying they will just call the police. They were also telling her to change her clothes. She Pursuant to an Order granting leave to publish notice of decision, said notice was published in the Manila
went from the bathroom to the room but she did not change her clothes being afraid that Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days from the date of the
last publication of the notice of judgment and the decision of the trial court had become final, petitioners
tried to execute on Bartelli's dollar deposit with China Banking Corporation. Likewise, the bank invoked garnishment, or any other order or process of any court, legislative body, government agency or any
Section 113 of Central Bank Circular No. 960. administrative body whatsoever.

Thus, petitioners decided to seek relief from this Court. For its part, respondent China Banking Corporation, aside from giving reasons similar to that of respondent
Central Bank, also stated that respondent China Bank is not unmindful of the inhuman sufferings
experienced by the minor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it is only too
The issues raised and the arguments articulated by the parties boil down to two:
willing to release the dollar deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner has
undergone; but it is restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank
May this Court entertain the instant petition despite the fact that original jurisdiction in petitions for Circular No. 960; and that despite the harsh effect of these laws on petitioners, CBC has no other alternative
declaratory relief rests with the lower court? Should Section 113 of Central Bank Circular No. 960 and but to follow the same.
Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be
made applicable to a foreign transient?
This Court finds the petition to be partly meritorious.

Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that
Petitioner deserves to receive the damages awarded to her by the court. But this petition for declaratory
"Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of
relief can only be entertained and treated as a petition for mandamus to require respondents to honor and
any court, legislative body, government agency or any administrative body whatsoever." should be adjudged
comply with the writ of execution in Civil Case No. 89-3214.
as unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank
deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners'
favor in violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign This Court has no original and exclusive jurisdiction over a petition for declaratory relief. 2 However,
currency depositors an undue favor or a class privilege in violation of the equal protection clause of the exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and
Constitution; 3.) it has provided a safe haven for criminals like the herein respondent Greg Bartelli y raises questions that should be resolved, it may be treated as one for mandamus.3
Northcott since criminals could escape civil liability for their wrongful acts by merely converting their money
to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank; and
Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of
4.) The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated
kindness by teaching his alleged niece the Filipino language as requested by the American, trustingly went
quasi-legislative power when it took away: a.) the plaintiffs substantive right to have the claim sought to be
with said stranger to his apartment, and there she was raped by said American tourist Greg Bartelli. Not
enforced by the civil action secured by way of the writ of preliminary attachment as granted by Rule 57 of
once, but ten times. She was detained therein for four (4) days. This American tourist was able to escape
the Revised Rules of Court; b.) the plaintiffs substantive right to have the judgment credit satisfied by way
from the jail and avoid punishment. On the other hand, the child, having received a favorable judgment in
of the writ of execution out of the bank deposit of the judgment debtor as granted to the judgment creditor
the Civil Case for damages in the amount of more than P1,000,000.00, which amount could alleviate the
by Rule 39 of the Revised Rules of Court, which is beyond its power to do so.
humiliation, anxiety, and besmirched reputation she had suffered and may continue to suffer for a long, long
time; and knowing that this person who had wronged her has the money, could not, however get the award
On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in issuing of damages because of this unreasonable law. This questioned law, therefore makes futile the favorable
Section 113 of CB Circular No. 960 did not exceed its power or authority because the subject Section is judgment and award of damages that she and her parents fully deserve. As stated by the trial court in its
copied verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary decision,
Board that grants exemption from attachment or garnishment to foreign currency deposits, but the law (R.A.
6426 as amended) itself; that it does not violate the substantive due process guaranteed by the Constitution
Indeed, after hearing the testimony of Karen, the Court believes that it was undoubtedly
because a.) it was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular
a shocking and traumatic experience she had undergone which could haunt her mind for
methods of procedure; and d.) it applies to all members of a class.
a long, long time, the mere recall of which could make her feel so humiliated, as in fact
she had been actually humiliated once when she was refused admission at the Abad
Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from Santos High School, Arellano University, where she sought to transfer from another
attachment, garnishment or any other order or process of any court, is to assure the development and school, simply because the school authorities of the said High School learned about what
speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines; happened to her and allegedly feared that they might be implicated in the case.
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
xxx xxx xxx
the Philippines, thus directly contributing to the economic development of the country; that the subject
section is being enforced according to the regular methods of procedure; and that it applies to all foreign
currency deposits made by any person and therefore does not violate the equal protection clause of the The reason for imposing exemplary or corrective damages is due to the wanton and
Constitution. bestial manner defendant had committed the acts of rape during a period of serious
illegal detention of his hapless victim, the minor Karen Salvacion whose only fault was in
her being so naive and credulous to believe easily that defendant, an American national,
Respondent Central Bank further avers that the questioned provision is needed to promote the public
could not have such a bestial desire on her nor capable of committing such a heinous
interest and the general welfare; that the State cannot just stand idly by while a considerable segment of
crime. Being only 12 years old when that unfortunate incident happened, she has never
the society suffers from economic distress; that the State had to take some measures to encourage
heard of an old Filipino adage that in every forest there is a
economic development; and that in so doing persons and property may be subjected to some kinds of
snake, . . . .4
restraints or burdens to secure the general welfare or public interest. Respondent Central Bank also alleges
that Rule 39 and Rule 57 of the Revised Rules of Court provide that some properties are exempted from
execution/attachment especially provided by law and R.A. No. 6426 as amended is such a law, in that it If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom how the
specifically provides, among others, that foreign currency deposits shall be exempted from attachment, 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 alien who had the gall to wrong a child of and regulations decreasing the rights of depositors, the rules and
tender years of a country where he is a mere visitor. This further illustrates the flaw in the questioned regulations at the time the deposit was made shall govern.
provisions.
The aforecited Section 113 was copied from Section 8 of Republic Act NO. 6426, as
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's economy was amended by P.D. 1246, thus:
in a shambles; when foreign investments were minimal and presumably, this was the reason why said
statute was enacted. But the realities of the present times show that the country has recovered
Sec. 8. Secrecy of Foreign Currency Deposits. — All foreign currency
economically; and even if not, the questioned law still denies those entitled to due process of law for being
deposits authorized under this Act, as amended by Presidential Decree
unreasonable and oppressive. The intention of the questioned law may be good when enacted. The law failed
No. 1035, as well as foreign currency deposits authorized under
to anticipate the iniquitous effects producing outright injustice and inequality such as the case before us.
Presidential Decree No. 1034, are hereby declared as and considered
of an absolutely confidential nature and, except upon the written
It has thus been said that — permission of the depositor, in no instance shall such foreign currency
deposits be examined, inquired or looked into by any person,
government official, bureau or office whether judicial or administrative
But I also know,5 that laws and institutions must go hand in hand with the progress of the
or legislative or any other entity whether public or private: Provided,
human mind. As that becomes more developed, more enlightened, as new discoveries are
however, that said foreign currency deposits shall be exempt from
made, new truths are disclosed and manners and opinions change with the change of
attachment, garnishment, or any other order or process of any court,
circumstances, institutions must advance also, and keep pace with the times. . . We
legislative body, government agency or any administrative body
might as well require a man to wear still the coat which fitted him when a boy, as civilized
whatsoever.
society to remain ever under the regimen of their barbarous ancestors.

The purpose of PD 1246 in according protection against attachment, garnishment and

In his Comment, the Solicitor General correctly opined, thus:
other court process to foreign currency deposits is stated in its whereases, viz.:

The present petition has far-reaching implications on the right of a national to obtain
WHEREAS, under Republic Act No. 6426, as amended by Presidential
redress for a wrong committed by an alien who takes refuge under a law and regulation
Decree No. 1035, certain Philippine banking institutions and branches
promulgated for a purpose which does not contemplate the application thereof envisaged
of foreign banks are authorized to accept deposits in foreign currency;
by the alien. More specifically, the petition raises the question whether the protection
against attachment, garnishment or other court process accorded to foreign currency
deposits by PD No. 1246 and CB Circular No. 960 applies when the deposit does not come WHEREAS, under the provisions of Presidential Decree No. 1034
from a lender or investor but from a mere transient or tourist who is not expected to authorizing the establishment of an offshore banking system in the
maintain the deposit in the bank for long. Philippines, offshore banking units are also authorized to receive
foreign currency deposits in certain cases;
The resolution of this question is important for the protection of nationals who are
victimized in the forum by foreigners who are merely passing through. WHEREAS, in order to assure the development and speedy growth of
the Foreign Currency Deposit System and the Offshore Banking
System in the Philippines, certain incentives were provided for under
xxx xxx xxx
the two Systems such as confidentiality of deposits subject to certain
exceptions and tax exemptions on the interest income of depositors
. . . Respondents China Banking Corporation and Central Bank of the Philippines refused who are nonresidents and are not engaged in trade or business in the
to honor the writ of execution issued in Civil Case No. 89-3214 on the strength of the Philippines;
following provision of Central Bank Circular No. 960:
WHEREAS, making absolute the protective cloak of confidentiality over
Sec. 113. Exemption from attachment. — Foreign currency deposits such foreign currency deposits, exempting such deposits from tax, and
shall be exempt from attachment, garnishment, or any other order or guaranteeing the vested rights of depositors would better encourage
process of any court, legislative body, government agency or any the inflow of foreign currency deposits into the banking institutions
administrative body whatsoever. authorized to accept such deposits in the Philippines thereby placing
such institutions more in a position to properly channel the same to
loans and investments in the Philippines, thus directly contributing to
Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426: the economic development of the country;

Sec. 7. Rules and Regulations. The Monetary Board of the Central Thus, one of the principal purposes of the protection accorded to foreign currency
Bank shall promulgate such rules and regulations as may be necessary deposits is "to assure the development and speedy growth of the Foreign Currency
to carry out the provisions of this Act which shall take effect after the Deposit system and the Offshore Banking in the Philippines" (3rd Whereas).
publication of such rules and regulations in the Official Gazette and in
a newspaper of national circulation for at least once a week for three
consecutive weeks. In case the Central Bank promulgates new rules
The Offshore Banking System was established by PD No. 1034. In turn, the purposes of Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his
PD No. 1034 are as follows: dollars with respondent China Banking Corporation only for safekeeping during his
temporary stay in the Philippines.
WHEREAS, conditions conducive to the establishment of an offshore
banking system, such as political stability, a growing economy and For the reasons stated above, the Solicitor General thus submits that the dollar deposit of
adequate communication facilities, among others, exist in the respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank
Philippines; Circular No. 960 and PD No. 1246 against attachment, garnishment or other court
processes.6
WHEREAS, it is in the interest of developing countries to have as wide
access as possible to the sources of capital funds for economic In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the
development; 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
WHEREAS, an offshore banking system based in the Philippines will be
foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides
advantageous and beneficial to the country by increasing our links with
that "in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body
foreign lenders, facilitating the flow of desired investments into the
intended right and justice to prevail. "Ninguno non deue enriquecerse tortizeramente con dano de otro."
Philippines, creating employment opportunities and expertise in
Simply stated, when the statute is silent or ambiguous, this is one of those fundamental solutions that would
international finance, and contributing to the national development
respond to the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377).
effort.

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device
WHEREAS, the geographical location, physical and human resources,
by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the
and other positive factors provide the Philippines with the clear
innocent.
potential to develop as another financial center in Asia;

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding the final
On the other hand, the Foreign Currency Deposit system was created by PD. No. 1035.
and executory judgment of the lower court against the Central Bank Circular protecting the foreign
Its purposes are as follows:
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.
WHEREAS, the establishment of an offshore banking system in the
Philippines has been authorized under a separate decree;
We definitely cannot have both ways and rest in the belief that we have served the ends of justice.

WHEREAS, a number of local commercial banks, as depository bank

IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it
under the Foreign Currency Deposit Act (RA No. 6426), have the
amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar
resources and managerial competence to more actively engage in
circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution issued in Civil Case
foreign exchange transactions and participate in the grant of foreign
No. 89-3214, "Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and to
currency loans to resident corporations and firms;
RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such amount as would
satisfy the judgment.
WHEREAS, it is timely to expand the foreign currency lending authority
of the said depository banks under RA 6426 and apply to their
SO ORDERED.
transactions the same taxes as would be applicable to transaction of
the proposed offshore banking units;
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco and
Panganiban, JJ., concur.
It is evident from the above [Whereas clauses] that the Offshore Banking System and the
Foreign Currency Deposit System were designed to draw deposits from
foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD Padilla, J., took no part.
No. 1035). It is these deposits that are induced by the two laws and given protection and
incentives by them.
Mendoza and Hermosisima, Jr., JJ., are on leave.

Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of
deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by
said laws because such depositor stays only for a few days in the country and, therefore,
will maintain his deposit in the bank only for a short time.
G.R. Nos. 157294-95             November 30, 2006 Nominee: URBAN BANK-TRUST DEPARTMENT

JOSEPH VICTOR G. EJERCITO, Petitioner, Special Private Account No. (SPAN) 858; and
vs.
SANDIGANBAYAN (Special Division) and PEOPLE OF THE PHILIPPINES, Respondents.
6. Ledger of the SPAN # 858.

DECISION
II. For Savings Account No. 0116-17345-9

CARPIO MORALES, J.:

SPAN No. 858

The present petition for certiorari under Rule 65 assails the Sandiganbayan Resolutions dated February 7
1. Signature Cards; and
and 12, 2003 denying petitioner Joseph Victor G. Ejercito’s Motions to Quash Subpoenas Duces Tecum/Ad
Testificandum, and Resolution dated March 11, 2003 denying his Motion for Reconsideration of the first two
resolutions. 2. Statement of Account/Ledger

The three resolutions were issued in Criminal Case No. 26558, "People of the Philippines v. Joseph Ejercito III. Urban Bank Manager’s Check and their corresponding Urban Bank Manager’s Check Application Forms,
Estrada, et al.," for plunder, defined and penalized in R.A. 7080, "AN ACT DEFINING AND PENALIZING THE as follows:
CRIME OF PLUNDER."
1. MC # 039975 dated January 18, 2000 in the amount of ₱70,000,000.00;
In above-stated case of People v. Estrada, et al., the Special Prosecution Panel 1 filed on January 20, 2003
before the Sandiganbayan a Request for Issuance of Subpoena Duces Tecum for the issuance of a subpoena
directing the President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her authorized 2. MC # 039976 dated January 18, 2000 in the amount of ₱2,000,000.00;
representative to produce the following documents during the hearings scheduled on January 22 and 27,
2003: 3. MC # 039977 dated January 18, 2000 in the amount of ₱2,000,000.00;

I. For Trust Account No. 858; 4. MC # 039978 dated January 18, 2000 in the amount of ₱1,000,000.00;

1. Account Opening Documents; The Special Prosecution Panel also filed on January 20, 2003, a Request for Issuance of Subpoena Duces
Tecum/Ad Testificandum directed to the authorized representative of Equitable-PCI Bank to produce
2. Trading Order No. 020385 dated January 29, 1999; statements of account pertaining to certain accounts in the name of "Jose Velarde" and to testify thereon.

3. Confirmation Advice TA 858; The Sandiganbayan granted both requests by Resolution of January 21, 2003 and subpoenas were
accordingly issued.

4. Original/Microfilm copies, including the dorsal side, of the following:

The Special Prosecution Panel filed still another Request for Issuance of Subpoena Duces Tecum/Ad
Testificandum dated January 23, 2003 for the President of EIB or his/her authorized representative to
a. Bank of Commerce MC # 0256254 in the amount of ₱2,000,000.00; produce the same documents subject of the Subpoena Duces Tecum dated January 21, 2003 and to testify
thereon on the hearings scheduled on January 27 and 29, 2003 and subsequent dates until completion of the
testimony. The request was likewise granted by the Sandiganbayan. A Subpoena Duces Tecum/Ad
b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the amount of
Testificandum was accordingly issued on January 24, 2003.
P10,875,749.43;

Petitioner, claiming to have learned from the media that the Special Prosecution Panel had requested for the
c. Urban Bank MC # 34182 dated November 8, 1999 in the amount of ₱42,716,554.22;
issuance of subpoenas for the examination of bank accounts belonging to him, attended the hearing of the
case on January 27, 2003 and filed before the Sandiganbayan a letter of even date expressing his concerns
d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in the amount of as follows, quoted verbatim:
₱54,161,496.52;
Your Honors:
5. Trust Agreement dated January 1999:
It is with much respect that I write this court relative to the concern of subpoenaing the undersigned’s bank
Trustee: Joseph Victor C. Ejercito account which I have learned through the media.
I am sure the prosecution is aware of our banking secrecy laws everyone supposed to observe. But, instead 1. Account Opening Forms;
of prosecuting those who may have breached such laws, it seems it is even going to use supposed evidence
which I have reason to believe could only have been illegally obtained.
2. Specimen Signature Card/s; and

The prosecution was not content with a general request. It even lists and identifies specific documents
3. Statements of Account.
meaning someone else in the bank illegally released confidential information.

The prosecution also filed a Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum bearing
If this can be done to me, it can happen to anyone. Not that anything can still shock our family. Nor that I
the same date, January 31, 2003, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to
have anything to hide. Your Honors.
produce the following documents on the scheduled hearings on February 3 and 5, 2003:

But, I am not a lawyer and need time to consult one on a situation that affects every bank depositor in the
1. Letter of authority dated November 23, 1999 re: SPAN [Special Private Account Number] 858;
country and should interest the bank itself, the Bangko Sentral ng Pilipinas, and maybe the Ombudsman
himself, who may want to investigate, not exploit, the serious breach that can only harm the economy, a
consequence that may have been overlooked. There appears to have been deplorable connivance. 2. Letter of authority dated January 29, 2000 re: SPAN 858;

xxxx 3. Letter of authority dated April 24, 2000 re: SPAN 858;

I hope and pray, Your Honors, that I will be given time to retain the services of a lawyer to help me protect 4. Urban Bank check no. 052092 dated April 24, 2000 for the amount of P36, 572, 315.43;
my rights and those of every banking depositor. But the one I have in mind is out of the country right now.
5. Urban Bank check no. 052093 dated April 24, 2000 for the amount of P107,191,780.85; and
May I, therefore, ask your Honors, that in the meantime, the issuance of the subpoena be held in abeyance
for at least ten (10) days to enable me to take appropriate legal steps in connection with the prosecution’s
request for the issuance of subpoena concerning my accounts. (Emphasis supplied) 6. Signature Card Savings Account No. 0116-17345-9. (Underscoring supplied)

From the present petition, it is gathered that the "accounts" referred to by petitioner in his above-quoted The subpoenas prayed for in both requests were issued by the Sandiganbayan on January 31, 2003.
letter are Trust Account No. 858 and Savings Account No. 0116-17345-9.2
On February 7, 2003, petitioner, this time assisted by counsel, filed an Urgent Motion to Quash Subpoenae
In open court, the Special Division of the Sandiganbayan, through Associate Justice Edilberto Sandoval, Duces Tecum/Ad Testificandum praying that the subpoena dated January 31, 2003 directed to Aurora Baldoz
advised petitioner that his remedy was to file a motion to quash, for which he was given up to 12:00 noon be quashed for the same reasons which he cited in the Motion to Quash 4 he had earlier filed.
the following day, January 28, 2003.
On the same day, February 7, 2003, the Sandiganbayan issued a Resolution denying petitioner’s Motion to
Petitioner, unassisted by counsel, thus filed on January 28, 2003 a Motion to Quash Subpoena Duces Quash Subpoenae Duces Tecum/Ad Testificandum dated January 28, 2003.
Tecum/Ad Testificandum praying that the subpoenas previously issued to the President of the EIB dated
January 21 and January 24, 2003 be quashed.3 Subsequently or on February 12, 2003, the Sandiganbayan issued a Resolution denying petitioner’s Urgent
Motion to Quash Subpoena Duces Tecum/Ad Testificandum dated February 7, 2003.
In his Motion to Quash, petitioner claimed that his bank accounts are covered by R.A. No. 1405 (The Secrecy
of Bank Deposits Law) and do not fall under any of the exceptions stated therein. He further claimed that the Petitioner’s Motion for Reconsideration dated February 24, 2003 seeking a reconsideration of the Resolutions
specific identification of documents in the questioned subpoenas, including details on dates and amounts, of February 7 and 12, 2003 having been denied by Resolution of March 11, 2003, petitioner filed the present
could only have been made possible by an earlier illegal disclosure thereof by the EIB and the Philippine petition.
Deposit Insurance Corporation (PDIC) in its capacity as receiver of the then Urban Bank.

Raised as issues are:

The disclosure being illegal, petitioner concluded, the prosecution in the case may not be allowed to make
use of the information.
1. Whether petitioner’s Trust Account No. 858 is covered by the term "deposit" as used in R.A.
1405;
Before the Motion to Quash was resolved by the Sandiganbayan, the prosecution filed another Request for
the Issuance of Subpoena Duces Tecum/Ad Testificandum dated January 31, 2003, again to direct the
President of the EIB to produce, on the hearings scheduled on February 3 and 5, 2003, the same documents 2. Whether petitioner’s Trust Account No. 858 and Savings Account No. 0116-17345-9 are
subject of the January 21 and 24, 2003 subpoenas with the exception of the Bank of Commerce MC excepted from the protection of R.A. 1405; and
#0256254 in the amount of ₱2,000,000 as Bank of Commerce MC #0256256 in the amount of ₱200,000,000
was instead requested. Moreover, the request covered the following additional documents: 3. Whether the "extremely-detailed" information contained in the Special Prosecution Panel’s
requests for subpoena was obtained through a prior illegal disclosure of petitioner’s bank accounts,
IV. For Savings Account No. 1701-00646-1: in violation of the "fruit of the poisonous tree" doctrine.
Respondent People posits that Trust Account No. 8585 may be inquired into, not merely because it falls Petitioner contends that since plunder is neither bribery nor dereliction of duty, his accounts are not
under the exceptions to the coverage of R.A. 1405, but because it is not even contemplated therein. For, to excepted from the protection of R.A. 1405. Philippine National Bank v. Gancayco7 holds otherwise:
respondent People, the law applies only to "deposits" which strictly means the money delivered to the bank
by which a creditor-debtor relationship is created between the depositor and the bank.
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen
why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The
The contention that trust accounts are not covered by the term "deposits," as used in R.A. 1405, by the policy as to one cannot be different from the policy as to the other. This policy expresses the notion that
mere fact that they do not entail a creditor-debtor relationship between the trustor and the bank, does not a public office is a public trust and any person who enters upon its discharge does so with the full
lie. An examination of the law shows that the term "deposits" used therein is to be understood broadly and knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
not limited only to accounts which give rise to a creditor-debtor relationship between the depositor and the
bank.
Undoubtedly, cases for plunder involve unexplained wealth. Section 2 of R.A. No. 7080 states so.

The policy behind the law is laid down in Section 1:

SECTION 2. Definition of the Crime of Plunder; Penalties. — Any public officer who, by himself or in
connivance with members of his family, relatives by affinity or consanguinity, business associates,
SECTION 1. It is hereby declared to be the policy of the Government to give encouragement to the people to subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth through a
deposit their money in banking institutions and to discourage private hoarding so that the same may be combination or series of overt or criminal acts as described in Section 1(d) hereof, in the aggregate amount
properly utilized by banks in authorized loans to assist in the economic development of the country. or total value of at least Seventy-five million pesos (P75,000,000.00), shall be guilty of the crime of
(Underscoring supplied) plunder and shall be punished by life imprisonment with perpetual absolute disqualification from holding any
public office. Any person who participated with said public officer in the commission of plunder shall likewise
be punished. In the imposition of penalties, the degree of participation and the attendance of mitigating and
If the money deposited under an account may be used by banks for authorized loans to third persons, then
extenuating circumstances shall be considered by the court. The court shall declare any and all ill-gotten
such account, regardless of whether it creates a creditor-debtor relationship between the depositor and the
wealth and their interests and other incomes and assets including the properties and shares of stock derived
bank, falls under the category of accounts which the law precisely seeks to protect for the purpose of
from the deposit or investment thereof forfeited in favor of the State. (Emphasis and underscoring supplied)
boosting the economic development of the country.

An examination of the "overt or criminal acts as described in Section 1(d)" of R.A. No. 7080 would make the
Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner and
similarity between plunder and bribery even more pronounced since bribery is essentially included among
Urban Bank provides that the trust account covers "deposit, placement or investment of funds" by Urban
these criminal acts. Thus Section 1(d) states:
Bank for and in behalf of petitioner.6 The money deposited under Trust Account No. 858, was, therefore,
intended not merely to remain with the bank but to be invested by it elsewhere. To hold that this type of
account is not protected by R.A. 1405 would encourage private hoarding of funds that could otherwise be d) "Ill-gotten wealth" means any asset, property, business enterprise or material possession of any person
invested by banks in other ventures, contrary to the policy behind the law. within the purview of Section Two (2) hereof, acquired by him directly or indirectly through dummies,
nominees, agents, subordinates and or business associates by any combination or series of the following
means or similar schemes.
Section 2 of the same law in fact even more clearly shows that the term "deposits" was intended to be
understood broadly:
1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on the
public treasury;
SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, 2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks
inquired or looked into by any person, government official, bureau or office, except upon written permission or any other form of pecuniary benefit from any person and/or entity in connection with
of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or any government contract or project or by reason of the office or position of the public
dereliction of duty of public officials, or in cases where the money deposited or invested is the subject officer concerned;
matter of the litigation. (Emphasis and underscoring supplied)
3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National
The phrase "of whatever nature" proscribes any restrictive interpretation of "deposits." Moreover, it is clear Government or any of its subdivisions, agencies or instrumentalities or government-owned or -
from the immediately quoted provision that, generally, the law applies not only to money which is deposited controlled corporations and their subsidiaries;
but also to those which are invested. This further shows that the law was not intended to apply only to
"deposits" in the strict sense of the word. Otherwise, there would have been no need to add the phrase "or
4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any
invested."
other form of interest or participation including promise of future employment in any business
enterprise or undertaking;
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.
5) By establishing agricultural, industrial or commercial monopolies or other combinations and/or
The protection afforded by the law is, however, not absolute, there being recognized exceptions thereto, as implementation of decrees and orders intended to benefit particular persons or special interests; or
above-quoted Section 2 provides. In the present case, two exceptions apply, to wit: (1) the examination of
bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials,
and (2) the money deposited or invested is the subject matter of the litigation.
 6) By taking undue advantage of official position, authority, relationship, connection or influence to which the money purportedly acquired illegally or a portion thereof was alleged to have been transferred.
unjustly enrich himself or themselves at the expense and to the damage and prejudice of the Trust Account No. 858 and Savings Account No. 0116-17345-9 in the name of petitioner fall under this
Filipino people and the Republic of the Philippines. (Emphasis supplied) description and must thus be part of the subject matter of the litigation.

Indeed, all the above-enumerated overt acts are similar to bribery such that, in each case, it may be said In a further attempt to show that the subpoenas issued by the Sandiganbayan are invalid and may not be
that "no reason is seen why these two classes of cases cannot be excepted from the rule making bank enforced, petitioner contends, as earlier stated, that the information found therein, given their "extremely
deposits confidential."8 detailed" character, could only have been obtained by the Special Prosecution Panel through an illegal
disclosure by the bank officials concerned. Petitioner thus claims that, following the "fruit of the poisonous
tree" doctrine, the subpoenas must be quashed.
The crime of bribery and the overt acts constitutive of plunder are crimes committed by public officers, and
in either case the noble idea that "a public office is a public trust and any person who enters upon its
discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public Petitioner further contends that even if, as claimed by respondent People, the "extremely-detailed"
scrutiny" applies with equal force. information was obtained by the Ombudsman from the bank officials concerned during a previous
investigation of the charges against President Estrada, such inquiry into his bank accounts would itself be
illegal.
Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must also
apply to cases of plunder.
Petitioner relies on Marquez v. Desierto10 where the Court held:
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 of the litigation" as used in R.A. 1405 is explained We rule that before an in camera inspection may be allowed there must be a pending case before a court of
in Union Bank of the Philippines v. Court of Appeals,9 thus: competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject
matter of the pending case before the court of competent jurisdiction. The bank personnel and the account
holder must be notified to be present during the inspection, and such inspection may cover only the account
Petitioner contends that the Court of Appeals confuses the "cause of action" with the "subject of the action".
identified in the pending case. (Underscoring supplied)
In Yusingco v. Ong Hing Lian, petitioner points out, this Court distinguished the two concepts.

As no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction
x x x "The cause of action is the legal wrong threatened or committed, while the object of the action is to
at the time the Ombudsman conducted an investigation, petitioner concludes that the information about his
prevent or redress the wrong by obtaining some legal relief; but the subject of the action is neither of these
bank accounts were acquired illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry
since it is not the wrong or the relief demanded, the subject of the action is the matter or thing with respect
into the same bank accounts.
to which the controversy has arisen, concerning which the wrong has been done, and this ordinarily is the
property or the contract and its subject matter, or the thing in dispute."
Petitioner’s attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it bears
noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence obtained
The argument is well-taken. We note with approval the difference between the ‘subject of the action’ from
therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that "[a]ny violation of this law will
the ‘cause of action.’ We also find petitioner’s definition of the phrase ‘subject matter of the action’ is
subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not more
consistent with the term ‘subject matter of the litigation’, as the latter is used in the Bank Deposits Secrecy
than twenty thousand pesos or both, in the discretion of the court."
Act.

The case of U.S. v. Frazin,11 involving the Right to Financial Privacy Act of 1978 (RFPA) of the United States,
In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently caused the transfer of the amount
is instructive.
of US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the bank
accounts where part of the money was subsequently caused to be deposited:
Because the statute, when properly construed, excludes a suppression remedy, it would not be appropriate
for us to provide one in the exercise of our supervisory powers over the administration of justice. Where
‘x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money
Congress has both established a right and provided exclusive remedies for its violation, we would "encroach
deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at
upon the prerogatives" of Congress were we to authorize a remedy not provided for by statute. United
recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into
States v. Chanen, 549 F.2d 1306, 1313 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83
the whereabouts of the illegally acquired amount extends to whatever is concealed by being held
(1977).
or recorded in the name of persons other than the one responsible for the illegal acquisition."

The same principle was reiterated in U.S. v. Thompson:12

Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation
since the money deposited was the very thing in dispute. x x x" (Emphasis and underscoring supplied)
x x x When Congress specifically designates a remedy for one of its acts, courts generally presume that it
engaged in the necessary balancing of interests in determining what the appropriate penalty should
The plunder case now pending with the Sandiganbayan necessarily involves an inquiry into the whereabouts
be. See  Michaelian, 803 F.2d at 1049 (citing cases); Frazin, 780 F.2d at 1466. Absent a specific reference to
of the amount purportedly acquired illegally by former President Joseph Estrada.
an exclusionary rule, it is not appropriate for the courts to read such a provision into the act.

In light then of this Court’s pronouncement in Union Bank, the subject matter of the litigation cannot be
Even assuming arguendo, however, that the exclusionary rule applies in principle to cases involving R.A.
limited to bank accounts under the name of President Estrada alone, but must include those accounts to
1405, the Court finds no reason to apply the same in this particular case.
Clearly, the "fruit of the poisonous tree" doctrine 13 presupposes a violation of law. If there was no violation of The Sandiganbayan credited the foregoing account of respondent People.15 The Court finds no reason to
R.A. 1405 in the instant case, then there would be no "poisonous tree" to begin with, and, thus, no reason to disturb this finding of fact by the Sandiganbayan.
apply the doctrine.
The Marquez ruling notwithstanding, the above-described examination by the Ombudsman of petitioner’s
How the Ombudsman conducted his inquiry into the bank accounts of petitioner is recounted by respondent bank accounts, conducted before a case was filed with a court of competent jurisdiction, was lawful.
People of the Philippines, viz:
For the Ombudsman issued the subpoenas bearing on the bank accounts of petitioner about four
x x x [A]s early as February 8, 2001, long before the issuance of the Marquez ruling, the Office of the months before Marquez was promulgated on June 27, 2001.
Ombudsman, acting under the powers granted to it by the Constitution and R.A. No. 6770, and acting on
information obtained from various sources, including impeachment (of then Pres. Joseph Estrada) related
While judicial interpretations of statutes, such as that made in Marquez with respect to R.A. No. 6770 or the
reports, articles and investigative journals, issued a Subpoena Duces Tecum addressed to Urban Bank.
Ombudsman Act of 1989, are deemed part of the statute as of the date it was originally passed, the rule is
(Attachment "1-b") It should be noted that the description of the documents sought to be produced at that
not absolute.
time included that of numbered accounts 727, 737, 747, 757, 777 and 858 and included such names as Jose
Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez,
Kevin or Kelvin Garcia. The subpoena  did not single out account 858. Columbia Pictures, Inc. v. Court of Appeals16 teaches:

xxxx It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was
originally passed, subject only to the qualification that when a doctrine of this Court is overruled
and a different view is adopted, and more so when there is a reversal thereof, the new doctrine
Thus, on February 13, 2001, PDIC, as receiver of Urban Bank, issued a certification as to the availability of
should be applied prospectively and should not apply to parties who relied on the old doctrine and acted
bank documents relating to A/C 858 and T/A 858 and the non-availability of bank records as to the other
in good faith. (Emphasis and underscoring supplied)
accounts named in the subpoena. (Attachments "2", "2-1" and "2-b)

When this Court construed the Ombudsman Act of 1989, in light of the Secrecy of Bank Deposits Law
Based on the certification issued by PDIC, the Office of the Ombudsman on February 16, 2001 again
in Marquez, that "before an in camera inspection may be allowed there must be a pending case before a
issued a Subpoena Duces Tecum  directed to Ms. Corazon dela Paz, as Interim Receiver, directing the
court of competent jurisdiction", it was, in fact, reversing an earlier doctrine found in Banco Filipino Savings
production of documents pertinent to account A/C 858 and T/C 858. (Attachment "3")
and Mortgage Bank v. Purisima17.

In compliance with the said subpoena  dated February 16, 2001, Ms. Dela Paz, as interim receiver, furnished
Banco Filipino involved subpoenas duces tecum issued by the Office of the Ombudsman, then known as the
the Office of the Ombudsman certified copies of documents under cover latter dated February 21, 2001:
Tanodbayan,18 in the course of its preliminary investigation of a charge of violation of the Anti-Graft and
Corrupt Practices Act.
1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-99, 1-07-00, 04-03-00
and 04-24-00;
While the main issue in Banco Filipino was whether R.A. 1405 precluded the Tanodbayan’s issuance
of subpoena duces tecum of bank records in the name of persons other than the one who was charged, this
2. Report of Unregularized TAFs & TDs for UR COIN A & B Placements of Various Branches as of Court, citing P.D. 1630,19 Section 10, the relevant part of which states:
February 29, 2000 and as of December 16, 1999; and
(d) He may issue a subpoena to compel any person to appear, give sworn testimony, or produce
3. Trading Orders Nos. A No. 78102 and A No. 078125. documentary or other evidence the Tanodbayan deems relevant to a matter under his inquiry,

Trading Order A No. 07125 is filed in two copies – a white copy which showed "set up" information; and a held that "The power of the Tanodbayan to issue subpoenae ad testificandum and subpoenae
yellow copy which showed "reversal" information. Both copies have been reproduced and are enclosed with duces tecum at the time in question is not disputed, and at any rate does not admit of doubt."20
this letter.
As the subpoenas subject of Banco Filipino were issued during a preliminary investigation, in effect this Court
We are continuing our search for other records and documents pertinent to your request and we will forward upheld the power of the Tandobayan under P.D. 1630 to issue subpoenas duces tecum for bank
to you on Friday, 23 February 2001, such additional records and documents as we might find until then. documents prior to the filing of a case before a court of competent jurisdiction.
(Attachment "4")
Marquez, on the other hand, practically reversed this ruling in Banco Filipino despite the fact that the
The Office of the Ombudsman then requested for the manger’s checks, detailed in the Subpoena Duces subpoena power of the Ombudsman under R.A. 6770 was essentially the same as that under P.D. 1630.
Tecum  dated March 7, 2001. (Attachment "5") Thus Section 15 of R.A. 6770 empowers the Office of the Ombudsman to

PDIC again complied with the said Subpoena Duces Tecum  dated March 7, 2001 and provided copies of the (8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation or
manager’s checks thus requested under cover letter dated March 16, 2001. (Attachment "6")14 (Emphasis inquiry, including the power to examine and have access to bank accounts and records;
in the original)
A comparison of this provision with its counterpart in Sec. 10(d) of P.D. 1630 clearly shows that it is only Thus, with the filing of the plunder case against former President Estrada before the Sandiganbayan, the
more explicit in stating that the power of the Ombudsman includes the power to examine and have access to Ombudsman, using the above independent information, may now proceed to conduct the same investigation
bank accounts and records which power was recognized with respect to the Tanodbayan through Banco it earlier conducted, through which it can eventually obtain the same information previously disclosed to it
Filipino. by the PDIC, for it is an inescapable fact that the bank records of petitioner are no longer protected by R.A.
1405 for the reasons already explained above.1âwphi1
The Marquez ruling that there must be a pending case in order for the Ombudsman to validly inspect bank
records in camera thus reversed a prevailing doctrine.21 Hence, it may not be retroactively applied. Since conducting such an inquiry would, however, only result in the disclosure of the same documents to the
Ombudsman, this Court, in avoidance of what would be a time-wasteful and circuitous way of administering
justice,24 upholds the challenged subpoenas.
The Ombudsman’s inquiry into the subject bank accounts prior to the filing of any case before a court of
competent jurisdiction was therefore valid at the time it was conducted.
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 subpoenas nor of the grant thereof, suffice it to state that the
Likewise, the Marquez ruling that "the account holder must be notified to be present during the inspection"
defects were cured when petitioner ventilated his arguments against the issuance thereof through his earlier
may not be applied retroactively to the inquiry of the Ombudsman subject of this case. This ruling is not a
quoted letter addressed to the Sandiganbayan and when he filed his motions to quash before the
judicial interpretation either of R.A. 6770 or R.A. 1405, but a "judge-made" law which, as People v.
Sandiganbayan.
Luvendino22 instructs, can only be given prospective application:

IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse of discretion in issuing the
x x x The doctrine that an uncounselled waiver of the right to counsel is not to be given legal
challenged subpoenas for documents pertaining to petitioner’s Trust Account No. 858 and Savings Account
effect was initially a judge-made one and was first announced on 26 April 1983 in Morales v.
No. 0116-17345-9 for the following reasons:
Enrile and reiterated on 20 March 1985 in People v. Galit. x x x

1. These accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two
While the Morales-Galit doctrine eventually became part of Section 12(1) of the 1987 Constitution, that
exceptions to the said law applicable in this case, namely: (1) the examination of bank accounts is
doctrine affords no comfort to appellant Luvendino for the requirements and restrictions outlined
upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2)
in Morales and Galit have no retroactive effect and do not reach waivers made prior to 26 April
the money deposited or invested is the subject matter of the litigation. Exception (1) applies since
1983 the date of promulgation of Morales. (Emphasis supplied)
the plunder case pending against former President Estrada is analogous to bribery or dereliction of
duty, while exception (2) applies because the money deposited in petitioner’s bank accounts is said
In fine, the subpoenas issued by the Ombudsman in this case were legal, hence, invocation of the "fruit of to form part of the subject matter of the same plunder case.
the poisonous tree" doctrine is misplaced.
2. The "fruit of the poisonous tree" principle, which states that once the primary source (the "tree")
At all events, even if the challenged subpoenas are quashed, the Ombudsman is not barred from requiring is shown to have been unlawfully obtained, any secondary or derivative evidence (the "fruit")
the production of the same documents based solely on information obtained by it from derived from it is also inadmissible, does not apply in this case. In the first place, R.A. 1405 does
sources independent of its previous inquiry. not provide for the application of this rule. Moreover, there is no basis for applying the same in this
case since the primary source for the detailed information regarding petitioner’s bank accounts –
the investigation previously conducted by the Ombudsman – was lawful.
In particular, the Ombudsman, even before its inquiry, had already possessed information giving him
grounds to believe that (1) there are bank accounts bearing the number "858," (2) that such accounts are in
the custody of Urban Bank, and (3) that the same are linked with the bank accounts of former President 3. At all events, even if the subpoenas issued by the Sandiganbayan were quashed, the
Joseph Estrada who was then under investigation for plunder. 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
Only with such prior independent information could it have been possible for the Ombudsman to issue the Ombudsman may obtain the same documents by another route. Upholding the subpoenas avoids
February 8, 2001 subpoena duces tecum addressed to the President and/or Chief Executive Officer of Urban an unnecessary delay in the administration of justice.
Bank, which described the documents subject thereof as follows:

WHEREFORE, the petition is DISMISSED. The Sandiganbayan Resolutions dated February 7 and 12, 2003
(a) bank records and all documents relative thereto pertaining to all bank accounts (Savings, Current, and March 11, 2003 are upheld.
Time Deposit, Trust, Foreign Currency Deposits, etc…) under the account names of Jose Velarde, Joseph
E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peach Osorio, Rowena Lopez, Kevin or Kelvin
Garcia, 727, 737, 747, 757, 777 and 858. (Emphasis and underscoring supplied) The 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.
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 SO ORDERED.
of President Estrada, related reports, articles and investigative journals. 23 In the absence of proof to the
contrary, this explanation proffered by respondent must be upheld. To presume that the information was
obtained in violation of R.A. 1405 would infringe the presumption of regularity in the performance of official
functions.
 CONCURRING OPINION 6. Ledger of the Span #858

CALLEJO, SR., J. II. For Savings Account No. 0116-17345-9

I concur in the encompassing ponencia of our esteemed colleague Mme. Justice Conchita Carpio-Morales, SPAN #858
however, I find it imperative to submit my concurring opinion and elucidate on the basis thereof.
1. signature cards; and
The basic factual and procedural antecedents of the case are restated as follows:
2. statement of account/ledger
In connection with Criminal Cases Nos. 26558 (Plunder) and 26565 (Illegal Use of Alias) filed against former
President Joseph Ejercito Estrada, and upon the written requests of the Special Prosecution Panel, the
III Urban Bank Manager’s Check and their corresponding Urban Bank’s Check Application Form as
Sandiganbayan issued the subpoenae duces tecum/ad testificandum dated January 21 and 24, 2003
follows:
addressed to the respective Presidents of the Export and Industry Bank (EIB, formerly Urban Bank and
Urbancorp Investment, Inc.) and Equitable-PCIBank. The subpoenas directed the said officers, or their
authorized representatives, to appear before the Sandiganbayan and bring with them documents, among 1. MC#039975 dated January 18, 2000 in the amount of ₱70,000,000.00;
others, pertaining to Trust Account No. 858 (with Urban Bank) and Savings Account No. 0116-17345-9 (also
with Urban Bank), both in the name of petitioner Joseph Victor (JV) G. Ejercito.
2. MC#039976 dated January 18, 2000 in the amount of ₱2,000,000.00;

The written requests of the Special Prosecution Panel enumerated the following documents to be
subpoenaed as follows: 3. MC#039977 dated January 18, 2000 in the amount of ₱2,000,000.00; and

I. For Trust Account No. 858: 4. MC#039978 dated January 18, 2000 in the amount of ₱1,000,000.00.

1. Account Opening Documents; Claiming to have learned about the subpoenae duces tecum/ad testificandum only through news reports,
petitioner JV Ejercito filed motions to quash them alleging that (a) they violated the bank secrecy laws
(Republic Act No. 14051 as amended by Presidential Decree No. 1792 and Republic Act 8791); (b) his case is
2. Trading Order No. 020385, dated January 29, 1999; not one of the recognized exceptions enumerated in the said laws as he is not an accused in the plunder and
illegal use of alias cases; (c) there appears to be a conspiracy between the bank officials and the prosecution
to violate the bank secrecy laws as the requests for the subpoenas contained particulars which could have
3. Confirmation Advice TA 858;
been known only if the bank had released in advance the information containing the details of his bank
accounts; (d) under Republic Act No. 30192 inquiry by subpoena into bank deposits can only be had if it was
4. Original/Microfilm copies, including the dorsal side of the following: established that: (1) the accused public official has been found to have acquired during his incumbency an
amount of property manifestly out of proportion to his salary; (2) the ownership of the property unlawfully
acquired is concealed by recording the same in the name of friends or relatives; and (3) the acquisition
a) Bank of Commerce MC#0256254 in the amount of ₱2,000,000;
through legitimate means of the money so deposited cannot be satisfactorily shown.

b) Urban Bank Corp. MC#34181 dated November 8, 1999 in the amount of

Former President Estrada for himself likewise moved for the quashal of the subpoenas on the same grounds
₱10,875,749.43;
relied upon by petitioner JV Ejercito and, additionally, that the documents sought were not relevant to the
amended information against him.
c) Urban Bank MC#34182 dated November 8, 1999 in the amount of
₱42,716,554.22;
Acting thereon, the Sandiganbayan issued the assailed Resolution dated February 7, 2003, denying the
motions to quash the subpoenas holding that its issuance of the same properly falls under one of the
d) Urban Bank MC#37661 dated November 23, 1999 in the amount of exceptions to the bank secrecy laws, particularly the clause in Section 2 of Republic Act (RA) 1405 thus:
₱54,161,496.52; "upon order of a competent court in cases of bribery or dereliction of duty of public officials." The
Sandiganbayan reasoned that the crime of plunder was analogous to the said cases. It opined that the fact
that petitioner JV Ejercito was not an accused in the plunder cases was of no moment because RA 3019
5. Trust Agreement dated January 1999 allows the inquiry into the bank deposits not only of the accused public official but also those of his spouse
and children. Further, whether or not the amount of deposits was manifestly out of proportion to the income
Trustee: Joseph Victor C. Ejercito need not be proved first before inquiry could be had on the bank deposits, rather such inquiry could be used
in proving the case.

Nominee: URBAN BANK-TRUST DEPARTMENT

The Sandiganbayan also held that petitioner JV Ejercito’s reliance on Marquez v. Desierto 3 was misplaced. In
Marquez, the Court disallowed the in camera inspection of accounts in connection with a case pending before
Special Private Account No. (SPAN) 858; and the Ombudsman. In the present case, however, the Sandiganbayan held that there was precisely a pending
case before it, a competent court within the meaning of the exception to the bank secrecy laws. The (1) In an examination made in the course of a special or general examination of a bank that is
Sandiganbayan also pointed out that there was nothing irregular in the issuance of the subpoenas because it specifically authorized by the Monetary Board after being satisfied that there is reasonable ground
was not required that the other party be notified of such requests. No violation of due process resulted by to believe that a bank fraud or serious irregularity has been or is being committed and that it is
such lack of notice since the other parties would have ample opportunity to examine the witnesses and necessary to look into the deposit to establish such fraud or irregularity;
documents subpoenaed once they are presented in court.
(2) In an examination made by an independent auditor hired by the bank to conduct its regular
A similar motion was filed by petitioner JV Ejercito involving the subpoenae duces tecum/ad testificandum audit provided that the examination is for audit purposes only and the results thereof shall be for
issued to the representative of the Urban Bank and Mrs. Aurora Baldoz of the Philippine Deposit Insurance the exclusive use of the bank;
Commission (PDIC). The said motion was denied by Sandiganbayan in the assailed Resolution dated
February 12, 2003. The motions for reconsideration were denied in the assailed Resolution dated March 11,
(3) Upon written permission of the depositor;
2003.

(4) In cases of impeachment;

Petitioner JV Ejercito now comes to the Court assailing the Sandiganbayan’s resolutions denying his motions
to quash the subpoenae duces tecum/ad testificandum.
(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; or
As the petitioner himself submits, the following are the issues for the Court’s resolution:
(6) In cases where the money deposited or invested is the subject matter of litigation. 6
WHETHER OR NOT RESPONDENT COURT ACTED IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE
OF DISCRETION IN RULING THAT THE SUBPOENA ON PETITIONER’S BANK ACCOUNTS FALLS UNDER THE The petitioner points out that one of the exceptions mentioned is "upon order of a competent court in cases
EXCEPTIONS PROVIDED UNDER R.A. NO. 1405 of bribery or dereliction of duty of public officials." Since the cases filed against his father, former President
Estrada, are not for these crimes but for plunder and illegal use of alias, then the said exception does not
allegedly apply. Further, his accounts do not fall under exception (6) as they are not allegedly "subject
WHETHER OR NOT RESPONDENT COURT ACTED IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE
matter of litigation."
OF DISCRETION IN RULING THAT THE CASES OF PNB VS. GANCAYCO AND BANCO FILIPINO VS. PURISIMA
ARE APPLICABLE TO THE INSTANT CASE
This argument of the petitioner is not persuasive. Former President Estrada is being charged with plunder as
defined and penalized under Section 2 of RA 7080,7 to wit:
WHETHER OR NOT RESPONDENT COURT ACTED IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE
OF DISCRETION IN RULING THAT THE MARQUEZ VS. DESIERTO CASE IS NOT APPLICABLE TO THE INSTANT
CASE.4 Definition of the Crime of Plunder, Penalties. – Any public officer who, by himself or in connivance with
members of his family, relatives by affinity or consanguinity, business associates, subordinates or other
persons, amasses, accumulates or acquires ill-gotten wealth through a combination or series of overt or
The petitioner does not deny his ownership of Trust Account No. 858 and Savings Account No. 0116-17345-
criminal acts as described in Section 1(d) hereof in the aggregate amount or total value of at least Fifty
9. In fact, he expressly admits the same and even explains that these were originally opened at Urban Bank
million pesos (₱50,000,000.00) shall be guilty of the crime of plunder and shall be punished by reclusion
but are now maintained at Export and Industry Bank. 5
perpetua to death. Any person who participated with the said public officer in the commission of an offense
contributing to the crime of plunder shall likewise be punished for such offense. In the imposition of
The petitioner argues that his accounts do not fall under any of the exceptions enumerated under Section 2 penalties, the degree of participation and the attendance of mitigating and extenuating circumstances, as
of RA 1405. The said provision reads: provided by the Revised Penal Code, shall be considered by the court. The court shall declare any and all ill-
gotten wealth and their interest and other incomes and assets including the properties and shares of stocks
derived from the deposit or investment thereof forfeited in favor of the State. (As amended by Sec. 12, RA
Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
7659).
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except, when the examination is Section 1(d) of the same law defines "ill-gotten wealth" as "any asset, property, business enterprise or
made in the course of a special or general examination of a bank and is specifically authorized by the material possession of any person within the purview of Section 2 thereof, acquired by him directly or
Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious indirectly through dummies, nominees, agents, subordinates, and/or business associates by any combination
irregularity has been or is being committed and that it is necessary to look into the deposit to establish such or series of the following means or similar schemes:
fraud or irregularity, or when the examination is made by an independent auditor hired by the bank to
conduct its regular audit provided that the examination is for audit purposes only and the results thereof
1. Through misappropriation, conversion, misuse or malversation of public funds or raids on the
shall be for the exclusive use of the bank, or upon written permission of the depositor, or in case of
public treasury;
impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials,
or in cases where the money deposited or invested is the subject matter of litigation. (As amended by PD
No. 1792) 2. By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or any
other form of pecuniary benefit from any person and/or entity in connection with any government
contract or project or by reason of the office or position of the public officer concerned;
Based on this provision, it has been declared that bank deposits are absolutely confidential except in the
following instances:
 3. By the illegal or fraudulent conveyance or disposition of assets belonging to the National The petitioner theorizes that prior to the amendment, the following may be taken into consideration in the
Government or any of its subdivisions, agencies or instrumentalities, or government-owned or enforcement of Section 8 of RA 3019:
controlled corporations and their subsidiaries;
c) properties in the name of the spouse and unmarried children of the public official; and
4. By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other
form of interest or participation including the promise of future employment in any business
d) bank deposits (without any qualification by law).12
enterprise or undertaking;

After its amendment on March 16, 1982, the following may allegedly be taken into consideration in the
5. By establishing agricultural, industrial or commercial monopolies or other combination and/or
enforcement of Section 8 of RA 3019:
implementation of decrees and others intended to benefit particular persons or special interests; or

c) properties in the name of the spouse and dependents of the public official; and
6. By taking undue advantage of official position, authority, relationship, connection or influence to
unjustly enrich himself or themselves at the expense and to the damage and prejudice of the
Filipino people and the Republic of the Philippines. d) bank deposits in the name of the public official, his spouse or any of their dependents. 13

It can be readily gleaned that the gravamen of plunder is the amassing, accumulating or acquiring of ill- According to the petitioner, although he is the son of former President Estrada, he is absolutely not his
gotten wealth by a public officer, his family or close associates. In Philippine National Bank v. Gancayco, 8 the dependent. Petitioner avers that he is in his own right a legitimate businessman having investments in
Court explained that "cases of unexplained wealth are similar to cases of bribery or dereliction of public duty several entities when he opened the subject accounts in Urban Bank, now Export and Industry Bank.
and no reason is seen why these two classes of cases cannot be excepted from the rule making bank Further, he is also the Municipal Mayor of San Juan, Manila. He thus urges the Court against applying the
deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy rulings in Gancayco and Banco Filipino in the light of the amendment of Section 8 of RA 3019.
expresses the notion that a public office is a public trust and any person enters upon its discharge does so
with full knowledge that his life, so far as relevant to his duty, is open to public scrutiny." 9
The petitioner’s contention is equally unpersuasive. It should be recalled that the petitioner in Banco Filipino
posited that the inquiry into illegally acquired property should be restricted to property held by or in the
A plain reading of the definition of plunder and the manner by which it may be committed as provided in RA name of the government official or employee or his spouses and unmarried children. The Court rejected this
7080 reveals that its policy also rests upon the fundamental tenet that "public office is a public argument as it pronounced that:
trust."10 There is thus no cogent reason to treat plunder any different from the cases of bribery or dereliction
of public duty for purposes of RA 1405.
To sustain the petitioner’s theory, and restrict the inquiry only to property held by or in the name of the
government official or employee, or his spouse and unmarried children is unwarranted in the light of the
The petitioner next contends that Gancayco and Banco Filipino Savings v. Purisima,11 insofar as they provisions of the statutes in question, and would make available to persons in government who illegally
expounded Section 8 of RA 3019 are not applicable to his case. He reasons that in these cases, when the acquired property an easy and fool-proof means of evading investigation and prosecution; all they would
subpoenas subject thereof were issued, the text of Section 8 of RA 3019 provided that: "x x x Properties in have to do would be to simply place the property in the possession or name of persons other than their
the name of the spouse and unmarried children of such public official may be taken into consideration x x x. spouse and unmarried children. This is an absurdity that we will not ascribe to the lawmakers. 14
Bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any
provision of law to the contrary notwithstanding."
At this point, it is well to mention that based on the evidence presented by the prosecution before the
Sandiganbayan, hundreds of millions of pesos flowed from the petitioner’s Trust Account No. 858 to the
On the other hand, Section 8 of RA 3019, as presently worded upon its amendment by Batas Pambansa Blg. alleged Jose Velarde account purportedly maintained by former President Estrada at Equitable PCIBank. In
195 on March 16, 1986, reads: fact, one manager’s check, marked as Exhibit "L" for the prosecution, in the amount of ₱107,191,780.85 was
drawn from, and funded by the said trust account of petitioner JV Ejercito.
SEC. 8. Prima facie evidence of and dismissal due to unexplained wealth. – If in accordance with the
provisions of Republic Act Numbered One thousand three hundred seventy-nine, a public official has been Considering the mind-boggling sums of money that flowed out of the petitioner’s Trust Account No. 858 and
found to have acquired during his incumbency, whether in his name or in the name of other persons, an its nexus to former President Estrada’s alleged Jose Velarde account, it is logical for the prosecution to
amount of property and/or money manifestly out of proportion to his salary and to his other lawful income, pursue the theory that the money in the said trust account forms part of the unexplained wealth of the
that fact shall be a ground for dismissal or removal. Properties in the name of the spouse and dependents of latter. As such, the money in the accounts of the petitioner may be properly considered as "subject matter"
such public official may be taken into consideration, when their acquisition through legitimate means cannot of the plunder cases falling under number (6) of the enumerated exceptions to the absolute confidentiality of
be satisfactorily shown. Bank deposits in the name of or manifestly excessive expenditures incurred by the bank deposits.
public official, his spouse or any of their dependents including but not limited to activities in any club or
association or any ostentatious display of wealth including frequent travel abroad of a non-official character
by any public official when such activities entail expenses evidently out of proportion to legitimate income, Viewed in this context, the petitioner’s assertion that since he is no longer a dependent of his father, then
shall likewise be taken into consideration in the enforcement of this section, notwithstanding any provision of the rulings in Gancayco and Banco Filipino are not applicable to his case is, to say the least, quite lame. In
law to the contrary. The circumstances hereinabove mentioned shall constitute valid ground for the fact, to sustain his theory would, as the Court stated in Banco Filipino, "make available to persons in
administrative suspension of the public official concerned for an indefinite period until the investigation of government who illegally acquired property an easy and fool-proof means of evading investigation and
the unexplained wealth is completed. prosecution; all they would have to do would be to simply place the property in the possession or name of
persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to the
lawmakers."15
The petitioner bewails the "extremely-detailed" information contained in the Special Prosecution Panel’s officer of Union Bank, directing her to bring several bank documents for in camera inspection in connection
requests for the subpoenae duces tecum/ad testificandum. The information upon which the requests were with an investigation being conducted by the Office of the Ombudsman.
based was allegedly illegally and improperly obtained.
Marquez refused to comply with the said directive and sought recourse to the Court by filing a petition and
The petitioner opines that there had been prior disclosure by the bank and its personnel of data and raising therein the issue of whether the order of the Office of the Ombudsman to have an in camera
information relative to his trust and savings accounts considering the very detailed information contained in inspection of the questioned account was allowed as an exception to the law on secrecy of bank deposits.
the request for the subpoenas, to wit:
According to the Court, notwithstanding Section 15(8) 18 of RA 6770 (The Ombudsman Act), "before an in
a) Trading Order No. 020385 dated January 29, 1999; camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction.
Further, the account must be clearly identified, the inspection limited to the subject matter of the pending
case before the court of competent jurisdiction. The bank personnel and the account holder must be notified
b) Confirmation Advice TA 858;
to be present during the inspection, and such inspection may cover only the account identified in the
pending case."19
c) Trust Agreement dated January 1999;
Marquez was promulgated by the Court on June 27, 2001. However, as early as February 8, 2001 or before
d) Special Private Account No. (SPAN) 858; the promulgation of Marquez, the Office of the Ombudsman, relying on Section 15(8) of RA 6770 and on the
basis of information obtained during the impeachment proceedings of former President Estrada, issued a
subpoena addressed to Urban Bank. The documents sought under the subpoena pertained to numbered
e) Savings Account No. 0116-17345-9; accounts 727, 737, 747, 757 and 858 allegedly in the names of Jose Velarde, Joseph E. Estrada, Laarni
Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin Garcia.
f) Letter of authority dated November 23, 1999 re:SPAN 858;
In compliance with the said subpoena, the PDIC, as then receiver of Urban Bank, issued a certification on
g) Letter of authority dated January 29, 2000 re: SPAN 858; February 13, 2001, as to the availability of bank documents relating to A/C 858 and T/A 858 and the non-
availability of bank records as to the other accounts named in the subpoena. Based on the PDIC certification,
the Office of the Ombudsman issued on February 16, 2001 another subpoena directing the production of
h) Letter of authority dated April 24, 2000 re: SPAN 858; documents pertinent to accounts A/C 858 and T/C 858. The PDIC again complied and furnished the Office of
the Ombudsman on February 21, 2001 certified copies of the following documents:
i) Urban Bank check no. 052092 dated April 24, 2000 for the amount of ₱36,572,315.43;
1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-99,1-07-00, 01-17-00,
j) Urban Bank check no. 052093 dated April 24, 2000 the amount of ₱107,191,780.85. 04-03-00 and 04-24-00;

According to the petitioner, the bank officials and personnel are criminally liable for releasing, without his 2. Report of Unregularized TAFs & DTs For UR COIN A & B Placements of Various Branches as of
knowledge, consent and authorization, information relative to his accounts to the prosecution. Further, since February 29, 2000 and as of December 16, 1999; and
the information used to support the requests for the subpoenas was not secured by court order, such
information was illegally acquired and the requests for subpoenas containing the said illegally acquired 3. Trading Orders Nos. A No. 78102 and A No. 078125.
information are already a direct violation of RA 1405. Consequently, such illegally acquired information
cannot be used in any proceeding. He invokes the constitutional provision on the right of the people to be
secure in their persons, houses, papers and effects against unreasonable searches and seizures of whatever Trading Order A No. 07125 is filed in two copies – a white copy which showed "set up" information; and a
nature and purpose and that any evidence obtained in violation thereof shall be inadmissible in evidence. 16 yellow copy which showed "reversal" information. Both copies have been reproduced and are enclosed with
this letter.

The petitioner cites the following pronouncement of the Court in Marquez:

We are continuing our search for other records and documents pertinent to your request and we will forward
to you on Friday, 23 February 2001, such additional records and documents as we might find until then.
Zones of privacy are recognized and protected in our laws. The Civil Code provides that "[e]very person shall (Attachment "4")20
respect the dignity, personality, privacy and peace of mind of his neighbors and other persons" and punishes
as actionable torts several acts for meddling and prying into the privacy of another. It also holds a public
officer or employee or any private individual liable for damages for any violation of the rights and liberties of Upon the request of the Office of the Ombudsman, the PDIC furnished the said office copies of the
another person, and recognizes the privacy of letters and other private communication. The Revised Penal manager’s checks. With respect to the other documents described by petitioner JV Ejercito as "extremely-
Code makes a crime of the violation of secrets by an officer, the revelation of trade and industrial secrets, detailed," the Special Prosecution Panel explains how they came to know about these documents in this
and trespass to dwelling. Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the manner:
Secrecy of Bank Deposits Act, and the Intellectual Property Code. 17
What is more, Attachment "2-a," the compliance letter from the PDIC, specifically mentioned, as among the
A review of the incidents related to the present case will show why the petitioner’s reliance on Marquez is documents transmitted thereby, a LIST (Attachment "2-B") pertaining to the documents available in
misplaced. In the said case, the Office of the Ombudsman issued a subpoena addressed to Marquez, a bank connection with Account No. 858, which list and documents (listed therein) were furnished the Office of the
Ombudsman:
In compliance with the Subpoena Duces Tecum dated February 8, 2001 issued by the Office of the by then Vice President Jose Estrada), "B6" (Certification of Employment), "C6" (Oath of Office), "D6" (Position
Ombudsman, transmitted are: Description Form), "E6" (Notice of Salary Adjustment) "F6" (Certification) and "G6" (Personal Data Sheet).
Ortaliza also worked for accused Joseph Estrada at the Office of the President as testified to by witness Lita
Sison of the Office of the President and as proved by Exhibits "I 6" (Master Personnel Records File), "H6"
1. Certification on available bank documents relating to A/C 858 and T/A 858 contained in a list attached
(Registration letter of Ortaliza from the Office of the President), "J6" (Personnel Assessment Form), "K 6"
thereto xxx (emphasis supplied)
(appointment papers designating her as Presidential Staff Officer VI, Internal House, signed by then
President Joseph Estrada), "L6" (Oath of Office), "M6" (Certification of Employment), "N6" (Position
There is a list, therefor, apart from the documents themselves (furnished the Office of the Ombudsman) to Description Form), "O6" (Personal Data Sheet) and "P6" (Ortaliza’s public service record). The same "Baby"
which said list is attached, from which details can be lifted. Thus, as to Trading Order No. 020385 dated Ortaliza also transacted on behalf of former President Joseph Estrada with respect to his personal bank
January 29, 1999, it must be noted that it is the second item in the list (Attachment "2-b" hereof) under accounts. Indeed, Baby Ortaliza, as testified to by numerous prosecution witnesses and as shown by the
document no. A-2. It is also among the documents furnished by the PDIC. documents they identified, is also the same person who transacted with Equitable PCIBank in connection
with the Jose Velarde account and with Citibank in connection with the conjugal bank account of former
President Joseph Estrada and Sen. Luisa Ejercito wherein the ₱8 Million check of Gov. Luis "Chavit" Singson
As to Confirmation Advice TA 858, it must be noted that this is a specific but not detailed document being was deposited. In addition to the foregoing and the testimonies of Clarissa Ocampo and Manuel Curato of
sought in the subpoena regarding Account No. 858, in general. For those familiar with banking practice, such Equitable PCIBank, the documents relating to Trust Account No. 858, thus, constitute further proof that
is an expected document of course, or one issued in the course of placements since it has been previously accused Joseph Estrada is Jose Velarde.
established that Account No. 858 is a Trust Account. A confirmation advice, therefore, is a reasonable and
expected document to be found in trust accounts to evidence participation in specific amounts. A sample of
said confirmation advice, in the amount of ₱200 Million, and which is among the documents officially Indeed, the surfacing of the name Baby Ortaliza in this Account No. 858 and her participation herein,
furnished the Office of the Ombudsman during the investigation leading to the charge for plunder against coupled with the previous evidence presented as to who she worked for, all the more make Trust Account
former President Joseph Estrada, et al., is attached as Attachment "36." No. 858 not only relevant and material, but also the very subject matter of litigation in the instant case.
Indeed, her participation herein more than establishes a pattern of behavior, a custom, a modus operandi
among accused Joseph Estrada, herself and the other co-accused in appearing for, representing, accused
Further, the list (Attachment "2-b" hereof) enumerates a number of confirmation advices sufficient for the Joseph Estrada and transacting with respect to his bank accounts.
plaintiff to ask for the same in the instant subpoena. However, as earlier explained, even in the absence of
such a list, any person could reasonably expect such a document in Trust Account No. 858 to evidence
participation. As to Letter of Authority dated January 17, 2000 re SPAN 858, it is document no. E-4 in the list.

As to the Trust Agreement dated January 1999, since the account had been established as a Trust Account, As to Letter of Authority dated April 24, 2000 re: SPAN 858, it is document no. E-5 in the list.
it is reasonable to presume and expect that there is such a Trust Agreement on or about January 1999,
coinciding with the date of the Trading Order, existing in the records.
As to Urban Bank Check No. 052093 dated April 24, 2000 in the amount of P36,572,315.43 and Urban Bank
Check No. 052093 dated April 24, 2000 in the amount of ₱107,191,780.85, the foregoing details were culled
Surely, this needs no stretch of imagination to reckon that such a document should exist in a truth account. from the contents of the letter of authority dated April 24, 2000. Indeed, said letter of authority authorizes
the issuance of manager’s checks in accordance with the details therein provided:
As to Special Private Account No. (SPAN) 858, SPAN 858 is yet another detail derived from a study of the
documents and list furnished by the PDIC to the Office of the Ombudsman. For example, document no. C-2 1) AMOUNT :PHP107,191,780.85
in the list would yield a Trading Order No. 046352 for ₱40 Million with the customer being identified as SPAN
858.
DATE :APRIL 24, 2000

As to Savings Account No. 0116-17345-9, again, among the documents furnished by the receiver of Urban
PAYEE :CASH
Bank to the Office of the Ombudsman pursuant to its constitutional powers is a copy of the Specimen
Signature Card for SPAN 858, opened on March 9, 1999 under Account No. 0116-17345-9. It must be
emphasized that Account No. 0116-17345-9 is an entry in the said document. MC # :052093

As to the Letter of Authority dated November 23, 1999 re: SPAN 858, it is document no. E-3 in the list. 2) AMOUNT :PHP36,572,315.43

It must be emphasized that this letter of authority dated November 23, 1999 authorized the release of more DATE :APRIL 24, 2000
than ₱100 Million worth of manager’s checks, where the ultimate recipient, for its deposit to the Jose Velarde
account was, Baby Ortaliza. It must be recalled that prosecution witnesses Teresa Barcelona and Glyzelyn H.
PAYEE :CASH
Bejec testified that it was Ortaliza who deposited the manager’s checks subject of the letter of authority
dated November 23, 1999 to the Jose Velarde account via Equitable PCIBank Greenhills Branch.
MC# :052092
It must be recalled that plaintiff has presented voluminous evidence to establish beyond any doubt that
Lucena "Baby" Ortaliza worked for accused Joseph Estrada in the Office of the Vice President, as testified to It must be emphasized that the foregoing details were adopted in seeking for the production of the two (2)
by prosecution witness Remedios Aguilar of the Office of the Vice President. The same fact is also shown by Urban Bank manager’s checks.21
Exhibits "Y5," "Z5," "A6" (Ortaliza’s appoint papers designating her as Vice-Presidential Staff Officer II signed
As shown by the Special Prosecution Panel, some of the details about the accounts of petitioner JV Ejercito to speak of but also because nowhere is it stated in RA 1405, and even in Marquez, that a violation thereof
were obtained from various sources gathered during the impeachment proceedings against former President warrants application of the exclusionary rule. Section 5 of RA 1405 provides that "[a]ny violation of this law
Estrada. The various sources included reports, articles and investigative journals, which are legitimate will subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not
sources. more than twenty thousand pesos or both, in the discretion of the court."

The other details were gathered upon compliance by the PDIC and/or Urban Bank with the subpoenas issued Interestingly, the United States has the Bank Secrecy Act (BSA). 25 However, unlike RA 1405, the US BSA
by the Office of the Ombudsman prior to the promulgation by the Court of Marquez. The Office of the was precisely enacted by the US Congress as a means of providing federal law investigators with an effective
Ombudsman, in issuing the subpoenas relied on Section 15(8) of RA 6770 giving it the power "to issue tool to fight criminal financial activity:
subpoena and subpoena duces tecum and take testimony in any investigation or inquiry, including the power
to examine and have access to bank accounts and records."
The conclusion reached by Congress in the early hearings was summarized by Robert Morgenthau, U.S.
Attorney, Southern District of New York, "Secret numbered foreign bank accounts have become an ever
The Marquez ruling, it bears reiterating, came after the subpoenas were issued by the Office of the increasing widespread and versatile tool for the evasion of our laws and regulations and for the commission
Ombudsman and the PDIC and Urban Bank had already complied therewith by furnishing it the necessary of crimes by American citizens and for hiding the fruits of crimes already committed.
information. The said information cannot thus be considered "illegal" because Marquez, which applied and
interpreted the power of the Office of the Ombudsman under Section 15(8) of RA 6770, cannot be given
This wave of criminal activity is fostered by the failure of fairly complete criminal investigations to ripen into
retroactive application. In Filoteo, Jr. v. Sandiganbayan, 22 the Court emphasized that "judge-made" laws are
prosecutions because there has been no disclosure of the real parties in interest; investigators cannot point
to be applied prospectively:
to any particular individual. Even if identity is revealed, the evidence remains inadmissible hearsay. Most
modern secrecy law prohibits the banker from coming forth with the disclosure. Thus, the prosecution lacks
The prospective application of "judge-made" laws was underscored in Co v. Court of Appeals where the the competent and qualified business representative who could state evidence of account information as a
Court ruled thru Chief Justice Andres R. Narvasa that in accordance with Article 8 of the Civil Code which business records exception to the hearsay rule.
provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the
legal system of the Philippines," and Article 4 of the same Code which states that "(l)aws shall have no
In response to the public outcry over this reported criminal activity and as a means of providing federal law
retroactive effect unless the contrary is provided," the principle of prospectivity of statutes, original or
investigators with an effective investigative tool, Congress enacted the Bank Secrecy Act (BSA). 26
amendatory, shall apply to judicial decisions, which, although in themselves are not laws, are nevertheless
evidence of what the law means.23
The important feature of the BSA is its regulatory structure that is designed to be used as an investigative
tool in the fight against white collar crime, and its passage is a broad delegation of commerce power to the
Contrary to the petitioner’s contention, therefore, the "extremely-detailed" information of the Office of the
Treasury Department. Title I thereof authorizes the Secretary of the Treasury Department to require
Ombudsman on which it based its requests for subpoenae duces tecum/ad testificandum can hardly be
financial institutions to record vast amounts of information on financial transactions. Title II provides a
characterized as "illegal." In any case, even if Marquez were to be given retroactive application, still, the
regulatory access to information via required reporting by the financial institutions and expressly authorized
crux of the Court’s ruling in the said case has no application to the present case. In Marquez, the Court
governmental interagency exchange of the accessed information.27
disallowed the Ombudsman from conducting an in camera inspection of the bank account because "there
was no pending case in court which would warrant the opening of the bank account for inspection."
In California Bankers Association v. Schulz, 28 the US Supreme Court held that the BSA is a constitutionally
valid and proper regulatory device. In United States v. Miller,29 the US Supreme Court reaffirmed its stance
On the other hand, it is indubitable that in the present case, the plunder and illegal use of alias cases against
by holding that government access to a customer account records is not an unreasonable search and seizure
former President Estrada are pending before the Sandiganbayan and, unlike in Marquez, the Special
even if realized through defective legal process and without customer notification.
Prosecution Panel has asked leave of court in accordance with RA 1405 for the production of the said
documents. Consequently, the subpoenae duces tecum/ad testificandum issued by the Sandiganbayan are
allowable exceptions to the bank secrecy laws as they properly fall under the following categories in Section Miller was convicted of operating an illegal still, functioning as a distiller without having posted bond, and
2 thereof: committing tax evasion. The convictions were based on evidence subpoenaed pursuant to the BSA. Miller
moved to suppress the bank records on the grounds that they were obtained by means of a defective
subpoena duces tecum which resulted in a seizure violative of the fourth amendment.
(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; or

The US Supreme Court held that Miller had no "protectable" fourth amendment interest in the subpoenaed
(6) In cases where the money deposited or invested is the subject matter of litigation. 24
documents. Justice Powell, speaking for the US Supreme Court, reasoned that the subpoenaed documents
were not Miller’s "private papers" and that he could assert neither ownership nor possession. Rather, these
Finally, the petitioner has sought to suppress the "extremely-detailed" information that the Special were the business records of the bank.
Prosecution Panel has requested. He invokes his constitutional right against unreasonable search and
seizures and that any evidence obtained in violation thereof shall be inadmissible in evidence. In her
The said Court also debunked Miller’s claim that he had a legitimate "expectation of privacy" concerning the
concurring and dissenting opinion, Mme. Justice Angelina Sandoval-Gutierrez agrees with petitioner JV
contents of the bank documents, e.g., checks and deposit slips:
Ejercito as she supports his plea to quash the subpoenae duces tecum/ad testificandum issued by the
Sandiganbayan characterizing them as "unreasonable and oppressive" for being based on information
allegedly obtained in violation of his constitutional right to privacy. Even if we direct our attention to the original checks and deposit slips, rather than to the microfilm copies
actually viewed and obtained by means of the subpoena, we perceive no legitimate "expectation of privacy"
in their contents. The checks are not confidential communications but negotiable instruments to be used in
To my mind, the application of the exclusionary rule or the "fruit of the poisonous tree" doctrine is not
commercial transactions. All of the documents obtained, including financial statements and deposit slips,
warranted in the present case not only because, as discussed earlier, there is no "illegally obtained evidence"
contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary government gained access to their financial records from the intermediary banks without a warrant. They
course of business. The lack of any legitimate expectation of privacy concerning the information kept in bank contended that evidence obtained from the subpoenas should have been suppressed at trial. The US
records was assumed by Congress in enacting the Bank Secrecy Act, the express purpose of which is to appellate court, in rejecting this argument, cited Frazin and succinctly held that "because the RFPA states
require records to be maintained because they "have a high degree of usefulness in criminal tax, and that civil penalties are the only authorized remedy for its violation, it would be inappropriate for the courts to
regulatory investigations and proceedings." imply a suppression remedy as well."

The depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that Also in United States v. Thompson,41 the US Court of Appeals, Eleventh Circuit, made the following
person to the Government. The Court has held repeatedly that the Fourth Amendment does not prohibit the disquisition:
obtaining of information revealed to a third party and conveyed by him to Government authorities, even if
the information is revealed on the assumption that it will be used only for a limited purpose and the
x x x [T]he defendant would have to show that Congress had provided such a remedy for a violation of the
confidence placed in the third party will not be betrayed.30
statute, either specifically or by inference. Clearly Congress intended to place limits on the Government’s
ability to monitor the private activities of individuals when it passed this statute. Congress did not, however,
Because the customer had no "protectable" fourth amendment rights, according to the US Supreme Court, suggest that any information obtained in violation of the statute’s provisions should be excluded. Instead the
the case was controlled by the general rule that a subpoena issued to a third party, for that party’s records, statute only provides for fines and possible imprisonment for knowing violations. When Congress specifically
does not violate the rights of the third party’s client. designates a remedy for one of its acts, courts generally presume that it engaged in the necessary balancing
of interests in determining what the appropriate penalty should be. Absent a specific reference to the
exclusionary rule, it is not appropriate for the courts to read such a provision into the act. 42
Largely in response to Miller and California Bankers, the US Congress enacted the Right to Financial Privacy
Act of 1978 (RFPA).31 It enumerates the legal processes available for federal agency access to customer’s
account information. Access is conditioned upon one of the following procedures: customer Under prevailing jurisprudence in the United States therefore, violations of the RFPA do not warrant the
authorization,32 administrative subpoena or summons,33 search warrant,34 judicial subpoena,35 grand jury application of the exclusionary rule with respect to the evidence obtained.
subpoena,36 or formal written agency request.37
Nonetheless, in the present case, there is no violation of RA 1405 precisely because petitioner JV Ejercito’s
Case law provides, however, that a violation of the procedures set forth in RFPA does not warrant exclusion case properly falls under the recognized exceptions to the rule on confidentiality of bank deposits. Further,
of the evidence obtained because courts should not imply a suppression remedy unless the statute expressly the Special Prosecution Panel has properly requested the Sandiganbayan for the issuance of the subpoenae
refers to the exclusionary rule. The RFPA states that civil penalties are the only authorized remedy for its duces tecum/ad testificandum for the production of documents relating to the bank accounts of petitioner JV
violation.38 In United States v. Frazin,39 for example, Frazin and Miller were charged with mail and wire fraud. Ejercito in connection with the plunder and illegal use of alias cases against former President Estrada. The
During its investigation, banks furnished the Federal Bureau of Investigation (FBI) information about the Sandiganbayan, in issuing the assailed resolutions, clearly committed no grave abuse of discretion.
account of Frazin without his knowledge or consent and without warrant. Frazin sought to suppress the bank
records and other information obtained in violation of RFPA. The United States Court of Appeals, Ninth
ACCORDINGLY, I vote to DISMISS the petition.
Circuit, held against Frazin ratiocinating that had Congress intended to authorize a suppression remedy, it
surely would have included it among the remedies it expressly authorized. The said US appellate court
likewise refused to suppress the financial evidence pursuant to its supervisory powers over the
administration of justice. It opined that "because the statute, when properly construed, excludes a
suppression remedy, it would not be appropriate for us to provide one in the exercise of our supervisory
powers over the administration of justice. Where Congress has both established a right and provided
exclusive remedies for its violation, we would encroach upon the prerogatives of Congress where we to
authorize a remedy not provided for by the statute."

The said ruling in Frazin was reiterated by the US Court of Appeals, Second Circuit, in United States v.
Daccarett,40 a civil forfeiture proceeding instituted by the United States Government against monies of Cali
cartel, a Colombian conglomerate headed by Jose Santacruz-Londono, which allegedly imported 3000
kilograms of cocaine a month into the US. The cartel allegedly used bank accounts throughout the US,
Europe, Central and South America to store and move its narcotic proceeds. Funds were moved through
various international banks by means of electronic fund transfers for ultimate deposit into Colombian bank
accounts.

Several associates of Santacruz-Londono were arrested in Luxembourg. Anticipating that the arrests would
trigger an effort by the cartel to move its monies to Colombia, the Luxembourg law enforcement authorities
requested the assistance of several countries to freeze monies related to the cartel. The US Drug
Enforcement Agency (DEA) instructed intermediary banks in New York to attach "all funds" on deposit in the
names of entities and individuals connected with Santacruz-Londono. The DEA also subpoenaed from the
intermediary banks financial records of related accounts.

The entities and individuals who claimed to be the beneficiaries of the seized funds argued, among others,
that their fourth amendment rights against unreasonable searches and seizures were violated when the
G.R. No. 161397               June 30, 2005 iii. No 8% penalty charge

a.2 On the amount advanced or balance thereof that remains unpaid for more than 30 days:
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,
vs. i. Interest on the advance at 7% p.a. ]
FELIPE P. ARCILLA, JR., Respondent. over DBP's borrowing cost; ]

ii. One time 2% service charge ] -- To be computed from

CALLEJO, SR., J.:
iii. Interest on the service charge ] the start of the 30-day

Atty. Felipe P. Arcilla, Jr. was employed by the Development Bank of the Philippines (DBP) in October 1981. iv. 8% penalty charge on the balances ] ‌ ‌ period
About five or six months thereafter, he was assigned to the legal department, and thereafter, decided to of the advances and service charge.9
avail of a loan under the Individual Housing 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 of the lot Arcilla also agreed to pay to DBP the following:
and the construction of a residential building thereon. He obliged himself to pay 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
*Insurance Premiums - 30-day period to be computed from date of advances

DBP obliged itself to transfer the title of the property upon the payment of the loan, including any
Other Advances - 30-day period to be computed from date of notification
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 loan/amount would be converted into a regular real estate loan
b. Taxes
account with the prevailing interest assigned on real estate loans, payable within the remaining term of the
loan account.4
b.1 One time service charge 2% of the amount advanced
5
Arcilla was notified of the periodic release of his loan.  During the period of July 1984 to December 31, 1986, b.2 Interest and penalty charge Interest - 7% p.a. over borrowing cost
the monthly amortizations for the said account were deducted from his monthly salary, for which he was Penalty charge û 8% p.a. if unpaid
issued receipts.6 after 30 days from date of advance

i. Interest of the advance at ]

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 December 1986. Conformably with the 7% p.a. over DBP's ]
Deed of Conditional Sale, the bank informed him, on June 11, 1987, that the balance of his loan account
borrowing costs; ]-- To be computed from start of 30-day period
with the bank had been converted to a regular housing loan, thus:
Monthly ii. One time 2% service charge ]
Amount converted to PH Loan Interest Rate Remaining Term
Amortization
iii. Interest on the service charge ]
₱ 155,218.79 - 1 9% 22 yrs. & 6 mos< ₱1,342.72
iv. 8% penalty charge on the ]
6,802.45 - 2 9% 21 yrs. & 10 mos. 59.41 balances of the advance and ]
service charge. ]
24,342.91 - 3 9% 22 yrs. 212.07

Plus: MRI at PC. 41/thousand ₱1,614.20 *Insurance Premiums - 30-day period to be computed from date of advances.
76.41
Other Advances - 30-day period to be computed from date of notification.

₱186,364.15 Total ₱1,690.617 b. Taxes

=========
b.1 One time service charge 2% of the amount advanced
On July 24, 1987, Arcilla signed three Promissory Notes8 for the total amount of ₱186,364.15. He was also b.2 Interest and penalty charge Interest - 7% p.a. over borrowing cost
obliged to pay service charge and interests, as follows: Penalty charge û 8% p.a. if unpaid
a.1 On the amount advanced or balance thereof that remains unpaid for 30 days* or less: after 30 days from date of advance

i. Interest on advances at 7% p.a. over DBP's borrowing cost:

However, Arcilla also agreed to the reservation by the DBP of its right to increase (with notice to him) the
ii. No 2% service charge
"rate of interest on the loan, as well as all other fees and charges on 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 On April 27, 2001, the trial court rendered judgment in favor of Arcilla and nullified the notarial rescission of
the loan shall be reduced by law or by the Monetary Board; Provided, further, that the adjustment in the the deeds executed by the parties. The fallo of the decision reads:
rate of interest shall take effect on or after the effectivity of the increase or decrease in the maximum rate of
interest."10
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendant.1avvphil.zw+ Defendant is hereby directed to furnish the disclosure statement to the plaintiff
Upon his request, DBP agreed to grant Arcilla an additional cash advance of ₱32,000.00. Thereafter, on May within five (5) days upon receipt hereof in the manner and form provided by R.A. No. 3765 and submit to
23, 1984, a Supplement to the Conditional Sale Agreement was executed in which DBP and Arcilla agreed on this Court for approval the total obligation of the plaintiff as of this date, within ten (10) days from receipt of
the following terms of the loan: this order. The Notarial Rescission (Exh. "16") dated November 27, 1990 is hereby declared null and void.
Amount Interest Rate Per Annum Terms Amortization Costs against the defendant.

₱32,000.00 Nine (9%) per cent MRI for P32,000.00 at 24 years ₱271.57
SO ORDERED.18
P0.40/1,000.00
12.80
DBP appealed the decision to the Court of Appeals (CA) wherein it made the following assignment of errors:
₱32,000.00 same to be consolidated with the original (Est.
advance in accordance with Condition No. 8 Amort.)
₱ 284.37
hereof.11 4.1. The trial court erred in ruling that the provision of the details of the loan without the issuance
=========
of a "Disclosure Statement" is not compliance with the "Truth in Lending Act;"

The additional advance was, thus, consolidated to the outstanding balance of Arcilla's original advance, 4.2. The trial court erred in declaring the Notarial Rescission null and void; and
payable within the remaining term thereof at 9% per annum. However, he failed to pay his loan account,
advances, penalty charges and interests which, as of October 31, 1990, amounted to ₱241,940.93. 12 DBP
rescinded the Deed of Conditional Sale by notarial act on November 27, 1990.13 Nevertheless, it wrote 4.3. The trial court erred in denying DBP's counterclaims for recovery of possession, back rentals
Arcilla, on January 3, 1992, giving him until October 24, 1992, within which to repurchase the property upon and litigation expenses.19
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 October 7, 1992.15 Arcilla failed On May 29, 2003, the CA rendered judgment setting aside and reversing the decision of the RTC. In ordering
to respond. Consequently, the property was advertised for sale at public bidding on February 14, 1994. 16 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 for reconsideration of the decision. For its part, DBP filed a
Arcilla filed a complaint against DBP with the Regional Trial Court (RTC) of Antipolo, Rizal, on February 21, motion for partial reconsideration of the decision, praying that Arcilla be ordered to vacate the property.
1994. He alleged that DBP failed to furnish him with the disclosure statement required by Republic Act (R.A.) However, the appellate court denied both motions.
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 account with the bank into a regular housing loan account. Despite this, DBP The parties filed separate petitions for review on certiorari with this Court. The first petition,
immediately deducted the account from his salary as early as 1984. Moreover, the bank applied its own entitled Development Bank of the Philippines v. Court of Appeals,  was docketed as G.R. No. 161397; the
formula and imposed its usurious interests, penalties and charges on his loan account and advances. He second petition, entitled Felipe Arcilla, Jr. v. Court of Appeals, was docketed as G.R. No. 161426. The Court
further alleged, thus: resolved to consolidate the two cases.

13. That when plaintiff could no longer cope-up with defendant's illegal and usurious impositions, the DBP The issues raised in the two petitions are the following: a) whether or not petitioner DBP complied with the
unilaterally increased further the rate of interest, without notice to the latter, and heaped-up usurious disclosure requirement of R.A. No. 3765 and CB Circular No. 158, Series of 1978, in the execution of the
interests, penalties and charges; deed of conditional sale, the supplemental deed of conditional sale, as well as the promissory notes; and b)
whether or not respondent Felipe 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,
as well as the supplement executed by DBP.

14. That to further bend the back of the plaintiff, defendant rescinded the subject deed of conditional sale on
4 December 1990 without giving due notice to plaintiff; On the first issue, Arcilla avers that under R.A. No. 3765 and CB Circular No. 158, the DBP, as the creditor
bank, was mandated to furnish him with the requisite information in such form prescribed by the Central
Bank before the commutation of the loan transaction. He avers that the disclosure of the details of the loan
15. That much later, on 10 October 1993, plaintiff received a letter from defendant dated 19 September contained in the deed of conditional sale and the supplement thereto, the promissory notes and release
1993, informing plaintiff that the subject deed of conditional sale was already rescinded on 4 December 1990 sheet, do not constitute substantial compliance with the law and the CB Circular. He avers that the required
(xerox copy of the same is hereto attached and made an integral part hereof as Annex "C"; 17 disclosure did not include the following:

In its answer to the complaint, the DBP alleged that it substantially complied with R.A. No. 3765 and CB à [T]he percentage of Finance Charges to Total Amount Financed (Computed in accordance with Sec. 2(i) of
Circular No. 158 because the details required in said statements were particularly disclosed in the CB Circular 158; the Additional Charges in case certain stipulations in the contract are not met by the
promissory notes, deed of conditional sale and the required notices sent to Arcilla. In any event, its failure to debtor; Total Non-Finance Charges; Total Finance Charges, Effective Interest Rate, etc. à 20
comply strictly with R.A. No. 3765 did not affect the validity and enforceability of the subject contracts or
transactions. DBP interposed a counterclaim for the possession of the property.
Arcilla further posits that the failure of DBP to comply with its obligation under R.A. No. 3765 and CB Circular Furthermore, the contract or document shall specify additional charges, if any, which will be collected in case
No. 158 forecloses its right to rescind the transaction between them, and to demand compliance of his certain stipulations in the contract are not met by the debtor. 21
obligation arising from said transaction. 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.
If the borrower is not duly informed of the data required by the law prior to the consummation of the
availment or drawdown, the lender will have no right to collect such charge or increases thereof, even if
DBP, on the other hand, avers that all the information required by R.A. No. 3765 was already contained in stipulated in the promissory note.22 However, such failure shall not affect the validity or enforceability of any
the loan transaction documents. It posits that even if it failed to comply strictly with the disclosure contract or transaction.23
requirement of R.A. No. 3765, nevertheless, under Section 6(b) of the law, the validity and enforceability of
any action or transaction is not affected. It asserts that Arcilla was estopped from invoking R.A. No. 3765
In the present case, DBP failed to disclose the requisite information in the disclosure statement form
because he failed to demand compliance with R.A. No. 3765 from the bank before the consummation of the
authorized by the Central Bank, but did so in the loan transaction documents between it and Arcilla. There is
loan transaction, until the time his complaint was filed with the trial court.
no evidence on record that DBP sought to collect or collected any interest, penalty or other charges, from
Arcilla other than those disclosed in the said deeds/documents.1avvphi1.zw+
In its petition in G.R. No. 161397, DBP asserts that the RTC erred in not rendering judgment on its
counterclaim for the possession of the subject property, and the liability of Arcilla for rentals while in the
The Court is convinced that Arcilla's claim of not having been furnished the data/information required by
possession of the property after the notarial rescission of the deeds of conditional sale. For his part, Arcilla
R.A. No. 3765 and CB Circular No. 158 was but an afterthought. Despite the notarial rescission of the
(in G.R. No. 161426) insists that the respondent failed to comply with its obligation under R.A. No. 3765;
conditional sale in 1990, and DBP's subsequent repeated offers to repurchase the property, the latter
hence, the notarial rescission of the deed of conditional sale and the supplement thereof was null and void.
maintained his silence. Arcilla filed his complaint only on February 21, 1994, or four years after the said
Until DBP complies with its obligation, he is not obliged to comply with his.
notarial rescission. The Court finds and so holds that the following findings and ratiocinations of the CA are
correct: After a careful perusal of the records, We find that the appellee had been sufficiently informed of the
The petition of Arcilla has no merit. terms and the requisite charges necessarily included in the subject loan. It 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 by using a full disclosure of such cost with a view of preventing the uninformed
Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, the bank, as
use of credit to the detriment of the national economy" (Emata vs. Intermediate Appellate Court, 174, SCRA
creditor, is obliged to furnish a client with a clear statement, in writing, setting forth, to the extent applicable
464 [1989]; Sec. 2, R.A. No. 3765).  Contrary to appellee's claim that he was not sufficiently informed of the
and in accordance with the rules and regulations prescribed by the Monetary Board of the Central Bank of
details of the loan, the records disclose that the required informations were readily available in the three (3)
the Philippines, the following information:
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
(1) the cash price or delivered price of the property or service to be acquired; 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).
(2) the amounts, if any, to be credited as down payment and/or trade-in;
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
(3) the difference between the amounts set forth under clauses (1) and (2); 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
(4) the charges, individually itemized, which are paid or to be paid by such person in connection the charges that had to be paid.
with the transaction but which are not incident to the extension of credit;
It might have been different if the borrower was, say, an ordinary employee eager to buy his first house and
(5) the total amount to be financed; 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
(6) the finance charges expressed in terms of pesos and centavos; and 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
(7) the percentage that the finance charge bears to the total amount to be financed expressed as a annulment of the rescission anchored on this ground was unjustified.24
simple annual rate on the outstanding unpaid balance of the obligation.
Anent the prayer of DBP to order Arcilla to vacate the property and pay rentals therefor from 1990, a review
Under Circular No. 158 of the Central Bank, the information required by R.A. No. 3765 shall be included in of the records has shown that it failed to adduce evidence on the reasonable amount of rentals for Arcilla's
the contract covering the credit transaction or any other document to be acknowledged and signed by the occupancy of the property. Hence, the Court orders a remand of the case to the court of origin, for the
debtor, thus: parties to adduce their respective evidence on the bank's counterclaim.

The contract covering the credit transaction, or any other document to be acknowledged and signed by the IN LIGHT OF ALL THE FOREGOING, the petition in G.R. No. 161426 is DENIED for lack of merit. The
debtor, shall indicate the above seven items of information. In addition, the contract or document shall petition in G.R. No. 161397 is PARTIALLY GRANTED. The case is hereby REMANDED to the Regional Trial
specify additional charges, if any, which will be collected in case certain stipulations in the contract are not Court of Antipolo, Rizal, Branch 73, for it to resolve the counterclaim of the Development Bank of the
met by the debtor. 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.
G.R. No. 135706             October 1, 2004 bank and became fully operational only on August 3, 1992. From April 1985 until July 1992,
defendant bank was restrained from doing its business. Doing business as construed by Justice
Laurel in 222 SCRA 131 refers to:
SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners,
vs.
PHILIPPINE VETERANS BANK, respondent. "….a continuity of commercial dealings and arrangements and contemplates to that
extent, the performance of acts or words or the exercise of some of the functions
normally incident to and in progressive prosecution of the purpose and object of its
DECISION
organization."

AUSTRIA-MARTINEZ, J.:
The defendant bank’s right to foreclose the mortgaged property prescribes in ten (10) years but
such period was interrupted when it was placed under receivership. Article 1154 of the New Civil
Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City, Branch 24, Code to this effect provides:
dated April 17, 1998,1 and the order denying petitioner’s motion for reconsideration dated August 25, 1998,
raising pure questions of law.2
"The period during which the obligee was prevented by a fortuitous event from enforcing
his right is not reckoned against him."
The following facts are uncontroverted:
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court
On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine said.
Veterans Bank in the amount of ₱135,000.00, evidenced by a promissory note, due and
demandable on February 27, 1981, and secured by a Real Estate Mortgage executed on their lot
"Having arrived at the conclusion that a foreclosure is part of a bank’s activity which could not have
together with the improvements thereon.
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
On March 23, 1985, the respondent bank went bankrupt and was placed under 1972 on account of the prohibition imposed by the Monetary Board against petitioner from
receivership/liquidation by the Central Bank from April 25, 1985 until August 1992. 3 transacting business, until the directive of the Board was nullified in 1981. Indeed, the period
during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned
against him. (Art. 1154, NCC) When prescription is interrupted, all the benefits acquired so far
On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for "accounts from the possession cease and when prescription starts anew, it will be entirely a new one. This
receivable in the total amount of ₱6,345.00 as of August 15, 1984," 4 which pertains to the insurance concept should not be equated with suspension where the past period is included in the
premiums advanced by respondent bank over the mortgaged property of petitioners. 5 computation being added to the period after the prescription is presumed (4 Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. pp. 18-19),
On August 23, 1995, more than fourteen years from the time the loan became due and demandable, consequently, when the closure of the petitioner was set aside in 1981, the period of ten years
respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners’ property. 6 On within which to foreclose under Art. 1142 of the N.C.C. began to run and, therefore, the action filed
October 18, 1995, the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine on August 21, 1986 to compel petitioner to release the mortgage carried with it the mistaken
Veterans Bank as the lone bidder. notion that petitioner’s own suit for foreclosure has prescribed."

On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-judicial Even assuming that the liquidation of defendant bank did not affect its right to foreclose the
foreclosure and the subsequent sale thereof to respondent bank null and void. 7 plaintiffs’ mortgaged property, the questioned extrajudicial foreclosure was well within the ten (10)
year prescriptive period. It is noteworthy to mention at this point in time, that defendant bank
through authorized Deputy Francisco Go made the first extrajudicial demand to the plaintiffs on
In the pre-trial conference, the parties agreed to limit the issue to whether or not the period within which August 1985. Then on March 24, 1995 defendant bank through its officer-in-charge Llanto made
the bank was placed under receivership and liquidation was a fortuitous event which suspended the running the second extrajudicial demand. And we all know that a written extrajudicial demand wipes out
of the ten-year prescriptive period in bringing actions. 8 the period that has already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A.,
224 SCRA 175.)10
On April 17, 1998, the RTC rendered its decision, the fallo of which reads:
Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998. 11 Thus, the present
WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for lack petition for review where petitioners claim that the RTC erred:
of merit. Likewise the compulsory counterclaim of defendant is dismissed for being unmeritorious. 9
I
It reasoned that:
…IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER
…defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED THE RUNNING
The defendant bank was given authority by the Central Bank to operate as a private commercial OF THE PRESCRIPTIVE PERIOD.
 II Respondent for its part asserts that: the period within which it was placed under receivership and liquidation
was a fortuitous event that interrupted the running of the prescriptive period for the foreclosure of
petitioners’ mortgaged property; within such period, it was specifically restrained and immobilized from
…IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT ON
doing business which includes foreclosure proceedings; the extra-judicial demand it made on March 24,
PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED.
1995 wiped out 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 petitioners on
III August 23, 1985; while it is true that the first demand letter of August 1985 pertained to the insurance
premium advanced by it over the mortgaged property of petitioners, the same however formed part of the
latter’s total loan obligation with respondent under the mortgage instrument and therefore constitutes a
…IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED valid extra-judicial demand made within the prescriptive period. 20
DECISION.12

In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that insured the
Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the mortgaged property thus it should not pass the obligation to petitioners through the letter dated August
bank on October 18, 1995, which was fourteen years from the date the obligation became due on February 1985.21
27, 1981, said foreclosure and the subsequent sale at public auction should be set aside and declared null
and void ab initio since they are already barred by prescription; the court a quo erred in sustaining the
respondent’s theory that its having been placed under receivership by the Central Bank between April 1985 To resolve this petition, two questions need to be answered: (1) Whether or not the period within which the
and August 1992 was a fortuitous event that interrupted the running of the prescriptive period; 13 the court a respondent bank was placed under receivership and liquidation proceedings may be considered a fortuitous
quo’s reliance on the case of Provident Savings Bank vs. Court of Appeals14 is misplaced since they have event which interrupted the running of the prescriptive period in bringing actions; and (2) Whether or not
different sets of facts; in the present case, a liquidator was duly appointed for respondent bank and there the demand letter sent by respondent bank’s representative on August 23, 1985 is sufficient to interrupt the
was no judgment or court order that would legally or physically hinder or prohibit it from foreclosing running of the prescriptive period.
petitioners’ property; despite the absence of such legal or physical hindrance, respondent bank’s receiver or
liquidator failed to foreclose petitioners’ property and therefore such inaction should bind respondent
Anent the first issue, we answer in the negative.
bank;15 foreclosure of mortgages is part of the receiver’s/liquidator’s duty of administering the bank’s assets
for the benefit of its depositors and creditors, thus, the ten-year prescriptive period which started on
February 27, 1981, was not interrupted by the time during which the respondent bank was placed under One characteristic of a fortuitous event, in a legal sense and consequently in relations to contract, is that its
receivership; and the Monetary Board’s prohibition from doing business should not be construed as barring occurrence must be such as to render it impossible for a party to fulfill his obligation in a normal manner. 22
any and all business dealings and transactions by the bank, 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
Respondent’s claims that because of a fortuitous event, it was not able to exercise its right to foreclose the
nugatory.16 Said provision reads:
mortgage on petitioners’ property; and that since it was banned from pursuing its business and was placed
under receivership from April 25, 1985 until August 1992, it could not foreclose the mortgage on petitioners’
Section 29. Proceedings upon Insolvency – Whenever, upon examination by the head of the property within such period since foreclosure is embraced in the phrase "doing business," are without merit.
appropriate supervising or examining department or his examiners or agents into the condition of
any bank or non-bank financial intermediary performing quasi-banking functions, it shall be
While it is true that foreclosure falls within the broad definition of "doing business," that is:
disclosed that the condition of the same is one of insolvency, or that its continuance in business
would involve probable loss to its depositors or creditors, it shall be the duty of the department
head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, …a continuity of commercial dealings and arrangements and contemplates to that extent, the
upon finding the statements of the department head to be true, forbid the institution to do performance of acts or words or the exercise of some of the functions normally incident to and in
business in the Philippines and designate the official of the Central Bank or a person of recognized progressive prosecution of the purpose and object of its organization. 23
competence in banking or finance, as 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 of its creditors, and represent the bank personally or through counsel as he may retain in it should not be considered included, however, in the acts prohibited whenever banks are "prohibited from
all actions or proceedings for or against the institution, exercising all the powers necessary for doing business" during receivership and liquidation proceedings.
these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the
bank. This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the
Philippines24 where we explained that:
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 has already elapsed; it is also Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that
not one of the instances enumerated by Art. 1115 of the Civil Code when prescription is interrupted; 17 and when a bank is forbidden to do business in the Philippines and placed under receivership, the
the August 23, 1985 letter by Francisco Go demanding ₱6,345.00, refers to the insurance premium on the person designated as receiver shall immediately take charge of the bank’s assets and liabilities, as
house of petitioners, advanced by respondent bank, thus such demand letter referred to another obligation expeditiously as possible, collect and gather all the assets and administer the same for the benefit
and could not have the effect of interrupting the running of the prescriptive period in favor of herein of its creditors, and represent the bank personally or through counsel as he may retain in all
petitioners insofar as foreclosure of the mortgage is concerned.18 actions or proceedings for or against the institution, exercising all the powers necessary for these
purposes including, but not limited to, bringing and foreclosing mortgages in the name of the
Petitioners then prayed that respondent bank be ordered to pay them ₱100,000.00 as moral damages, bank.25
₱50,000.00 as exemplary damages and ₱100,000.00 as attorney’s fees. 19
This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent to deter its
assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the receiver and liquidator from performing their obligations under the law. Thus, the ruling laid down in
detriment of the creditors of the bank.26 the Provident case cannot apply in the case at bar.

When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary There is also no truth to respondent’s claim that it could not continue doing business from the period of April
Board, determines whether to proceed with the liquidation or reorganization of the financially distressed 1985 to August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent
bank. A receiver, who concurrently represents the bank, then takes control and possession of its assets for was even able to send petitioners a demand letter, through Francisco Go, on August 23, 1985 for "accounts
the benefit of the bank’s creditors. A liquidator meanwhile assumes the role of the receiver upon the receivable in the total amount of ₱6,345.00 as of August 15, 1984" for the insurance premiums advanced by
determination by the Monetary Board that the bank can no longer resume business. His task is to dispose of respondent bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid
all the assets of the bank and effect partial payments of the bank’s obligations in accordance with legal insurance premiums and not foreclose the mortgage during the time it was "prohibited from doing business"
priority. In both receivership and liquidation proceedings, the bank retains its juridical personality was not adequately explained by respondent.
notwithstanding the closure of its business and may even be sued as its corporate existence is assumed by
the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the bank, but
Settled is the principle that a bank is bound by the acts, or failure to act of its receiver. 34 As we held
for its creditors as well.27
in Philippine Veterans Bank vs. NLRC,35 a labor case which also involved respondent bank,

In Provident Savings Bank vs. Court of Appeals,28 we further stated that:

… all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioner’s
corporate existence. Petitioner cannot disclaim liability by arguing that the non-payment of
When a bank is prohibited from continuing to do business by the Central Bank and a receiver is MOLINA’s just wages was committed by the liquidators during the liquidation period. 36
appointed for such bank, that bank would not be able to do new business, i.e., to grant new  loans
or to accept new  deposits. However, the receiver of the bank is in fact obliged to collect
However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect
debts owing to the bank, which debts form part of the assets of the bank. The receiver
the assets of such bank and to safeguard its assets.37
must assemble the assets and pay the obligation of the bank under receivership, and
take steps to prevent dissipation of such assets. Accordingly, the receiver of the bank is
obliged to collect pre-existing debts due to the bank, and in connection therewith, to Having reached the conclusion that the period within which respondent bank was placed under receivership
foreclose mortgages securing such debts.29 (Emphasis supplied.) 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 Francisco Go, on August 23, 1985 for the amount of ₱6,345.00, which pertained
It is true that we also held in said case that the period during which the bank was placed under receivership
to the insurance premiums advanced by the bank over the mortgaged property, constitutes a valid extra-
was deemed fuerza mayor which validly interrupted the prescriptive period.30 This is being invoked by the
judicial demand which interrupted the running of the prescriptive period. Again, we answer this question in
respondent and was used as basis by the trial court in its decision. Contrary to the position of the
the negative.
respondent and court a quo however, such ruling does not find application in the case at bar.

Prescription of actions is interrupted when they are filed before the court, when there is a written extra-
A close scrutiny of the Provident  case, shows that the Court arrived at said conclusion, which is an exception
judicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. 38
to the general rule, due to the peculiar circumstances of Provident Savings Bank at the time. In said case,
we stated that:
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 formed part of the latter’s total
Having arrived at the conclusion that a foreclosure is part of a bank’s business activity which
loan obligation with respondent under the mortgage instrument, and therefore, constitutes a valid extra-
could not have been pursued by the receiver then because of the circumstances
judicial demand which interrupted the running of the prescriptive period, is not plausible.
discussed in the Central Bank case, we are thus convinced that the prescriptive period was
legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary
Board against petitioner from transacting business, until the directive of the Board was nullified in The real estate mortgage signed by the petitioners expressly states that:
1981.31 (Emphasis supplied.)
This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit
Further examination of the Central Bank case reveals that the circumstances of Provident Savings Bank at accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in the amount
the time were peculiar because after the Monetary Board issued MB Resolution No. 1766 on September 15, of ONE HUNDRED THIRTY FIVE THOUSAND (₱135,000.00) PESOS ONLY Philippine Currency in
1972, prohibiting it from doing business in the Philippines, the bank’s majority stockholders immediately favor of the herein Mortgagee.39
went to the Court of First 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 from
liquidating Provident. The decision was appealed to and affirmed by this Court in 1981. Thus, the The promissory note, executed by the petitioners, also states that:
Superintendent of Banks, which was instructed to take charge of the 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. …FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE PHILIPPINE
29 of the Central Bank Act.32 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
In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID. 40
Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the
Central Bank Act on insolvency of banks. 33
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.

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, 1998 are
hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate mortgage on October
18, 1995, is hereby declared null and void and respondent is ordered to return to petitioners their owner’s
duplicate certificate of title.

Costs against respondent.

G.R. No. 213241 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 of the certificate of redemption and the annotation thereof
on TCT No. 131498. The said decision was affirmed by the CA on 19 October 1997 in CA-G.R. CV No.
PHILIPPINE NATIONAL BANK, Petitioner
49463. 10 The decision of the appellate court became final and executory on 19 November 1997.
vs.
JUAN F. VILLA, Respondent
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. Accordingly, a Writ of Execution 11 was issued by the RTC on 14
DECISION
December 1997.

PEREZ, J.:
By unfortunate tum of events, the Sheriff could not successfully enforce the decision because the certificate
of title covering the subject property was no longer registered under the names of the Spouses Comista.
For resolution of the Court is the instant Petition for Review on Certiorari1 filed by petitioner Philippine Hence, the judgment was returned unsatisfied as shown in Sheriffs Retum12 dated 13 July 1999.
National Bank (PNB), seeking to reverse and set aside the Decision2 dated 18 December 2013 and
Resolution3 dated 13 June 2014 of the Court of Appeals (CA) in CA-G.R. CV No. 97612. The assailed decision
Upon investigation it was found out that during the interregnum the Spouses Comista were able to secure a
and resolution affirmed the 22 June 2011 Decision4 of the Regional Trial. Court (RTC) of Villasis, Pangasinan,
loan from the PNB in the amount of ₱532,000.00 using the same property subject of litigation as security.
Branch 50 which found that petitioner PNB is not a mortgagee in good faith.
The Real Estate Mortgage (REM) was recorded on 28 September 1992 under Entry No. 758171 13 or month
before the Notice of Lis Pendens  was annotated.
The Facts
Eventually, the Spouses Comista defaulted in the payment of their loan obligation with the PNB prompting
Petitioner PNB is a universal banking corporation duly authorized by Bangko Sentral ng Pilipinas (BSP) to the latter to foreclose the property offered as security. The bank emerged as the highest bidder during the
engage in banking business. Sometime in 1986, Spouses Reynaldo Comista and Erlinda Gamboa Comista public sale as shown at the Certificate of Sale issued by the Sheriff. As with the prior mortgage, the Spouses
(Spouses Comista) obtained a loan from Traders Royal Bank (Traders Bank). 5 To secure the said obligation, Comista once again failed to exercise their right of redemption within the required period allowing PNB to
the Spouses Comista mortgaged to the bank a parcel of land with an area of 451 square meters designated consolidate its ownership over the subject property. Accordingly, TCT No. 131498 14 in
as Lot 555-A-2 and registered under Transfer Certificate of Title (TCT) No. 131498 in their names by the
Register of Deeds of Pangasinan.
the name of the Spouses Comista was cancelled and a new one under TCT No. 216771 15 under the name of
the PNB was issued.
For failure of the Spouses Comista to make good of their loan obligation after it has become due, Traders
Bank foreclosed the mortgage constituted on the security of the loan. After the notice and publication
The foregoing tum of events left Vila with no other choice but to commence another round of litigation
requirements were complied with, the subject property was sold at the public auction on 23 December 1987.
against the Spouses Comista and PNB before the RTC of Villasis, Pangasinan, Branch 50. In his Complaint
During the public sale, respondent Juan F. Vila (Vila) was declared as the highest bidder after he offered to
docketed as Civil Case No. V-0567, Vila sought for the nullification of TCT No. 216771 issued under the
buy the subject property for P50,000.00. The Certificate of Sale dated 13 January 1988 was duly recorded in
name of PNB and for the payment of damages.
TCT No. 131498 under Entry No. 623599.6

To refute the allegations of Vila, PNB pounded that it was a mortgagee in good faith pointing the fact that at
To exercise his right of ownership, Vila immediately took possession of the subject property and paid the real
the time the subject property was mortgaged to it, the same was still free from any liens and encumbrances
estate taxes corresponding thereon.
and the Notice 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 Cornista were still the absolute owners of the
On 11 February 1989, a Certificate of Final Sale was issued to Vila after the one-year redemption period had property possessing all the rights to mortgage the same to third persons. PNB also harped on the fact that a
passed without the Spouses Comista exercising their statutory right to redeem the subject property. He was, close examination of title was conducted and nowhere was it shown that there was any cloud in the title of
however, prevented from consolidating the ownership of the property under his name because the owner's the Spouses Cornista, the latter having redeemed the property after they have lost it in a foreclosure sale. 16
copy of the certificate of title was not turned over to him by the Sheriff.
After the Pre-Trial Conference, trial on the merits ensued. The court a quo then proceeded to receive
Despite the lapse of the redemption period and the fact of issuance of a Certificate of Final Sale to Vila, the documentary and testimonial evidence from the opposing parties. Thereafter, the parties submitted their
Spouses Comista were nonetheless allowed to buy back the subject property by tendering the amount of respective memorandum and the case was submitted for decision.
₱50,000.00. A Certificate of Redemption7 dated 14 March 1989 was issued for this purpose and was duly
annotated in the title under Entry No. 708261.
On 22 June 2011, the RTC rendered a Decision17 in favor of Vila and ruled that PNB is not a mortgagee in
good faith. As a financial institution, the trial court held that PNB is expected to observe a higher degree of
Claiming that the Spouses Cornista already lost their right to redeem the subject property, Vila filed an diligence. In hastily granting the loan, the trial court declared that PNB failed in this regard. Had the bank
action for nullification of redemption, transfer of title and damages against the Spouses Comista and Alfredo exercised due diligence, it could have easily discovered that the Spouses Comista were not the possessors of
Vega in his capacity as the Register of Deeds of Pangasinan. The case was docketed as Civil Case No. V- the subject property which could lead it to the fact that at the time the subject property was mortgaged to
0242 on 10 January 1992 and was raffled to Branch 50. A Notice of Lis Pendens was issued for this purpose it, a litigation involving the same was already commenced before the court. ·It was further ratiocinated by
and was duly recorded in the certificate of title of the property on 19 October 1992 under Entry No. the RTC that "[a] mortgagee cannot close his eyes to facts which should put a reasonable man upon his
759302.8 guard" in ascertaining the status of a mortgaged property. The dispositive portion of the decision reads:
"WHEREFORE, judgment is hereby rendered: The Court's Ruling

1. Declaring the Real Estate Mortgage dated September 28, 1992, executed by the Spouses Reynaldo We resolve to deny the petition.
Comista and Erlinda Gamboa in favor of the Philippine National Bank, Tayug, Pangasinan Branch, over the
parcel of land covered by TCT No. 131498 null and void;
In general, the issue of whether a mortgagee is in good faith cannot be entertained in a Rule 45 petition.
This is because the ascertainment of good faith or the lack thereof, and the determination of negligence are
2. Declaring the Deed of Sale dated September 27, 1996, in favor of the PNB null and void; factual matters which lay outside the scope of a petition for review on certiorari. Good faith, or the lack of it,
is a question of intention. In ascertaining intention, courts are necessarily controlled by the evidence as to
the conduct and outward facts by which alone the inward motive may, with safety, be determined. 25 A
3. Ordering the nullification and cancellation of Transfer Certificate of Title No. 216771 in the name of PNB;
recognized. exception to the rule is when there are conflicting findings of fact by the CA and the RTC. 26 In
the case at bar, RTC and the CA agreed on their findings.
4. Ordering the Register of Deeds of Pangasinan to issue a new certificate of title covering the property
subject matter of this case in the name.of Juan F. Vila; and
The RTC, which possessed the first hand opportunity to observe the demeanor of the witnesses and admit
the documentary evidence, found that PNB accepted outright the collateral offered by the Spouses Cornista
5. Ordering [the] defendant PNB to pay the plaintiff P-50,000.00 moral damages, P-50,000.00 exemplary without making further inquiry as to the real status of the subject property. Had the bank been prudent and
damages and P-100,000.00 attorney's fees and litigation expenses. diligent enough in ascertaining the condition of the property, it could have discovered that the same was in
the possession of Vila who, at that time, possessed a colorable title thereon being a holder of a Final
Certificate of Sale. The RTC further exposed the frailty of PNB' s claim by pointing to the fact that it was Vila
Costs against defendant Philippine National Bank. who was paying the realty tax on the property, a crucial information that the bank could have easily
discovered had it exercised due diligence.
SO ORDERED." 18
Resonating the findings of the RTC, the CA also declared that PNB fell short in exercising the degree of
In a Resolution19 dated 13 June 2014, the RTC refused to reconsider its earlier decision and thereby denied diligence expected from bank and financial institutions. We hereby quote with approval the disquisition of
the Motion for Reconsideration interposed by PNB. the appellate court:

On appeal, the CA Decision20 dated 18 December 2013 affirmed the RTC ruling. In failing to exercise greater Thus, before approving a loan application, it is a standard operating practice for these institutions to conduct
care and diligence in approving the loan of the Spouses Comista without first ascertaining if there were any an ocular inspection of the property offered for mortgage and to verify the genuineness of the title to
defects in their title, tlre appellate court held that PNB could not be afforded the status of a mortgagee in determine the real owner thereof. The apparent purpose of an ocular inspection is to protect the "true
good faith. It went further by declaring that "[a] bank whose business is impressed with public interest is owner" of the property as well as innocent third parties with a right, interest or claim thereon from a usurper
expected to exercise more care and prudence in its dealings than a private individual, even in cases who may have acquired a fraudulent certificate of title thereto. Here, [the] PNB has failed to exercise the
involving registered lands. A bank cannot assume that, simply because the title offered as security is on its requisite due diligence in ascertaining the status and condition of the property being offered to it as security
face free of any encumbrances of lien, it is relieved of the responsibility of taking further steps to verify the for the loan before it approved the same. xxx. 27
title and inspect the properties to be mortgaged. "21 The CA thus disposed:
Clearly, the PNB failed to observe the exacting standards required of banking institutions which are
"WHEREFORE, the instant appeal is DENIED. The assailed Decision dated June 22, 2011 and the behooved by statutes and jurisprudence to exercise greater care and prudence before entering into a
Resolution dated August 11, 2011 of the Regional Trial Court of Villasis, Pangasinan, Branch 50, in Civil Case mortgage contract.
No, V-0567 are hereby AFFIRMED."22
No credible proof on the records could substantiate the claim of PNB that a physical inspection of the
On 13 June 2014, the CA issued a Resolution23 denying the Motion for Reconsideration of the PNB prompting property was conducted. We agree with both the RTC and CA that if in fact it were true that ocular inspection
the bank to seek recourse before the Court via instant Petition for Review on Certiorari. For Our resolution was conducted, a suspicion could have been raised as to the real status of the property. By failing to uncover
are the following issues: a crucial fact that the mortgagors were not the possessors of the subject property, We could not lend
credence to the claim of the bank that an ocular inspection of the property was conducted.1âwphi1 What
further tramples upon PNB' s claim is the fact that, as shown on the records, it was Vila who was religiously
The Issues paying the real property tax due on the property from 1989 to 1996, another significant fact that could have
raised a red flag as to the real ownership of the property. The failure of the mortgagee to take precautionary
I. steps would mean negligence on his part and would thereby preclude it from invoking that it is a mortgagee
in good faith.

WHETHER OR NOT PNB IS A MORTGAGEE IN GOOD FAITH;

Before approving a loan application, it is standard operating procedure for banks and financial institutions to
conduct an ocular inspection of the property offered for mortgage and to determine the real owner(s)
II. 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, interest or claim thereon from a usurper who may have acquired a
WHETHER OR NOT PNB IS LIABLE FOR DAMAGES. 24 fraudulent certificate of title thereto.28
In this case, it was adjudged by the courts of competent jurisdiction in a final and executory .decision that
the Spouses Cornista's reacquisition of the property after the lapse of the redemption period is fraudulent
and the 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 observed the degree diligence expected from it.

In Land Bank of the Philippines v. Belle Corporation,29 the Court exhorted banks to exercise the highest
degree of diligence in its dealing with properties offered as securities for the loan obligation:

When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees for value is
applied more strictly. Being in the business of extending loans secured by real estate mortgage, banks are
presumed to be familiar with the rules on land registration. Since the banking business· is impressed with
public interest, they are expected to be more cautious, to exercise a higher degree of diligence, care and
prudence, than private individuals in their dealings, even those involving registereo lands. 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 encumbrances or lien, they are relieved of the responsibility of taking
further steps to verify the title and inspect the properties to be mortgaged. As expected, the ascertainment
of the status or condition of a property offered to 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. 33

PNB clearly failed to observe the required degree of caution in readily approving the loan and accepting the
collateral offered by the Spouses Comista without first ascertaining the real ownership of the property. It
should not have simply relied on the face of title but went further to physically ascertain the actual condition
of the property. That the property offered as security was in the possession of the person other than the one
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 purchaser for value.34

Having laid down that the PNB is not in good faith, We are led to affirm the award of moral damages,
exemplary damages, attorney's fees and costs of litigation in favor of Vila. Moral damages are not awarded
to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered. 35 Willful
injury to property may be a legal ground for awarding moral damages if the court should find that, under the
circumstances, such damages are justly due.36 In the instant case, we find that the award of moral damages
is proper. 37 As for the award of exemplary damages, we deem that the same is proper for the PNB was
remiss in its obligation to inquire the real status of the subject property, causing damage to Vila. 38 Finally,
we rule that the award of attorney's fees and litigation expenses is valid since Vila was compelled to litigate
and thus incur expenses in order to protect its rights over the subject property. 39

WHEREFORE, premises considered, the petition is DENIED. The assailed Decision and Resolution of the
Court of Appeals are hereby AFFIRMED. Accordingly, the decision of the RTC dated 22 June
2011 STANDS as the final resolution of this case.

SO ORDERED.
G.R. No. 162336               February 1, 2010 succeeded in securing a loan and converting the loan proceeds for their personal gain and benefit. 15 The
information reads:
HILARIO P. SORIANO, Petitioner,
vs. That in or about the month of April, 1997, and thereafter, in San Miguel, Bulacan, and within the jurisdiction
PEOPLE OF THE PHILIPPINES, BANGKO SENTRAL NG PILIPINAS (BSP), PHILIPPINE DEPOSIT of this Honorable Court, the said accused HILARIO P. SORIANO and ROSALINDA ILAGAN, as principals by
INSURANCE CORPORATION (PDIC), PUBLIC PROSECUTOR ANTONIO C.BUAN, and STATE direct participation, with unfaithfulness or abuse of confidence and taking advantage of their position as
PROSECUTOR ALBERTO R. FONACIER, Respondents. President of the Rural Bank 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, conspiring,
confederating and mutually helping one another, did then and there, willfully and feloniously falsify loan
DECISION
documents consisting of undated loan application/information sheet, credit proposal dated April 14, 1997,
credit proposal dated April 22, 1997, credit investigation report dated April 15, 1997, promissory note dated
DEL CASTILLO, J.: April 23, 1997, disclosure statement on loan/credit transaction dated April 23, 1997, and other related
documents, by making it appear that one Enrico Carlos filled up the application/information sheet and filed
the aforementioned loan documents when in truth and in fact Enrico Carlos did not participate in the
A bank officer violates the DOSRI2 law when he acquires bank funds for his personal benefit, even if such execution of said loan documents and that by virtue of said falsification and with deceit and intent to cause
acquisition was facilitated by a fraudulent loan application. Directors, officers, stockholders, and their related damage, the accused succeeded in securing a loan in the amount of eight million pesos (PhP8,000,000.00)
interests cannot be allowed to interpose the fraudulent nature of the loan as a defense to escape culpability from the Rural Bank of San Miguel – San Ildefonso branch in the name of Enrico Carlos which amount of
for their circumvention of Section 83 of Republic Act (RA) No. 337.3 PhP8 million representing the loan proceeds the accused thereafter converted the same amount to their own
personal gain and benefit, to the damage and prejudice of the Rural Bank of San Miguel – San Ildefonso
Before us is a Petition for Review on Certiorari4 under Rule 45 of the Rules of Court, assailing the September branch, its creditors, the Bangko Sentral ng Pilipinas, and the Philippine Deposit Insurance Corporation.
26, 2003 Decision5 and the February 5, 2004 Resolution6 of the Court of Appeals (CA) in CA-G.R. SP No.
67657. The challenged Decision disposed as follows: CONTRARY TO LAW.16

WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED.7 The other Information17 dated November 10, 2000 and docketed as Criminal Case No. 238-M-2001, was for
violation of Section 83 of RA 337, as amended by PD 1795. The said provision refers to the prohibition
Factual Antecedents against the so-called DOSRI loans. The information alleged that, in his capacity as President of RBSM,
petitioner indirectly secured an ₱8 million loan with RBSM, for his personal use and benefit, without the
written consent and approval of the bank's Board of Directors, without entering the said transaction in the
Sometime in 2000, the Office of Special Investigation (OSI) of the Bangko Sentral ng Pilipinas  (BSP), bank's records, and without transmitting a copy of the transaction to the supervising department of the
through its officers,8 transmitted a letter9 dated March 27, 2000 to Jovencito Zuño, Chief State Prosecutor of bank. His ruse was facilitated by placing the loan in the name of an unsuspecting RBSM depositor, one
the Department of Justice (DOJ). The letter attached as annexes five affidavits,10 which would allegedly Enrico Carlos.18 The information reads:
serve as bases for filing criminal charges for Estafa thru Falsification of Commercial Documents, in relation to
Presidential Decree (PD) No. 1689,11 and for Violation of Section 83 of RA 337, as amended by PD
1795,12 against, inter alia,  petitioner herein Hilario P. Soriano. These five affidavits, along with other That in or about the month of April, 1997, and thereafter, and within the jurisdiction of this Honorable Court,
documents, stated that spouses Enrico and Amalia Carlos appeared to have an outstanding loan of ₱8 million the said accused, in his capacity as President of the Rural Bank of San Miguel (Bulacan), Inc., did then and
with the Rural Bank of San Miguel (Bulacan), Inc. (RBSM), but had never applied for nor received such loan; there, willfully and feloniously indirectly borrow or secure a loan with the Rural Bank of San Miguel – San
that it was petitioner, who was then president of RBSM, who had ordered, facilitated, and received the Ildefonso branch, a domestic rural banking institution created, organized and existing under Philippine laws,
proceeds of the loan; and that the ₱8 million loan had never been authorized by RBSM's Board of Directors amounting to eight million pesos (PhP8,000,000.00), knowing fully well that the same has been done by him
and no report thereof had ever been submitted to the Department of Rural Banks, Supervision and without the written consent and approval of the majority of the board of directors of the said bank, and
Examination Sector of the BSP. The letter of the OSI, which was not subscribed under oath, ended with a which consent and approval the said accused deliberately failed to obtain and enter the same upon the
request that a preliminary investigation be conducted and the corresponding criminal charges be filed records of said banking institution and to transmit a copy thereof to the supervising department of the said
against petitioner at his last known address. bank, as required by the General Banking Act, by using the name of one depositor Enrico Carlos of San
Miguel, Bulacan, the latter having no knowledge of the said loan, and one in possession of the said amount
of eight million pesos (PhP8,000,000.00), accused converted the same to his own personal use and benefit,
Acting on the letter-request and its annexes, State Prosecutor Albert R. Fonacier proceeded with the in flagrant violation of the said law.
preliminary investigation. He issued a subpoena with the witnesses’ affidavits and supporting documents
attached, and required petitioner to file his counter-affidavit. In due course, the investigating officer issued a
Resolution finding probable cause and correspondingly filed two separate informations against petitioner CONTRARY TO LAW.19
before the Regional Trial Court (RTC) of Malolos, Bulacan. 13
Both cases were raffled to Branch 79 of the RTC of Malolos, Bulacan. 20
14
The first Information,  dated November 14, 2000 and docketed as Criminal Case No. 237-M-2001, was for
estafa through falsification of commercial documents, under Article 315, paragraph 1(b), of the Revised On June 8, 2001, petitioner moved to quash21 these informations on two grounds: that the court had no
Penal Code (RPC), in relation to Article 172 of the RPC and PD 1689. It basically alleged that petitioner and jurisdiction over the offense charged, and that the facts charged do not constitute an offense.
his co-accused, in abuse of the confidence reposed in them as RBSM officers, caused the falsification of a
number of loan documents, making it appear that one Enrico Carlos filled up the same, and thereby
On the first ground, petitioner argued that the letter transmitted by the BSP to the DOJ constituted the subsequently certified by State Prosecutor Fonacier, who personally examined the affiants and was
complaint and hence was defective for failure to comply with the mandatory requirements of Section 3(a), convinced that the affiants fully understood their sworn statements.31
Rule 112 of the Rules of Court, such as the statement of address of petitioner and oath and
subscription.22 Moreover, petitioner argued that the officers of OSI,  who were the signatories to the "letter-
Anent the second ground, the CA found no merit in petitioner's argument that the violation of the DOSRI law
complaint,"  were not authorized by the BSP Governor, much less by the Monetary Board, to file the
and the commission of estafa thru falsification of commercial documents are inherently inconsistent with
complaint. According to petitioner, this alleged fatal oversight violated Section 18, pars. (c) and (d) of the
each other. It explained that the test in considering a motion to quash on the ground that the facts charged
New Central Bank Act (RA 7653).
do not constitute an offense, is whether the facts alleged, when hypothetically admitted, constitute the
elements of the offense charged. The appellate court held that this test was sufficiently met because the
On the second ground, petitioner contended that the commission of estafa under paragraph 1(b) of Article allegations in the assailed informations, when hypothetically admitted, clearly constitute the elements of
315 of the RPC is inherently incompatible with the violation of DOSRI law (as set out in Section 83 23 of RA Estafa thru Falsification of Commercial Documents and Violation of DOSRI law. 32
337, as amended by PD 1795),24 hence a person cannot be charged for both offenses. He argued that a
violation of DOSRI law requires the offender to obtain a loan from his bank, without complying with
Petitioner’s Motion for Reconsideration33 was likewise denied for lack of merit.
procedural, reportorial, or ceiling requirements. On the other hand, estafa under par. 1(b), Article 315 of the
RPC requires the offender to misappropriate or convert something that he holds in trust, or on
commission, or for administration, or under any other obligation involving the duty to return the same.25 Hence, this petition.

Essentially, the petitioner theorized that the characterization of possession is different in the two offenses. If Issues
petitioner acquired the loan as DOSRI, he owned the loaned money and therefore, cannot misappropriate or
convert it as contemplated in the offense of estafa. Conversely, if petitioner committed estafa, then he
merely held the money in trust for someone else and therefore, did not acquire a loan in violation of DOSRI Restated, petitioner raises the following issues34 for our consideration:
rules.
I
Ruling of the Regional Trial Court
Whether the complaint complied with the mandatory requirements provided under Section 3(a), Rule 112 of
In an Order26 dated August 8, 2001, the trial court denied petitioner's Motion to Quash for lack of merit. The the Rules of Court and Section 18, paragraphs (c) and (d) of RA 7653.
lower court agreed with the prosecution that the assailed OSI letter was not the complaint-affidavit itself;
thus, it need not comply with the requirements under the Rules of Court. The trial court held that the II
affidavits, which were attached to the OSI letter, comprised the complaint-affidavit in the case. Since these
affidavits were duly subscribed and sworn to before a notary public, there was adequate compliance with the
Rules. The trial court further held that the two offenses were separate and distinct violations, hence the Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of RA 337, as
prosecution of one did not pose a bar to the other.27 amended) could also be the subject of Estafa under Article 315 (1) (b) of the Revised Penal Code.

Petitioner’s Motion for Reconsideration was likewise denied in an Order dated September 5, 2001. 28 III

Aggrieved, petitioner filed a Petition for Certiorari29 with the CA, reiterating his arguments before the trial Is a petition for certiorari under Rule 65 the proper remedy against an Order denying a Motion to Quash?
court.
IV
Ruling of the Court of Appeals
Whether petitioner is entitled to a writ of injunction.
The CA denied the petition on both issues presented by petitioner.
Our Ruling
On the first issue, the CA determined that the BSP letter, which petitioner characterized to be a fatally infirm
complaint, was not actually a complaint, but a transmittal or cover letter only. This transmittal letter merely The petition lacks merit.
contained a summary of the affidavits which were attached to it. It did not contain any averment of personal
knowledge of the events and 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 First Issue:
Court.30
Whether the complaint complied with the mandatory requirements provided under Section 3(a),
The CA further determined that the five affidavits attached to the transmittal letter should be considered as Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of
the complaint-affidavits that charged petitioner with violation of Section 83 of RA 337 and for Estafa thru
Falsification of Commercial Documents. These complaint-affidavits complied with the mandatory Republic Act No. 7653
requirements set out in the Rules of Court – they were subscribed and sworn to before a notary public and

Petitioner moved to withdraw the first issue from the instant petition
On March 5, 2007, the Court noted35 petitioner's Manifestation and Motion for Partial Withdrawal of the A close scrutiny of the letters transmitted by the BSP and PDIC to the DOJ shows that these
Petition36 dated February 7, 2007. In the said motion, petitioner informed the Court of the promulgation of a were not intended to be the complaint envisioned under the Rules. It may be clearly inferred from the tenor
Decision entitled Soriano v. Hon. Casanova, 37  which also involved petitioner and similar BSP letters to the of the letters that the officers merely intended to transmit the affidavits of the bank employees to the DOJ.
DOJ. According to petitioner, the said Decision allegedly ruled squarely on the nature of the BSP letters and Nowhere in the transmittal letters is there any averment on the part of the BSP and PDIC officers of personal
the validity of the sworn affidavits attached thereto. For this reason, petitioner moved for the partial knowledge of the events and transactions constitutive of the criminal violations alleged to have been made
withdrawal of the instant petition insofar as it involved the issue of "whether or not a court can legally by the accused. In fact, the letters clearly stated that what the OSI of the BSP and the LIS of the PDIC did
acquire jurisdiction over a complaint which failed to comply with the mandatory requirements provided under was to respectfully transmit to the DOJ for preliminary investigation the affidavits and personal knowledge of
Section 3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of RA 7653". 38 the acts of the petitioner. These affidavits were subscribed under oath by the witnesses who executed them
before a notary public. Since the affidavits, not the letters transmitting them, were intended to initiate the
preliminary investigation, we hold that Section 3(a), Rule 112 of the Rules of Court was substantially
Given that the case had already been submitted for resolution of the Court when petitioner filed his latest
complied with.
motion, and that all respondents had presented their positions and arguments on the first issue, the Court
deems it proper to rule on the same.
Citing the ruling of this Court in Ebarle v. Sucaldito, the Court of Appeals correctly held that a  complaint for
purposes of preliminary investigation by the fiscal need not be filed by the offended party. The rule has been
In Soriano v. Hon. Casanova, the Court held that the affidavits attached to the BSP transmittal letter
that, unless the offense subject thereof is one that cannot be prosecuted de oficio, the same may
complied with the mandatory requirements under the Rules of Court.
be filed, for preliminary investigation purposes, by any competent person. The crime of estafa is a public
crime which can be initiated by "any competent person." The witnesses who executed the affidavits based on
To be sure, the BSP letters involved in Soriano v. Hon. Casanova39  are not the same as the BSP letter their personal knowledge of the acts committed by the petitioner fall within the purview of "any competent
involved in the instant case. However, the BSP letters in Soriano v. Hon. Casanova and the BSP letter person" who may institute the complaint for a public crime. x x x (Emphasis and italics supplied)
subject of this case are similar in the sense that they are all signed by the OSI officers of the BSP, they were
not sworn to by the said officers, they all contained summaries of their attached affidavits, and they all
A preliminary investigation can thus validly proceed on the basis of an affidavit of any competent person,
requested the conduct of a preliminary investigation and the filing of corresponding criminal charges against
without the referral document, like the NBI-NCR Report, having been sworn to by the law enforcer as the
petitioner Soriano. Thus, the principle of stare decisis dictates that the ruling in Soriano v. Hon. Casanova be
nominal complainant. To require otherwise is a needless exercise. The cited case of Oporto, Jr. v. Judge
applied in the instant case – once a question of law has been examined and decided, it should be deemed
Monserate does not appear to dent this proposition. After all, what is required is to reduce the evidence
settled and closed to further argument.40
into affidavits, for while reports and even raw information may justify the initiation of an investigation, the
preliminary investigation stage can be held only after sufficient evidence has been gathered and evaluated
We held in Soriano v. Hon. Casanova, after a close scrutiny of the letters transmitted by the BSP to the DOJ, which may warrant the eventual prosecution of the case in court. 42
that these were not intended to be the complaint, as envisioned under the Rules. They did not contain
averments of personal knowledge of the events and transactions constitutive of any offense. The letters
Following the foregoing rulings in Soriano v. Hon. Casanova and Santos-Concio v. Department of Justice, we
merely transmitted for preliminary investigation the affidavits of people who had personal knowledge of the
hold that the BSP letter, taken together with the affidavits attached thereto, comply with the requirements
acts of petitioner. We ruled that these affidavits, not the letters transmitting them, initiated the preliminary
provided under Section 3(a), Rule 112 of the Rules of Court and Section 18, paragraphs (c) and (d) of RA
investigation. Since these affidavits were subscribed under oath by the witnesses who executed them before
7653.
a notary public, then there was substantial compliance with Section 3(a), Rule 112 of the Rules of Court.

Second Issue:
Anent the contention that there was no authority from the BSP Governor or the Monetary Board to file a
criminal case against Soriano, we held that the requirements of Section 18, paragraphs (c) and (d) of RA
7653 did not apply because the BSP did not institute the complaint but merely transmitted the affidavits of Whether a loan transaction within the ambit of the DOSRI law (violation of Section 83 of RA 337, as
the complainants to the DOJ. amended) could be the subject of Estafa under Article 315 (1) (b) of the

We further held that since the offenses for which Soriano was charged were public crimes, authority holds Revised Penal Code
that it can be initiated by "any competent person" with personal knowledge of the acts committed by the
offender. Thus, the witnesses who executed the affidavits clearly fell within the purview of "any competent
The second issue was raised by petitioner in the context of his Motion to Quash Information on the ground
person" who may institute the complaint for a public crime.
that the facts charged do not constitute an offense.43 It is 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
The ruling in Soriano v. Hon. Casanova has been adopted and elaborated upon in the recent case of Santos- elements of the offense charged as defined by law. The trial court may not consider a situation contrary to
Concio v. Department of Justice.41 Instead of a transmittal letter from the BSP, the Court in Santos-Concio that set forth in the criminal complaint or information. Facts that constitute the defense of the petitioner[s]
was faced with an NBI-NCR Report, likewise with affidavits of witnesses as attachments. Ruling on the against the charge under the information must be proved by [him] during trial. Such facts or circumstances
validity of the witnesses’ sworn affidavits as bases for a preliminary investigation, we held: do not constitute proper grounds for a motion to quash the information on the ground that the material
averments do not constitute the offense". 44
The Court is not unaware of the practice of incorporating all allegations in one document denominated as
"complaint-affidavit." It does not pronounce strict adherence to only one approach, however, for there are We have examined the two informations against petitioner and we find that they contain allegations which, if
cases where the extent of one’s personal knowledge may not cover the entire gamut of details material to hypothetically admitted, would establish the essential elements of the crime of DOSRI violation and estafa
the alleged offense. The private offended party or relative of the deceased may not even have witnessed the thru falsification of commercial documents.
fatality, in 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 to that of the NBI-NCR.
Thus, in Soriano v. Casanova, the Court held:
In Criminal Case No. 238-M-2001 for violation of DOSRI rules, the information alleged that petitioner The prohibition in Section 83 is broad enough to cover various modes of borrowing.[48] It covers loans by a
Soriano was the president of RBSM; that he was able to indirectly obtain a loan from RBSM by putting the bank director or officer (like herein petitioner) which are made either: (1) directly, (2) indirectly, (3) for
loan in the name of depositor Enrico Carlos; and that he did this without complying with the requisite board himself, (4) or as the representative or agent of others. It applies even if the director or officer is a mere
approval, reportorial, and ceiling requirements. guarantor, indorser or surety for someone 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,
In Criminal Case No. 237-M-2001 for estafa thru falsification of commercial documents, the information
especially the depositors,[49] from the overborrowing of bank funds by bank officers, directors, stockholders
alleged that petitioner, by taking advantage of his position as president of RBSM, falsified various loan
and related interests, as such overborrowing may lead to bank failures.[50] It has been said that "banking
documents to make it appear that an Enrico Carlos secured a loan of ₱8 million from RBSM; that petitioner
institutions are not created for the benefit of the directors [or officers]. While directors have great powers as
succeeded in obtaining the loan proceeds; that he later converted the loan proceeds to his own personal gain
directors, they have no special privileges as individuals. They cannot use the assets of the bank for their own
and benefit; and that his action caused damage and prejudice to RBSM, its creditors, the BSP, and the PDIC.
benefit except as permitted by law. Stringent restrictions are placed about them so that when acting both for
the bank and for one of themselves at the same time, they must keep within certain prescribed lines
Significantly, this is not the first occasion that we adjudge the sufficiency of similarly worded informations. In regarded by the legislature as essential to safety in the banking business". 51
Soriano v. People,45 involving the same petitioner in this case (but different transactions), we also reviewed
the sufficiency of informations for DOSRI violation and estafa thru falsification of commercial documents,
A direct borrowing is obviously one that is made in the name of the DOSRI himself or where the DOSRI is a
which were almost identical, mutatis mutandis, with the subject informations herein. We held in Soriano v.
named party, while an indirect borrowing includes one that is made by a third party, but the DOSRI has a
People that there is no basis for the quashal of the informations as "they contain material allegations
stake in the transaction.52 The latter type – indirect borrowing – applies here. The information in Criminal
charging Soriano with violation of DOSRI rules and estafa thru falsification of commercial documents".
Case 238-M-2001 alleges that petitioner "in his capacity as President of Rural Bank of San Miguel – San
Ildefonso branch x x x indirectly borrow[ed] or secure[d] a loan with [RBSM] x x x knowing fully well that
Petitioner raises the theory that he could not possibly be held liable for estafa in concurrence with the charge the same has been done by him without the written consent and approval of the majority of the board of
for DOSRI violation. According to him, the DOSRI charge presupposes that he acquired a loan, which would directors x x x, and which consent and approval the said accused deliberately failed to obtain and enter the
make the loan proceeds his own money and which he could neither possibly misappropriate nor convert to same upon the records of said banking institution and to transmit a copy thereof to the supervising
the prejudice of another, as required by the statutory definition of estafa.46 On the other hand, if petitioner department of the said bank x x x by using the name of one depositor Enrico Carlos x x x, the latter having
did not acquire any loan, there can be no DOSRI violation to speak of. Thus, petitioner posits that the two no knowledge of the said loan, and once in possession of the said amount of eight million pesos (₱8 million),
offenses cannot co-exist. This theory does not persuade us. [petitioner] converted the same to his own personal use and benefit".53

Petitioner’s theory is based on the false premises that the loan was extended to him by the bank in his own The foregoing information describes the manner of securing the loan as indirect; names petitioner as the
name, and that he became the owner of the loan proceeds. Both premises are wrong. benefactor of the indirect loan; and states that the requirements of the 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.
The bank money (amounting to ₱8 million) which came to the possession of petitioner was money held in
trust or administration by him for the bank, in his
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 (such as principals represented by
fiduciary capacity as the President of said bank.47 It is not accurate to say that petitioner became the owner the DOSRI), and where the DOSRI’s interest does not appear to be beneficial but even burdensome (such as
of the ₱8 million because it was the proceeds of a loan. That would have been correct if the bank knowingly in cases when the DOSRI acts as a mere guarantor or surety). If the law finds it necessary to protect the
extended the loan to petitioner himself. But that is not the case here. According to the information for bank and the banking system in such situations, it will surely be illogical for it to exclude a case like this
estafa, the loan was supposed to be for another person, a certain "Enrico Carlos"; petitioner, through where the DOSRI acted for his own benefit, using the name of an unsuspecting person. A contrary
falsification, made it appear that said "Enrico Carlos" applied for the loan when in fact he ("Enrico Carlos") interpretation will effectively allow a DOSRI to use dummies to circumvent the requirements of the law.
did not. Through such fraudulent device, petitioner obtained the loan proceeds and converted the same.
Under these circumstances, it cannot be said that petitioner became the legal owner of the ₱8 million. Thus,
petitioner remained the bank’s fiduciary with respect to that money, which makes it capable of In sum, the informations filed against petitioner do not negate each other.
misappropriation or conversion in his hands.
Third Issue:
The next question is whether there can also be, at the same time, a charge for DOSRI violation in such a
situation wherein the accused bank officer did not secure a loan in his own name, but was alleged to have
Is a Rule 65 petition for certiorari the proper remedy against an Order denying a Motion to
used the name of another person in order to indirectly secure a loan from the bank. We answer this in the
Quash?
affirmative. Section 83 of RA 337 reads:

This issue may be speedily resolved by adopting our ruling in Soriano v. People, 55 where we held:
Section 83. No director or officer of any banking institution shall, either directly or indirectly, for himself or
as the representative or agent of others, borrow any of the deposits of funds of such bank, nor shall he
become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor In fine, the Court has consistently held that a special civil action for certiorari is not the proper remedy to
for moneys borrowed from the bank or loaned by it, except with the written approval of the majority of the assail the denial of a motion to quash an information. The proper procedure in such a case is for the accused
directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records to enter a plea, go to trial without prejudice on his part to present the special defenses he had invoked in his
of the corporation and a copy of such entry shall be transmitted forthwith to the Superintendent of Banks. motion to quash and if after trial on the merits, an adverse decision is rendered, to appeal therefrom in the
The office of any director or officer of a bank who violates the provisions of this section shall immediately manner authorized by law. Thus, petitioners should not have forthwith filed a special civil action
become vacant and the director or officer shall be punished by imprisonment of not less than one year nor for certiorari with the CA and instead, they should have gone to trial and reiterated the special defenses
more than ten years and by a fine of not less than one thousand nor more than ten thousand pesos. x x x contained in their motion to quash. There are no special or exceptional circumstances in the present case
that would justify immediate resort to a filing of a petition for certiorari. Clearly, the CA did not commit any
reversible error, much less, grave abuse of discretion in dismissing the petition.56

Fourth Issue:

Whether petitioner is entitled to a writ of injunction

The requisites to justify an injunctive relief are: (1) the right of the complainant is clear and 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 "enforceable as a matter of law." Absent any clear and unquestioned legal
right, the issuance of an injunctive writ would constitute grave abuse of discretion.57 Caution and 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:

It has been consistently held that there is no power the exercise of which is more delicate, which requires
greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance
of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury,
where courts of law cannot afford an adequate or commensurate remedy in damages.

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.

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.

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 Ofelia to inform her that the check had already been cleared.9 The following day, PNB Buendia Branch, after
deducting the bank charges, credited $299,248.37 to the account of the spouses Cheah. 10 Acting on Adelina’s
instruction to withdraw the credited amount, Ofelia that day personally withdrew $180,000.00. 11 Adelina was
PHILIPPINE NATIONAL BANK, Petitioner,
able to withdraw the remaining amount the next day after having been authorized by Ofelia.12 Filipina
vs.
received all the proceeds.
SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO CHEAH, Respondents.

In the meantime, the Cable Division of PNB Head Office in Escolta, Manila received on November 16, 1992 a
x-----------------------x
SWIFT13 message from Philadelphia National Bank dated November 13, 1992 with Transaction Reference
Number (TRN) 46506218, informing PNB of the return of the subject check for insufficient funds. 14 However,
DECISION the PNB Head Office could not ascertain to which branch/office it should forward the same for proper action.
Eventually, PNB Head Office sent Philadelphia National Bank a SWIFT message informing the latter that
SWIFT message with TRN 46506218 has been relayed to PNB’s various divisions/departments but was
DEL CASTILLO, J.: returned to PNB Head Office as it seemed misrouted. PNB Head Office thus requested for Philadelphia
National Bank’s advice on said SWIFT message’s proper disposition. 15 After a few days, PNB Head Office
Law favoreth diligence, and therefore, hateth folly and negligence.—Wingate’s Maxim. ascertained that the SWIFT message was intended for PNB Buendia Branch.

In doing a friend a favor to help the latter’s friend collect the proceeds of a foreign check, a woman PNB Buendia Branch learned about the bounced check when it received on November 20, 1992 a debit
deposited the check in her and her husband’s dollar account. The local bank accepted the check for collection advice,16 followed by a letter17 on November 24, 1992, from Philadelphia National Bank to which the
and immediately credited the proceeds thereof to said spouses’ account even before the lapse of the clearing November 13, 1992 SWIFT message was attached. Informed about the bounced check and upon demand by
period. And just when the money had been withdrawn and distributed among different beneficiaries, it was PNB Buendia Branch to return the money withdrawn, Ofelia immediately contacted Filipina to get the money
discovered that all along, to the horror of the woman whose intention to accommodate a friend’s friend back. But the latter told her that all the money had already been given to several people who asked for the
backfired, she and her check’s encashment. In their effort to recover the money, spouses Cheah then sought the help of the
National Bureau of Investigation. Said agency’s Anti-Fraud and Action Division was later able to apprehend
some of the beneficiaries of the proceeds of the check and recover from them $20,000.00. Criminal charges
bank had dealt with a rubber check. were then filed against these suspect beneficiaries.18

These consolidated1 Petitions for Review on Certiorari  filed by the Philippine National Bank (PNB)2 and by the Meanwhile, the spouses Cheah have been constantly meeting with the bank officials to discuss matters
spouses Cheah Chee Chong and Ofelia Camacho Cheah (spouses Cheah) 3 both assail the August 22, 2005 regarding the incident and the recovery of the value of the check while the cases against the alleged
Decision4 and December 21, 2005 Resolution5 of the Court of Appeals (CA) in CA-G.R. CV No. 63948 which perpetrators remain pending. Chee Chong in the end signed a PNB drafted 19 letter20 which states that the
declared both parties equally negligent and, hence, should equally suffer the resulting loss. For its part, PNB spouses Cheah are offering their condominium units as collaterals for the amount withdrawn. Under this
questions why it was declared blameworthy together with its depositors, spouses Cheah, for the amount setup, the amount withdrawn would be treated as a loan account with deferred interest while the spouses try
wrongfully paid the latter, while the spouses Cheah plead that they be declared entirely faultless. to recover the money from those who defrauded them. Apparently, Chee Chong signed the letter after the
Vice President and Manager of PNB Buendia Branch, Erwin Asperilla (Asperilla), asked the spouses Cheah to
Factual Antecedents help him and the other bank officers as they 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.
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 (Filipina), approached her to ask if
she could have Filipina’s check cleared and encashed for a service fee of 2.5%. The check is Bank of America Although some of the officers of PNB were amenable to the proposal,21 the same did not materialize.
Check No. 1906 under the account of Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo Subsequently, PNB sent a demand letter to spouses Cheah for the return of the amount of the check, 22 froze
Rosales against Bank of America Alhambra Branch in California, USA, with a face amount of $300,000.00, their peso and dollar deposits in the amounts of ₱275,166.80 and $893.46, 23 and filed a complaint24 against
payable to cash. Because Adelina does not have a dollar account in which to deposit the check, she asked them for Sum of Money with Branch 50 of the Regional Trial Court (RTC) of Manila, docketed as Civil Case
Ofelia if she could accommodate Filipina’s request since she has a joint dollar savings account with her No. 94-71022. In said complaint, PNB demanded payment of around ₱8,202,220.44, plus interests 25 and
Malaysian husband Cheah Chee Chong (Chee Chong) under Account No. 265-705612-2 with PNB Buendia attorney’s fees, from the spouses Cheah.
Branch.
As their main defense, the spouses Cheah claimed that the proximate cause of PNB’s injury was its own
Ofelia agreed. negligence of paying a US dollar denominated check without waiting for the 15-day clearing period, in
violation of its bank practice as mandated by its own bank circular, i.e., PNB General Circular No. 52-
101/88.26 Because of this, spouses Cheah averred that PNB is barred from claiming what it had lost. They
That same day, Ofelia and Adelina went to PNB Buendia Branch. They met with Perfecto Mendiola of the further averred that it is unjust for them to pay back the amount disbursed as they never really benefited
Loans Department who referred them to PNB Division Chief Alberto Garin (Garin). Garin discussed with them therefrom. As counterclaim, they prayed for the return of their frozen deposits, the recoupment of
the process of clearing the subject check and they were told that it normally takes 15 days. 7 Assured that the ₱400,000.00 representing the amount they had so far spent in recovering the value of the check, and
deposit and subsequent clearance of the check is a normal transaction, Ofelia deposited Filipina’s check. PNB payment of moral and exemplary damages, as well as attorney’s fees.
then sent it for clearing through its correspondent bank, Philadelphia National Bank. Five 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 Ruling of the Regional Trial Court
The RTC ruled in PNB’s favor. The dispositive portion of its Decision 27 dated May 20, 1999 reads: Accordingly, PNB is hereby ordered to credit to the peso and dollar accounts of the Cheah spouses the
amount due to them.
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Philippine National
Bank [and] against defendants Mr. Cheah Chee Chong and Ms. Ofelia Camacho Cheah, ordering the latter to SO ORDERED.31
pay jointly and severally the herein plaintiffs’ bank the amount:
In so ruling, the CA ratiocinated that PNB Buendia Branch’s non-receipt of the SWIFT message from
1. of US$298,950.25 or its peso equivalent based on Central Bank Exchange Rate prevailing at the time the Philadelphia National Bank within the 15-day clearing period is not an acceptable excuse. Applying the last
proceeds of the BA Check No. 190 were withdrawn or the prevailing Central Bank Rate at the time the clear chance doctrine, the CA held that PNB had the last clear opportunity to avoid the impending loss of the
amount is to be reimbursed by the defendants to plaintiff or whatever is lower. This is without prejudice money and yet, it glaringly exhibited its negligence in allowing the withdrawal of funds without exhausting
however, to the rights of the defendants (accommodating parties) to go against the group of Adelina Guarin, the 15-day clearing period which has always been a standard banking practice as testified to by PNB’s own
Atty. Eduardo Rosales, Filipina Tuazon, etc., (Beneficiaries- accommodated parties) who are privy to the officers, and as provided in its own General Circular No. 52/101/88. To the CA, PNB cannot claim from
defendants. spouses Cheah even if the latter are accommodation parties under the law as the bank’s own negligence is
the proximate cause of the damage it sustained. Nevertheless, it also found Ofelia guilty of contributory
negligence. Thus, both parties should be made equally responsible for the resulting loss.
No pronouncement as to costs.

Both parties filed their respective Motions for Reconsideration32 but same were denied in a Resolution33 dated
No other award of damages for non[e] has been proven.
December 21, 2005.

SO ORDERED.28
Hence, these Petitions for Review on Certiorari.

The RTC held that spouses Cheah were guilty of contributory negligence.
Our Ruling

Because Ofelia trusted a friend’s friend whom she did not know and considering the amount of the check
The petitions for review lack merit. Hence, we affirm the ruling of the CA.
made payable to cash, the RTC opined that Ofelia showed lack of vigilance in her dealings. She should have
exercised due care by investigating the negotiability of the check and the identity of the drawer. While the
court found that the proximate cause of the wrongful payment of the check was PNB’s negligence in not PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing period was the
observing the 15-day guarantee period rule, it ruled that spouses Cheah still cannot escape liability to proximate cause of the loss.1âwphi1
reimburse PNB the value of the check as an accommodation party pursuant to Section 29 of the Negotiable
Instruments Law.29 It likewise applied the principle of solutio indebiti under the Civil Code. With regard to the
"Proximate cause is ‘that cause, which, in natural and continuous sequence, unbroken by any efficient
award of other forms of damages, the RTC held that each party must suffer the consequences of their own
intervening cause, produces the injury and without which the result would not have occurred.’ x x x To
acts and thus left both parties as they are.
determine the proximate cause of a controversy, the question that needs to be asked is: If the event did not
happen, would the injury have resulted? If the answer is no, then the event is the proximate cause." 34
Unwilling to accept the judgment, the spouses Cheah appealed to the CA.
Here, while PNB highlights Ofelia’s fault in accommodating a stranger’s check and depositing it to the bank,
Ruling of the Court of Appeals it remains mum in its release of the proceeds thereof without exhausting the 15-day clearing period, an act
which contravened established banking rules and practice.
While the CA recognized the spouses Cheah as victims of a scam who nevertheless have to suffer the
consequences of Ofelia’s lack of care and prudence in immediately trusting a stranger, the appellate court It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking days. As declared
did not hold PNB scot-free. It ruled in its August 22, 2005 Decision, 30 viz: 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 the "lapse of 15 banking days was not observed."35 Even
PNB’s agreement with Philadelphia National Bank36 regarding the rules on the collection of the proceeds of US
As both parties were equally negligent, it is but right and just that both parties should equally suffer and
dollar checks refers to "business/ banking days." Ofelia deposited the subject check on November 4, 1992.
shoulder the loss. The scam would not have been possible without the negligence of both parties. As earlier
Hence, the 15th banking day from the date of said deposit should fall on November 25, 1992. However,
stated, the complaint of PNB cannot be dismissed because the Cheah spouses were negligent and Ms. Cheah
what happened was that PNB Buendia Branch, upon calling up Ofelia that the check had been cleared,
took an active part in the deposit of the check and the withdrawal of the subject amounts. On the other
allowed the proceeds thereof to be withdrawn on November 17 and 18, 1992, a week before the lapse of the
hand, the Cheah spouses cannot entirely bear the loss because PNB allowed her to withdraw without waiting
standard 15-day clearing period.
for the clearance of the check. The remedy of the parties is to go after those who perpetrated, and benefited
from, the scam.
This Court already held that the payment of the amounts of checks without previously clearing them with the
drawee bank especially so where the drawee bank is a foreign bank and the amounts involved were large is
WHEREFORE, the May 20, 1999 Decision of the Regional Trial Court, Branch 5, Manila, in Civil Case No. 94-
contrary to normal or ordinary banking practice.37 Also, in Associated Bank v. Tan, 38 wherein the bank
71022, is hereby REVERSED and SET ASIDE and another one entered DECLARING both parties equally
allowed the withdrawal of the value of a check prior to its clearing, we said that "[b]efore the check shall
negligent and should suffer and shoulder the loss.
have been cleared for deposit, the collecting bank can only ‘assume’ at its own risk x x x that the 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 clearing period and had never released during that time the proceeds In any case, the complaint against the spouses Cheah could not be dismissed. As PNB’s client, Ofelia was the
of the check, it would have already been duly notified of its dishonor. Clearly, PNB’s disregard of its one who dealt with PNB and negotiated the check such that its value was credited in her and her husband’s
preventive and protective measure against the possibility of being victimized by bad checks had brought account. Being the ones in privity with PNB, the spouses Cheah are therefore the persons who should return
upon itself the injury of losing a significant amount of money. to PNB the money released to them.

It bears stressing that "the diligence required of banks is more than that of a Roman pater familias or a good All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are equally negligent
father of a family. The highest degree of diligence is expected."39 PNB miserably failed to do its duty of and should therefore equally suffer the loss. The two must both bear the consequences of their mistakes.
exercising extraordinary diligence and reasonable business prudence. The disregard of its own banking policy
amounts to gross negligence, which the law defines as "negligence characterized by the want of even slight
WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R. No. 170865 and in G.R. No.
care, acting or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and
170892 are both DENIED. The assailed August 22, 2005 Decision and December 21, 2005 Resolution of the
intentionally with a conscious indifference to consequences in so far as other persons may be
Court of Appeals in CA-G.R. CV No. 63948 are hereby AFFIRMED in toto.
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 deposited with it for the purpose of determining
their genuineness and regularity. "The collecting bank, being primarily engaged in banking, holds itself out SO ORDERED.
to the public as the expert on this field, and the law thus holds it to a high standard of conduct." 41 A bank is
expected to be an expert in banking procedures and it has the necessary means to ascertain whether a
check, local or foreign, is sufficiently funded.

Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle of solutio
indebiti, which is laid down in Article 2154 of the Civil Code:42

Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises.

"[T]he indispensable requisites of the juridical relation known as solutio indebiti, are, (a) that he who paid
was not under obligation to do so; and (b) that the payment was made by reason of an essential mistake of
fact.43

In the case at bench, PNB cannot recover the proceeds of the check under the principle it invokes. In the
first place, the gross negligence of PNB, as earlier discussed, can never be equated with a mere mistake of
fact, which must be something excusable and which requires the exercise of prudence. No recovery is due if
the mistake done is one of gross negligence.

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 husband
who would be put at risk and not the accommodated party. However, Ofelia chose to ignore the same and
instead actively participated in immediately withdrawing the proceeds of the check. Thus, we are one with
the CA in ruling that Ofelia’s prior consultation with PNB officers is not enough to totally absolve her of any
liability. In the first place, she should have shunned any participation in that palpably shady transaction.
G.R. No. 178467 Prior to the filing of the suit in the RTC, the petitioners had two meetings with the 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 had encountered, and offered to reinstate
SPS. CRISTINO & EDNA CARBONELL, Petitioners,
US$500 in their dollar account, and, in addition, to underwrite a round-trip all-expense-paid trip to Hong
vs.
Kong, but they were adamant and staged a walk-out.8
METROPOLITAN BANK AND TRUST COMPANY, Respondent.

In its judgment rendered on May 22, 1998,9 the RTC ruled in favor of the respondent, disposing as follows:
DECISION

WHEREFORE, in the light of all the foregoing, judgment is hereby rendered:

BERSAMIN, J.:

1. Dismissing plaintiff’s complaint for lack of merit;

The petitioners assail the decision promulgated on December 7, 2006, 1 whereby the Court of Appeals (CA)
affirmed with modification the decision rendered on May 22, 1998 2 by the Regional Trial Court, Branch 157,
in Pasig City (RTC) dismissing the petitioners' complaint in Civil Case No. 65725 for its lack of merit, and 2. On the counterclaim, awarding Metrobank the amount of ₱20,000.00 as attorney's fees.
awarded attorney's fees under the respondent's counterclaim.
SO ORDERED.10
Antecedents
The petitioners appealed, but the CA ultimately promulgated its assailed decision on December 7, 2006
The petitioners initiated against the respondent Civil Case No. 65725, an action for damages, alleging that affirming the judgment of the RTC with the modification of deleting the award of attorney's fees, 11 to wit:
they had experienced emotional shock, mental anguish, public ridicule, humiliation, insults and
embarrassment during their trip to Thailand because of the respondent's release to them of five US$ 100
As to the award of attorneys fees, we agree with appellants that there is simply no factual and legal basis
bills that later on turned out to be counterfeit. They claimed that they had travelled to Bangkok, Thailand
thereto.
after withdrawing US$ l ,000.00 in US$ 100 notes from their dollar account at the respondent's Pateros
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 fifth one was "no good;" that Unquestionably, appellants filed the present case for the humiliation and embarrassment they suffered in
unconvinced by the reason for the rejection, they had asked a companion to exchange the same bill at Bangkok. They instituted the complaint in their honest belief that they were entitled to damages as a result
Norkthon Bank in Bangkok; that the bank teller thereat had then informed them and their companion that of appellee's issuance of counterfeit dollar notes. Such being the case, they should not be made answerable
the dollar bill was fake; that the teller had then confiscated the US$ 100 bill and had threatened to report to attorney's fees. It is not good public policy to put a premium on the right to litigate where such right is
them to the police if they insisted in getting the fake dollar bill back; and that they had to settle for a exercised in good faith, albeit erroneously.
Foreign Exchange Note receipt.3
WHEREFORE, the appealed decision is AFFIRMED with modification that the award of attorney's fees is
The petitioners claimed that later on, they had bought jewelry from a shop owner by using four of the deleted.
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 had turned out to be counterfeit; that the shop
owner had shouted at them: "You Filipinos, you are all cheaters!;" and that the incident had occurred within SO ORDERED.
the hearing distance of fellow travelers and several foreigners.
Issues
The petitioners continued that upon their return to the Philippines, they had confronted the manager of the
respondent's Pateros branch on the fake dollar bills, but the latter had insisted that the dollar bills she had Hence, this appeal, with the petitioners contending that the CA gravely erred in affirming the judgment of
released to them were genuine inasmuch as the bills had come from the head office; that in order to put the the RTC. They insist that inasmuch as the business of banking was imbued with public interest, the
issue to rest, the counsel of the petitioners had submitted the subject US$ 100 bills to the Bangko Sentral ng respondent's failure to exercise the degree of diligence required in handling the affairs of its clients showed
Pilipinas (BSP) for examination; that the BSP had certified that the four US$100 bills were near perfect that it was liable not just for simple negligence but for misrepresentation and bad faith amounting to fraud;
genuine notes;4 and that their counsel had explained by letter their unfortunate experience caused by the that the CA erred in giving weight and relying on the news clippings allegedly showing that the "supernotes"
respondent's release of the fake US dollar bills to them, and had demanded moral damages of ₱10 Million had deceived even the U.S. Secret Service and Central Intelligence Agency, for such news were not based
and exemplary damages.5 on facts. 12

The petitioners then sent a written notice to the respondent, attaching the BSP certification and informing Ruling of the Court
the latter that they were giving it five days within which to 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 experience but stressing that the respondent could not absolutely guarantee the The appeal is partly meritorious.
genuineness of each and every foreign currency note that passed through its system; that it had also been a
victim like them; and that it had exercised the diligence required in dealing with foreign currency notes and The General Banking Act of 2000 demands of banks the highest standards of integrity and performance. As
in the selection and supervision of its employees.7 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 diligence is to be determined in accordance with With the respondent having established that the characteristics of the subject dollar notes had made it
the particular circumstances of each case. difficult even for the BSP itself as the country's own currency note expert to identify the counterfeiting with
ease despite adhering to all the properly laid out standard operating procedure and precautions in the
handling of US dollar bills, holding it liable for damages in favor of the petitioners would be highly
The petitioners argue that the respondent was liable for failing to observe the diligence required from it by
unwarranted in the absence of proof of bad faith, malice or fraud on its part. That it formally apologized to
not doing an act from which the material damage had resulted by reason of inexcusable lack of precaution in
them and even offered to reinstate the USD$500.00 in their account as well as to give them the all-expense-
the performance of its duties. 14 Hence, the respondent was guilty of gross negligence, misrepresentation
paid round trip ticket to Hong Kong as means to assuage their inconvenience did not necessarily mean it was
and bad faith amounting to fraud.
liable. In civil cases, an offer of compromise is not an admission of liability, and is inadmissible as evidence
against the offeror. 20
The petitioners' argument is unfounded.
Even without taking into consideration the news clippings to the effect that the US Secret Service and
Gross negligence connotes want of care in the performance of one's duties; it is a negligence characterized Central Intelligence Agency had themselves been deceived by the 1990 series of the US dollar notes
by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not infamously known as the "supernotes," the record had enough to show in that regard, not the least of which
inadvertently but wilfully and intentionally, with a conscious indifference to consequences insofar as other was the testimony of Ms. Malabrigo as BSP's Senior Currency Analyst about the highly deceptive nature of
persons may be affected. It evinces a thoughtless disregard of consequences without exe1iing any effort to the subject US dollar notes and the possibility for them to pass undetected.
avoid them. 15
Also, the petitioners' allegation of misrepresentation on the part of the respondent was factually
In order for gross negligence to exist as to warrant holding the respondent liable therefor, the petitioners unsupported.1âwphi1 They had been satisfied with the services of the respondent for about three years prior
must establish that the latter did not exert any effort at all to avoid unpleasant consequences, or that it to the incident in question.21 The incident was but an isolated one. Under the law, moral damages for culpa
wilfully and intentionally disregarded the proper protocols or procedure in the handling of US dollar notes contractual  or breach of contract are recoverable only if the defendant acted fraudulently or in bad faith, or
and in selecting and supervising its employees. is found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual
obligations.22 The breach must be wanton, reckless, malicious or in bad faith, oppressive or abusive.23 In
order to maintain their action for damages, the petitioners must establish that their injury resulted from a
The CA and the RTC both found that the respondent had exercised the diligence required by law in observing breach of duty that the respondent had owed to them, that is, there must be the concurrence of injury
the standard operating procedure, in taking the necessary precautions for handling the US dollar bills in caused to them as the plaintiffs and legal responsibility on the part of the respondent. Underlying the award
question, and in selecting and supervising its employees. 16 Such factual findings by the trial court are of damages is the premise that an individual was injured in contemplation of law. In this regard, there must
entitled to great weight and respect especially after being affirmed by the appellate court, and could be first be a breach of some duty and the imposition of liability for that breach before damages may be
overturned only upon a showing of a very good reason to warrant deviating from them. awarded; and the breach of such duty should be the proximate cause of the injury. 24 That was not so in this
case.
In this connection, it is significant that the BSP certified that the falsity of the US dollar notes in question,
which were "near perfect genuine notes," could be detected only with extreme difficulty even with the It is true that the petitioners suffered embarrassment and humiliation in Bangkok. Yet, we should distinguish
exercise of due diligence. Ms. Nanette Malabrigo, BSP's Senior Currency Analyst, testified that the subject between damage and injury. In The Orchard Golf & Country Club, Inc. v. Yu,  25 the Court has fittingly
dollar notes were "highly deceptive" inasmuch as the paper used for them were similar to that used in the pointed out the distinction, viz.:
printing of the genuine notes. She observed that the security fibers and the printing were perfect except for
some microscopic defects, and that all lines were clear, sharp and well defined. 17
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
Nonetheless, the petitioners contend that the respondent should be liable for moral and exemplary can be damage without injury in those instances in which the loss or harm was not the result of a violation of
damages18 on account of their suffering the unfortunate experience abroad brought about by their use of the a legal duty. These situations are often called dmimum absque injuria.  26
fake US dollar bills withdrawn from the latter.

In every situation of damnum absque injuria,  therefore, the injured person alone bears the consequences
The contention cannot be upheld. because the law affords no remedy for damages resulting from an act that does not amount to a legal injury
or wrong. For instance, in BP I Express Card Corporation v. Court of Appeals  ,27 the Court turned down the
The relationship existing between the petitioners and the respondent that resulted from a contract of loan claim for damages of a cardholder whose credit card had been cancelled after several defaults in
was that of a creditor-debtor. 19 Even if the law imposed a high standard on the latter as a bank by vi1iue of payment,  holding therein that there could be damage without injury  where the loss or harm was not the
the fiduciary nature of its banking business, bad faith or gross negligence amounting to bad faith was result of a violation of a legal duty towards the plaintiff. In such situation, the injured person alone should
absent. Hence, there simply was no legal basis for holding the respondent liable for moral and exemplary bear the consequences because the law afforded no remedy for damages resulting from an act that did not
damages. In breach of contract, moral damages may be awarded only where the defendant acted
fraudulently or in bad faith. That was not true herein because the respondent was not shown to have acted amount to a legal injury or wrong.28 Indeed, the lack of malice in the conduct complained of precluded the
fraudulently or in bad faith. This is pursuant to Article 2220 of the Civil Code,  to wit: recovery of damages.29

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should Here, although the petitioners suffered humiliation resulting from their unwitting use of the counterfeit US
find that, under the circumstances, such damages are justly due. The same rule applies to breaches of dollar bills, the respondent, by virtue of its having observed the proper protocols and procedure in handling
contract where defendant acted fraudulently or in bad faith. the US dollar bills involved, did not violate any legal 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, the latter was not liable for damages. Given the situation being one of damnum absque
injuria,  they could not be compensated for the damage sustained. WHEREFORE, the Court AFFIRMS the
decision promulgated on December 7, 2006; and ORDERS the petitioners to pay the costs of suit. SO
ORDERED.
 THIRD DIVISION On July 8, 2004, Banco Filipino filed a Petition for Revival of Judgment with 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 raffled to Branch 62.14
G.R. No. 200678, June 04, 2018

During the pendency of its Petition, Banco Filipino entered into discussions and negotiations with Bangko
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. BANGKO SENTRAL NG PILIPINAS
Sentral, which resulted to seven (7) revisions in the business plan. Thus, Banco Filipino filed a Proposal for
AND THE MONETARY BOARD, Respondents.
Settlement dated September 21, 2007 before Branch 62, Regional Trial Court, Makati City to settle the
issues between the parties.15
DECISION
On April 8, 2009, Banco Filipino submitted its 8th Revised Business Plan to Bangko Sentral for evaluation.16 In
LEONEN, J.: this business plan, Banco Filipino requested, among others, a P25,000,000,000.00 income enhancement
loan. Unable to come to an agreement, the parties constituted an Ad Hoc Committee composed of
representatives from both parties to study and act on the proposals. The Ad Hoc Committee produced an
A bank which has been ordered closed by the Bangko Sentral ng Pilipinas (Bangko Sentral) is placed under Alternative Business Plan, which was accepted by Banco Filipino, but was subject to the Monetary Board's
the receivership of the Philippine Deposit Insurance Corporation. As a consequence of the receivership, the approval.17
closed bank may sue and be sued only through its receiver, the Philippine Deposit Insurance Corporation.
Any action filed by the closed bank without its receiver may be dismissed.
In a letter18 dated December 4, 2009, Bangko Sentral informed Banco Filipino that the Monetary Board
issued Resolution No. 1668 granting its request for the P25,000,000,000.00 Financial Assistance and
This is a Petition for Review on Certiorari1 assailing the Court of Appeals July 28, 2011 Decision2 and Regulatory Reliefs to form part of its Revised Business Plan and Alternative Business Plan. The approval was
February 16, 2012 Resolution3 in CA-G.R. SP No. 116905, which dismissed Civil Case No. 10-1042 and held also subject to certain terms and conditions, among which was the withdrawal or dismissal with prejudice to
that the trial court had no jurisdiction over Bangko Sentral and the Monetary Board. all pending cases filed by Banco Filipino against Bangko Sentral and its officials.19 The terms also included
the execution of necessary quitclaims and commitments to be given by Banco Filipino's principal
On December 11, 1991, this Court promulgated Banco Filipino Savings & Mortgage Bank v. Monetary Board stockholders, Board of Directors, and duly authorized officers "not to revive or refile such similar cases in the
and Central Bank of the Philippines,4 which declared void the Monetary Board's order for closure and future."20
receivership of Banco Filipino Savings & Mortgage Bank (Banco Filipino). This Court also directed the Central
Bank of the Philippines and the Monetary Board to reorganize Banco Filipino and to allow it to resume In a letter21 dated January 20, 2010, Banco Filipino requested reconsideration of the terms and conditions of
business under the comptrollership of both the Central Bank and the Monetary Board. 5 the P25,000,000,000.00 Financial Assistance and Regulatory Reliefs package, noting that the salient features
of the Alternative Business Plan were materially modified.22 However, in a letter23 dated April 8, 2010, Banco
Banco Filipino subsequently filed several Complaints before the Regional Trial Court, among them a claim for Filipino informed Bangko Sentral that it was constrained to accept the "unilaterally whittled down version of
damages in the total amount of P18,800,000,000.00.6 the [P25,000,000,000.00] Financial Assistance Package and Regulatory Reliefs." 24 It, however, asserted that
it did not agree with the condition to dismiss and withdraw its cases since this would require a separate
discussion.25
On June 14, 1993, Congress passed Republic Act No. 7653,7 providing for the establishment and
organization of Bangko Sentral as the new monetary authority.
In a letter26 dated April 19, 2010, Bangko Sentral informed Banco Filipino that it was surprised by the latter's
hesitation in accepting the terms and conditions, in particular, the withdrawal of the cases against it, since
On November 6, 1993, pursuant to this Court's 1991 Banco Filipino Decision, the Monetary Board issued this condition had already been discussed from the start of the negotiations between the parties. 27
Resolution No. 427, which allowed Banco Filipino to resume its business.8

In a letter28 dated June 21, 2010, Banco Filipino informed Bangko Sentral that it never accepted the
In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek the help of Bangko Sentral. In condition of the withdrawal of the cases in prior negotiations but was willing to discuss this condition as a
a letter dated October 9, 2003, Banco Filipino asked for financial assistance of more than P3,000,000,000.00 separate and distinct matter.
through emergency loans and credit easement terms. 9 In a letter10 dated November 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 In a letter29 dated August 10, 2010, Bangko Sentral and the Monetary Board, through counsel CVC Law,
rehabilitation plan approved by Bangko Sentral before emergency loans could be granted. informed Banco Filipino that its rejection of certain 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 acceptable
settlement.
In a letter11 dated April 14, 2004, Banco Filipino submitted its Long-Term Business Plan to Bangko Sentral. It
also claimed that Bangko Sentral already extended similar arrangements to other banks and that it was still
awaiting the payment of P18,800,000,000.00 in damage claims, "the entitlement to which the Supreme In a letter30 dated August 13, 2010, Banco Filipino questioned the legality of referring the matter to private
Court has already decided with finality."12 counsel and stated that it had not been notified of the action taken on the acceptance of its Business Plan.

In response, Bangko Sentral informed Banco Filipino that its business plan could not be acted upon since it In a letter31 dated September 13, 2010, CVC Law told Banco Filipino that the matter was referred to it as an
was neither "confirmed nor approved by [Banco Filipino's Board of Directors]." 13 incident of Civil Case No. 04-823, which it was handling on behalf of Bangko Sentral. It also informed Banco
Filipino that the latter's rejection of the terms and conditions of Resolution No. 1668 made this Resolution On November 5, 2010, Bangko Sentral and the Monetary Board filed a Petition For Certiorari with prayer for
legally unenforceable. temporary restraining order and/or writ of preliminary injunction43 with the Court of Appeals, assailing the
Regional Trial Court's October 28, 2010 Order for having been issued without jurisdiction. The Petition was
docketed as CA-G.R. SP No. 116627.44
Banco Filipino sent letters32 dated September 22, 2010 and September 28, 2010, questioning the legality of
Bangko Sentral's referral to private counsel and reiterating that the terms and conditions embodied in
Resolution No. 1668 were not meant to be a settlement of its P18,800,000,000.00 damage claim against On November 17, 2010, the trial court issued an Order45 denying the Bangko Sentral and the Monetary
Bangko Sentral. Board's Motion to Dismiss Ad Cautelam, stating that the acts complained of pertained to Bangko Sentral 's
regulatory functions, not its adjudicatory functions.46 It likewise stated that as requested in the handwritten
letter47 dated October 21, 2010 by Bangko Sentral's general counsel requesting for an advanced copy of
In a letter33 dated October 4, 2010, Bangko Sentral reiterated that its referral of the matter to CVC Law was
Banco Filipino's Petition, it furnished Bangko Sentral a copy of the Petition. It also held that Bangko Sentral's
due to the matter being incidental to the civil case pending before the Regional Trial Court.
subsequent participation in the preliminary hearing and its receipt of the summons on October 28, 2010
satisfied the requirements of procedural due process. 48
On October 20, 2010, Banco Filipino filed a Petition For Certiorari and Mandamus with prayer for issuance of
a temporary restraining order and writ of preliminary injunction34 before Branch 66, Regional Trial Court,
The trial court likewise found that litis pendencia and forum shopping were not present in the case, that
Makati City, docketed as Civil Case No. 10-1042. It assailed the alleged "arbitrary, capricious and illegal
Bangko Sentral's verification and certification of non-forum shopping were validly signed by the Executive
acts"35 of Bangko Sentral and of the Monetary Board in coercing Banco Filipino to withdraw all its present
Committee, and that Banco Filipino's Petition did not fail to state a cause of action. 49
suits in exchange of the approval of its Business Plan. In particular, Banco Filipino alleged that Bangko
Sentral and the Monetary Board committed grave abuse of discretion in imposing an additional condition in
Resolution No. 1668 requiring it to withdraw its cases and waive all future cases since it was unconstitutional On November 25, 2010, Bangko Sentral and the Monetary Board filed another Petition for Certiorari 50 with
and contrary to public policy. It prayed that a writ of mandamus be issued to compel Bangko Sentral and the prayer for temporary restraining order and writ of preliminary injunction with the Court of Appeals, this time
Monetary Board to approve and implement its business plan and release its Financial Assistance and assailing the November 17, 2010 Order. The case was docketed as CA-G.R. SP No. 116905. However, the
Regulatory Reliefs package.36 trial court issued a writ of preliminary injunction on November 18, 2010 51 so they filed their Urgent Motion to
Admit Attached Amended Petition52 with the Court of Appeals to include the Issuance.
The trial court issued a Notice of Hearing on the prayer for a temporary restraining order on the same day,
setting the hearing on October 27, 2010.37 In the meantime, or on November 23, 2010, Bangko Sentral and the Monetary Board filed a Motion to Admit
Attached Supplemental Petition for Certiorari with Application for Interim Relief 53 in CA-G.R. SP No. 116627
seeking to include the trial court's October 28, 2010 Order.
On October 27, 2010, Bangko Sentral and the Monetary Board filed their Motion to Dismiss Ad
Cautelam,38 assailing the Regional Trial Court's jurisdiction over the subject matter and over the persons of
Bangko Sentral and the Monetary Board. Banco Filipino, on the other hand, filed its Opposition 39 to this In its December 28, 2010 Resolution,54 the Court of Appeals granted55 Bangko Sentral and the Monetary
Petition. Board's Urgent Motion to Admit Attached Amended Petition in CA-G.R. SP No. 116905.

In its October 28, 2010 Order,40 the Regional Trial Court granted the request for the issuance of a temporary Meanwhile, Banco Filipino filed its Opposition dated January 18, 2011 in CA-G.R. SP No. 116905. 56
restraining order against Bangko Sentral and the Monetary Board. The dispositive portion of this Order read:
After oral arguments were held on February 7, 2011, 57 the Court of Appeals issued its February 14, 2011
WHEREFORE, premises considered and pursuant to Rule 58 of the Revised Rules of Court, Petitioner's prayer Resolution58 in CA-G.R. SP No. 116905. It granted the application for a writ of preliminary injunction and
for a Temporary Restraining Order is hereby GRANTED. Respondent[s] Ban[gk]o Sentral ng Pilipinas and enjoined the trial court from conducting further proceedings in Civil Case No. 10-1042 pending a decision on
[t]he Monetary Board, as well as [their] representatives, agents, assigns and/or third person or entity acting the merits.
for and [their] behalf are hereby enjoined from (a) employing acts inimical to the enforcement and
implementation of the approv[ed] Business Plan, (b) continuing and committing acts prejudicial to
On February 16, 2011, Banco Filipino filed an Urgent Motion for Consolidation 59 in CA-G.R. SP No. 116905,
Petitioner's operations, (c) withdrawing or threatening to withdraw the approval of the Business Plan
requesting for the consolidation of the two (2) Petitions for Certiorari filed by Bangko Sentral and the
containing financial assistance, and package of regulatory reliefs, and (d) otherwise enforcing other
Monetary Board before the Court of Appeals. On March 1, 2011, it also filed a Motion for Reconsideration 60 of
regulatory measures and abuses calculated to coerce Banco Filipino Savings and Mortgage Bank into
the Court of Appeals February 14, 2011 Resolution.
agreeing to drop and/or withdraw its suits and damage claims against BSP and MB, and to waive future
claims against Respondents or their official[s] and employees.
In its June 2, 2011 Resolution,61 the Court of Appeals in CA-G.R. SP No. 116905 denied Banco Filipino's
Motion for Reconsideration, holding that special civil actions against quasi-judicial agencies should be filed
Further, the Court directs Sheriff Leodel N. Roxas to personally serve a copy of this Order to the herein
before the Court of Appeals, not before a trial court.62 The Court of Appeals also denied the Urgent Motion for
Respondent Ban[gk]o Sentral ng Pilipinas and [t]he Monetary Board. Finally, let this case be set on
Consolidation for the following reasons:
November 11, 2010 and November 12, 2010 both at 2:00 in the afternoon for hearing on the prayer for
issuance of a Writ of Preliminary Mandatory Injunction.
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 disposition of both cases; 2) the subject matters and issues
SO ORDERED.41
raised in the instant petition are different from those set forth in CA-G.R. SP No. 116627, hence, they can be
the subject of separate: petitions; and 3) Since a writ of preliminary injunction was earlier issued, Section 2
On the same day or on October 28, 2010, summons was served on Bangko Sentral through a staff member (d), Rule VI of the 2009 IRCA requires that the instant petition remain with the undersigned ponente for
of the Office of the Governor, as certified by the Process Server's Return dated November 4, 2010. 42 decision on the merits with dispatch.63
On July 28, 2011, the Court of Appeals rendered its Decision 64 in CA-G.R. SP No. 116905 granting Bangko respondents' Petition for Certiorari for "maliciously omitt[ing]" the handwritten letter dated October 21, 2010
Sentral and the Monetary Board's Amended Petition. According to the Court of Appeals, the trial court had no of their general counsel.82 It likewise points out that respondents failed to file a motion for reconsideration
jurisdiction over the Petition for Certiorari and Mandamus filed by Banco Filipino since special civil actions before the trial court before filing their petition for certiorari with the Court of Appeals. 83
against quasi-judicial agencies are only cognizable by the Court of Appeals. 65 It also found that the trial court
gravely abused its discretion in acquiring jurisdiction over Bangko Sentral and the Monetary Board by reason
Respondents, on the other hand, counter that the Petition should be dismissed outright for being filed
of their voluntary appearance in the preliminary hearing since their counsel had made it clear that the
without Philippine Deposit Insurance Corporation's authority. It asserts that petitioner was placed under
appearance was specifically to question the absence of a service of summons. 66
receivership on March 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 receiver, Philippine Deposit Insurance
The Court of Appeals likewise found that the delegation of authority from Banco Filipino's Board of Directors Corporation.84 They also point out that both the Philippine Deposit Insurance Corporation Charter and
to the Executive Committee to sign pleadings on its behalf validated the verification and certification of non- Republic Act No. 7653 categorically state that the authority to file suits or retain counsels for closed banks is
forum shopping signed only by the Executive Vice Presidents.67 It also ruled that there was no  litis vested in the receiver.85 Thus, the verification and certification of non-forum shopping signed by petitioner's
pendencia or forum shopping in the case docketed as Civil Case No. 10-1042 despite the pendency of Civil Executive Committee has no legal effect.86
Case No. 04-823 since the causes of action and the reliefs prayed for were not the same. 68 The dispositive
portion of the Court of Appeals July 28, 2011 Decision read:
Respondents likewise claim that the Court of Appeals did not err in finding that the trial court had no
jurisdiction over respondents. It cited this Court's ruling in United Coconut Planters Bank v. E. Ganzon,
WHEREFORE, the petition is GRANTED. The Order dated November 17, 2010 issued by respondent Judge Inc.87 and National Water Resources Board v. A. L. Ang Network,88 where this Court categorically stated that
Joselito C. Villarosa of the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No. 10-1042, is special civil cases filed against quasi-judicial agencies must be filed before the Court of Appeals. 89 They
ANNULLED and SET ASIDE. In lieu thereof, judgment is hereby rendered. DISMISSING Civil Case No. 10- argue that there was no showing that Merchants Rural Bank of Talavera was ever upheld by this
1042 on the ground of the RTC's lack of jurisdiction over the same. Court.90 They contend that petitioner should be estopped from raising the issue of jurisdiction considering
that during the pendency of this case, or on March 21, 2011 and November 20, 2011, it filed two (2)
separate petitions for certiorari against respondent Monetary Board directly before the Court of Appeals. 91
Accordingly, the writ of preliminary injunction issued by this Court on February 14, 2011, enjoining
respondent Judge, private respondent and their representatives from conducting further proceedings in Civil
Case No. 10-1042, is hereby made PERMANENT. Respondents maintain that the trial court did not acquire jurisdiction over them since there was no valid
service of summons. They argue that when 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, 2010. 92 They likewise
SO ORDERED.69
contend that their voluntary appearance in the summary hearing before the trial court was not a submission
to the trial court's jurisdiction since they consistently manifested that their appearance would be special and
Banco Filipino filed a Motion for Reconsideration, 70 which was denied by the Court of Appeals in its February limited to raise the issues of jurisdiction.93 They also assert that the service of summons to a staff member
16, 2012 Resolution.71 Hence, it filed this Petition72 on April 10, 2012 against Bangko Sentral and the of the Office of the Governor General is not equivalent to the service of summons to the Governor General,
Monetary Board before this Court. making the service of summons ineffective.94

Petitioner claims that it had the authority to file this Petition since the Court of Appeals promulgated its Respondents likewise claim that their filing of their Petition before the Court of Appeals without a prior
January 27, 2012 Decision in CA-G.R. SP No. 118599, finding petitioner's closure and receivership to have motion for reconsideration was justified by certain exceptional circumstances. They mention, among others,
been illegal.73 It argues that to dismiss its Petition now pending before this Court for lack of authority from the trial court's lack of jurisdiction, the fact that the issues have already been raised and passed upon by the
its receiver Philippine Deposit Insurance Corporation would be "an absurd and unjust situation." 74 Petitioner trial court, the prejudice to government interest in delaying the case, and their denied due process because
admits, however, that this decision was eventually overturned on reconsideration 75 in the Court of Appeals of the improper service of summons.95 They further argue that the only significance of the October 21, 2010
November 21, 2012 Amended Decision.76 handwritten letter was to show that respondents were informed that a Petition was filed, and not that the
trial court had. already acquired jurisdiction over their persons.96
Petitioner points out that there was nothing in the Philippine Deposit Insurance Corporation Charter or in
Republic Act No. 7653 that precludes its Board of Directors from suing on its behalf. It adds that there was From the arguments of the parties, this Court is asked to resolve the following issues:
an obvious conflict of interest in requiring it to seek Philippine Deposit Insurance Corporation's authority to
file the case considering that Philippine Deposit Insurance Corporation was under the control of herein
First, whether or not trial courts have jurisdiction to take cognizance of a petition for certiorari against acts
respondent Monetary Board.77
and omissions of the Monetary Board;

Petitioner asserts that the trial court had jurisdiction over special civil actions against respondents,
Second, whether or not respondents Bangko Sentral ng Pilipinas and the Monetary Board should have filed a
accordingly with Merchants Rural Bank of Talavera v. Monetary Board, et al.,78 a decision promulgated by the
motion for reconsideration of the trial court's denial of their motion to dismiss before filing their petition for
Court of Appeals in 2006.79
certiorari before the Court of Appeals; and

Petitioner likewise argues that the trial court acquired jurisdiction over respondents considering that they
Finally, whether or not the trial court validly acquired jurisdiction over respondents Bangko Sentral ng
were able to participate in the summary hearing. It points out that respondents questioned before the trial
Pilipinas and the Monetary Board.
court the service of the petition on October 21, 2010 but never actually questioned the service of summons
on October 28, 2010 until it filed its petition with the Court of Appeals.80 It argues that respondents' private
counsel was present during the raffle of the case on October 21, 2010 and even assisted respondents' However, before any of these issues can be addressed, this Court must first resolve the issue of whether or
general counsel in receiving copies of the petition that the latter requested, showing that respondents' due not petitioner Banco Filipino, as a closed bank under receivership, could file this Petition for Review without
process was never violated.81 It asserts that the Court of Appeals should have dismissed outright joining its statutory receiver, the Philippine Deposit Insurance Corporation, as a party to the case.
 I 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. The receiver
A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
shall:
Insurance Corporation.

(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any other
Under Republic Act No. 7653,97 when the Monetary Board finds a bank insolvent, it may "summarily and
action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by
without need for prior hearing forbid the institution from doing business in the Philippines and designate the
the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-
Philippine Deposit Insurance Corporation as receiver of the banking institution." 98
banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court
shall, upon motion by the receiver after due notice, adjudicate disputed claims against the institution, assist
Before the enactment of Republic Act No. 7653, an insolvent bank under liquidation could not sue or be sued the enforcement of individual liabilities of the stockholders, directors and officers, and decide, on other
except through its liquidator. In Hernandez v. Rural Bank of Lucena:99 issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the
proceedings from the assets of the institution.
[A]n insolvent bank, which was under the control of the finance commissioner for liquidation, was without
power or capacity to sue or be sued, prosecute or defend, or otherwise function except through the finance (2) convert the assets of the institution to money, dispose of the same to creditors and other parties, for the
commissioner or liquidator.100 purpose of paying the debts of such institution in accordance with the rules on concurrence and preference
of credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the
assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover
This Court in Manalo v. Court of Appeals101 reiterated this principle: accounts and assets of, or 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 the receiver and shall, from the
A bank which had been ordered closed by the monetary board retains its juridical personality which can sue moment the institution was placed under such receivership or liquidation, be exempt from any order of
and be sued through its liquidator. The only limitation being that the prosecution or defense of the action garnishment, levy, attachment, or execution. (Emphasis supplied)
must be done through the liquidator. Otherwise, no suit for or against an insolvent entity would prosper. 102
The relationship between the Philippine Deposit Insurance Corporation and a closed bank is fiduciary in
Under the old Central Bank Act, or Republic Act No. 265,103 as amended,104 the same principle applies to the nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank to "immediately gather
receiver appointed by the Central Bank. The law explicitly stated that a receiver shall "represent the and take charge of all the assets and liabilities of the institution" and "administer the same for the benefit of
[insolvent] bank personally or through counsel as he [or she] may retain in all actions or proceedings for or its creditors."105
against the institution." Section 29 of the old law states:
The law likewise grants the receiver "the general powers of a receiver under the Revised Rules of
Section 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the appropriate Court."106 Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power to bring and
supervising or examining department or his examiners or agents into the condition of any bank or non-bank defend, in such capacity, actions in his [or her] own name."107 Thus, Republic Act No. 7653 provides that the
financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the receiver shall also "in the name of the institution, and with the assistance of counsel as [it] may retain,
same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or institute such actions as may be necessary to collect and recover accounts and assets of, or defend any
creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary action against, the institution." 108 Considering that the receiver has the power to take charge of all the assets
Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid of the closed bank and to institute for or defend any action against it, only the receiver, in its fiduciary
the institution to do business in the Philippines and designate an official of the Central Bank or a person of capacity, may sue and be sued on behalf of the closed bank.
recognized competence in banking or finance, as receiver to immediately take charge of its assets and
liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the In Balayan Bay Rural Bank v. National Livelihood Development Corporation,109 this Court explained that a
benefit of its creditors, and represent the bank personally or through counsel as he [or she] may retain in all receiver of a closed bank is tasked with the duty to hold the assets and liabilities in trust for the benefit of
actions or proceedings for or against the institution, exercising all the powers necessary for these purposes the bank's creditors.
including, but not limited to, bringing and foreclosing mortgages in the name of the bank or non-bank
financial intermediary performing quasi-banking functions.
As fiduciary of the insolvent bank, Philippine Deposit Insurance Corporation conserves and manages the
assets of the bank to prevent the assets' dissipation. This includes the power to bring and defend any action
In Republic Act No. 7653, this provision is substantially altered. Section 30 now states, in part: that threatens to dissipate the closed bank's assets. Balayan Bay Rural Bank  explained that Philippine
Deposit Insurance Corporation does so, not as the real party-in-interest, but as a representative party, thus:
The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend the case by or against
Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any the said bank as a representative party while the bank will remain as the real party in interest pursuant to
act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver Section 3, Rule 3 of the Revised Rules of Court which provides:
may deposit or place the funds of the 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 that it may be permitted to resume business SEC. 3. Representatives as parties. — Where the action is allowed to be prosecuted or defended by a
with safety to its depositors and creditors and the general public: Provided, That any determination for the representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the
resumption of business of the institution shall be subject to prior approval of the Monetary Board. case and shall be 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 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 It was speculative on petitioner's part to presume that it could file this Petition without joining its receiver on
principal except when the contract involves things belonging to the principal. the ground that Philippine Deposit Insurance Corporation might not allow the suit. At the very least,
petitioner should have shown that it attempted to seek Philippine Deposit Insurance Corporation's
authorization to file suit. It was possible that Philippine Deposit Insurance Corporation could have granted its
The inclusion of the PDIC as a representative party in the case is therefore grounded on its statutory role as
permission to be joined in the suit. If it had refused to allow petitioner to file its suit, petitioner still had a
the fiduciary of the closed bank which, under Section 30 of R.A. 7653 (New Central Bank Act), is authorized
remedy available to it. Under Rule 3, Section 10 of the Rules of Court,120 petitioner could have made
to conserve the latter's property for the benefit of its creditors.110 (Citation omitted)
Philippine Deposit Insurance Corporation an unwilling co-petitioner and be joined as a respondent to this
case.
For this reason, Republic Act No. 3591,111 or the Philippine Deposit Insurance Corporation Charter, as
amended,112 grants Philippine Deposit Insurance Corporation the following powers as a receiver:
Petitioner's suit concerned its Business Plan, a matter that could have affected the status of its insolvency.
Philippine Deposit Insurance Corporation's participation would have been necessary, as it had the duty to
(c) In addition to the powers of a receiver pursuant to existing laws, the Corporation is empowered to: conserve petitioner's assets and to examine any possible liability that petitioner might undertake under the
Business Plan.
(1) bring suits to enforce liabilities to or recoveries of the closed bank;
Philippine Deposit Insurance Corporation also safeguards the interests of the depositors in all legal
proceedings. Most bank depositors are ordinary people who have entrusted their money to banks in the
.... hopes of growing their savings. When banks become insolvent, depositors are secure in the knowledge that
they can still recoup some part of their savings through Philippine Deposit Insurance Corporation. 121 Thus,
(6) hire or retain private counsels as may be necessary; Philippine Deposit Insurance Corporation's participation in all suits involving the insolvent bank is necessary
and imbued with the public interest.

....
In any case, petitioner's verification and certification of non-forum shopping was signed by its Executive Vice
Presidents Maxy S. Abad and Atty. Francisco A. Rivera, as authorized by its Board of Directors.122 Under
(9) exercise such other powers as are inherent and necessary for the effective discharge of the duties of the Section 10(b) of the Philippine Deposit Insurance Corporation Charter, as amended:
Corporation as a receiver.113

b. The Corporation as receiver shall control, manage and administer the affairs of the closed bank. Effective
Balayan Bay Rural Bank  summarized, thus: immediately upon takeover as receiver of such bank,  the powers, functions and duties, as well as all
allowances, remunerations and prerequisites of the directors, officers, and stockholders of such bank are
[T]he legal personality of the petitioner bank is not  ipso facto dissolved by insolvency; it is not divested of suspended, and the relevant provisions of the Articles of Incorporation and By-laws of the closed bank are
its capacity to sue and be sued after it was ordered by the Monetary Board to cease operation. The law likewise deemed suspended.123 (Emphasis supplied)
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 When petitioner was placed under receivership, the powers of its Board of Directors and its officers were
the fiduciary relation created by statute which reposed upon the receiver the task of preserving and suspended. Thus, its Board of Directors could not have validly authorized its Executive Vice Presidents to file
conserving the properties of the insolvent for the benefit of its creditors. 114 the suit on its behalf. The Petition, not having been properly verified, is considered an unsigned
pleading.124 A defect in the certification of non-forum shopping is likewise fatal to petitioner's cause.125
Petitioner contends that it was not a closed bank at the time of the filing of this Petition on April 10, 2012
since the Court of Appeals January 27, 2012 Decision, docketed as CA-G.R. SP No. 118599, found the Considering that the Petition was filed by signatories who were not validly authorized to do so, the Petition
closure to have been illegal.115 does not produce any legal effect.126 Being an unauthorized pleading, this Court never validly acquired
jurisdiction over the case. The Petition, therefore, must be dismissed.
This Court of Appeals Decision, however, was not yet final since the Monetary Board filed a timely motion for
reconsideration.116 There is also nothing in its dispositive portion which states that it was immediately II
executory.117 Through 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 under receivership. It was, therefore,
erroneous for petitioner to presume that it was not a closed bank on April 10, 2012 when it filed its Petition Even assuming that the Petition did not suffer from procedural infirmities, it must still be denied for lack of
with this Court considering that there was no final declaration yet on the matter. merit.

Petitioner should have attempted to comply after the promulgation of the November 21, 2012 Amended Unless otherwise provided for by law and the Rules of Court, petitions for certiorari against a quasi-judicial
Decision. Its substantial compliance would have cured the initial defect of its Petition. agency are cognizable only by the Court of Appeals. The Regional Trial Court had no jurisdiction over the
Petition for Certiorari filed by petitioner against respondents.

Petitioner likewise claims that there was "an obvious conflict of interest"119 if it was required to sue
respondents only through Philippine Deposit Insurance Corporation, considering that respondent Monetary Pursuant to Article XII, Section 20 of the Constitution,127 Congress constituted Bangko Sentral128 as an
Board appointed Philippine Deposit Insurance Corporation as petitioner's receiver. This is a fact, however, independent central monetary authority. As an administrative agency, it is vested with quasi-judicial powers,
that petitioner failed to address when it filed its Petition, signifying that petitioner had no intention of which it exercises through the Monetary Board. In United Coconut Planters Bank v. E. Ganzon, Inc.:129
complying with the law when it filed its Petition or anytime after.
A quasi-judicial agency or body is an organ of government other than a court and other than a legislature, The Court of Appeals, therefore, did not err in dismissing the case before the Regional Trial Court since the
which affects the rights of private parties through either adjudication or rule-making. The very definition of trial court did not have jurisdiction over the Petition for Certiorari filed by petitioner against respondents.
an administrative agency includes its being vested with quasi-judicial powers. The ever increasing variety of
powers and functions given to administrative agencies recognizes the need for the active intervention of
This Court cannot subscribe to petitioner's contention that a Court of Appeals decision already provided for
administrative agencies in matters calling for technical knowledge and speed in countless controversies
an exception to Rule 65. A Court of Appeals decision, no matter how persuasive or well written, does not
which cannot possibly be handled by regular courts. A "quasi-judicial function" is a term which applies to the
function as stare decisis.133 Neither can a Court of Appeals decision amend the Rules of Court.134 As it stands,
action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts, or
Rule 65 and jurisprudence hold that petitions for certiorari against the Monetary Board must be filed with the
ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official
Court of Appeals.
action and to exercise discretion of a judicial nature.

III
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent central
monetary authority and a body corporate with fiscal and administrative autonomy, mandated to provide While this Petition is considered dismissed, this Court takes the opportunity to address other lingering
policy directions in the areas of money, banking and credit. It has power to issue subpoena, to sue for procedural issues raised by the parties in their pleadings.
contempt those refusing to obey the subpoena without justifiable reason, to administer oaths and compel
presentation of 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 Act No. 7653, in particular, explicitly provides Petitioner assails respondents' failure to file a motion for reconsideration of the trial court's denial of its
that the BSP Monetary Board shall exercise its discretion in determining whether administrative sanctions motion to dismiss before filing a petition for certiorari with the Court of Appeals. 135
should be imposed on banks and quasi-banks, which necessarily implies that the BSP Monetary Board must
conduct some form of investigation or hearing regarding the same. 130 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" available before a petition for certiorari can be filed. An
Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions, resolutions, and orders are the order denying a motion to dismiss is merely an interlocutory order of the court as it does not finally dispose
decisions, resolutions, and orders of a quasi-judicial agency. Any action filed against the Monetary Board is of a case.136 In BA Finance Corporation v. Pineda,137 a case citing the 1964 Rules of Court:
an action against a quasi-judicial agency.
It must be remembered that, normally, when an interlocutory order is sought to be reviewed or annulled by
This does not mean, however, that Bangko Sentral only exercises quasi-judicial functions. As an means of any of the extra legal remedies of prohibition or certiorari, it is required that a motion for
administrative agency, it likewise exercises "powers and/or functions which may be characterized as reconsideration of the question[ed] order must first be filed, such being considered a speedy and adequate
administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as may remedy at law which must first be resorted to as a condition precedent for filing of any of such proceedings
be conferred by the Constitution or by statute."131 (Secs. 1 and 2, Rule 65, Rules of Court).138

In this case, the issue between the parties was whether the trial court had jurisdiction over petitions for In contrast, Rule 41, Section 1(c) of the Revised Rules of Court now provides:
certiorari against Bangko Sentral and the Monetary Board. Rule 65, Section 4 of the Rules of Court provides:
Section 1. Subject of appeal. — An appeal may be taken from a judgment or final order that completely
Section 4. Where and when petition to be filed. — The petition shall be filed not later than sixty (60) days disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the No appeal may be taken from:
denial of said motion.

....
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of
a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial
area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same (c) An interlocutory order;
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 quasi-judicial agency, unless otherwise provided by law or these Rules, ....
the petition shall be filed in and cognizable only by the Court of Appeals. (Emphasis supplied)

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file
The Rules of Court categorically provide that petitions for certiorari involving acts or omissions of a quasi- an appropriate special civil action under Rule 65.
judicial agency "shall be filed in and cognizable only by the Court of Appeals."

It would appear that the Revised Rules of Court allow a direct filing of a petition for certiorari of an
As previously discussed, respondent Bangko Sentral exercises a myriad of functions, including those that interlocutory order without need of a motion for reconsideration. However, in Estate of Salvador Serra Serra
may not be necessarily exercised by a quasi-judicial agency. It is settled, however, that it exercises its v. Primitivo Hernaez,139 a case decided after the Rules of Court were revised in 1997:
quasi judicial functions through respondent Monetary Board. Any petition for certiorari against an act or
omission of Bangko Sentral, when it acts through the Monetary Board, must be filed with the Court of
Appeals. Thus, this Court in Vivas v. Monetary Board and Philippine Deposit Insurance Corporation 132 held The settled rule is that a motion for reconsideration is a sine qua non condition for the filing of a petition for
that the proper remedy to question a resolution of the Monetary Board is through a petition for certiorari certiorari. The purpose is to grant an opportunity to public respondent to correct any actual or perceived
filed with the Court of Appeals. error attributed to it by the re-examination of the legal and factual circumstances of the case. 140
This rule evolved from several labor cases of this Court. Estate of Salvador Serra Serra cited  Interorient action pending between the parties before the trial court since special civil actions against quasi-judicial
Maritime Enterprises v. National Labor Relations Commission 141 as basis for this rule, which in turn, agencies must be filed with the Court of Appeals.
cited Palomado v. National Labor Relations Commission142 and Pure Foods Corporation v. National Labor
Relations Commission.143 This Court, in formulating the rule in Palomado, declared:
WHEREFORE, the Petition is DISMISSED on the ground of petitioner's lack of capacity to sue.

The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain,
SO ORDERED.
speedy and adequate remedy in the ordinary course of law against the acts of public respondent. In the
instant case, the plain and adequate remedy expressly provided by [Sec. 9, Rule X, New Rules of the
National Labor Relations Commission] was a motion for reconsideration 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 decision.144

Pure Foods Corporation, on the other hand, stated:

In the present case, the plain and adequate remedy expressly provided by law was a motion for
reconsideration of the assailed decision and the resolution thereof, which was not only expected to be but
would actually have provided adequate and more speedy remedy than the present petition for certiorari. This
remedy was actually sought to be availed of by petitioner when it filed a 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 no plain, speedy and adequate remedy available to it and that it must, therefore, be allowed
to seek relief by certiorari. This contention is not only untenable but would even place a premium on a
party's negligence or indifference in availing of procedural remedies afforded by law. 145

In labor cases, it was necessary to first file a motion for reconsideration before resorting to a petition for
certiorari since the National Labor Relations Commission's rules of procedure provided for this remedy. The
same rule has since applied to civil cases through Estate of Salvador Serra Serra, regardless of the absence
of a provision in the Rules of Court requiring a motion for reconsideration even for interlocutory orders.

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
Certiorari.148 They were, thus, excused from filing the requisite motion for reconsideration.

Considering that there is sufficient basis to dismiss this Petition outright, this Court finds it unnecessary to
address the other issues raised.

In sum, this Court holds that petitioner did not have the legal capacity to file this Petition absent any
authorization from its statutory receiver, Philippine Deposit Insurance Corporation. Even assuming that the
Petition could be given due course, it would still be denied. The Court of Appeals did not err in dismissing the
 FIRST DIVISION In addition, the RTC also cited Section 2215 of Republic Act (RA) No. 3591, as amended, which essentially
states that only the CA shall issue temporary restraining orders, preliminary injunctions or preliminary
mandatory injunctions against the PDIC for any action under the said Act.
G.R. No. 230020, March 19, 2018

The RTC disposed, thus:

PETER L. SO, Petitioner, v. PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondent.

WHEREFORE, in view of the foregoing, for lack of jurisdiction, the petition for certiorari filed by the petitioner
DECISION
is hereby DISMISSED.

TIJAM, J.:
SO ORDERED.16

This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the Decision2 dated
In its February 17, 2017 Order, the RTC denied petitioner's motion for reconsideration.
November 7, 2016 and Order3 dated February 17, 2017 of the Regional Trial Court (RTC) of Makati, Branch
138, in Special Civil Case No. 16-031, which dismissed Peter L. So's (petitioner's) Petition for Certiorari4 on
the ground of lack of jurisdiction. Hence, this petition, filed directly to this Court on pure question of law.

Factual Antecedents Issue

Petitioner opened an account with the Cooperative Rural Bank Bulacan (CRBB) on April 17, 2013, amounting Does the RTC have jurisdiction over a petition for certiorari filed under Rule 65, assailing the PDIC's denial of
to P300,000, for which he was assigned the Special Incentive Savings Account (SISA) No. 05-15712-1. 5 a deposit insurance claim?

On the same year, however, petitioner learned that CRBB closed its operations and was placed under Our Ruling
Philippine Deposit Insurance Corporation's (PDIC's) receivership. This prompted petitioner, together with
other depositors, to file an insurance claim with the PDIC on November 8, 2013. 6
The petition lacks merit.

Acting upon such claim, PDIC sent a letter/notice dated November 22, 2013, requiring petitioner to submit
There is no controversy as to the proper remedy to question the PDIC's denial of petitioner's deposit
additional documents, which petitioner averred of having complied with. 7
insurance claim. Section 4(f) of its Charter, as amended, clearly provides that:

Upon investigation, the PDIC found that petitioner's account originated from and was funded by the proceeds
xxx
of a terminated SISA (mother account), jointly owned by a certain Reyes family. 8 Thus, based on the
determination 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 payment of deposit insurance. 9 Petitioner filed The actions of the Corporation taken under this section shall be final and executory, and may not
a Request for Reconsideration, which was likewise denied by the PDIC on January 6, 2016. 10 be restrained or set aside by the court, except on appropriate petition for certiorari on the
ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion
as to amount to a lack or excess of jurisdiction. The petition for certiorari  may only be filed within
Aggrieved, petitioner filed a Petition for Certiorari11 under Rule 65 before the RTC.
thirty (30) days from notice of denial of claim for deposit insurance. (emphasis supplied)

RTC Ruling
The issue, however, is which court has jurisdiction over such petition.

In its November 7, 2016 assailed Decision, the RTC upheld the factual findings and conclusions of the PDIC.
Petitioner's stance is that the petition for certiorari, questioning PDIC's action, denying a deposit insurance
According to the RTC, based on the records, the PDIC correctly denied petitioner's claim for insurance on the
claim should be filed with the RTC, arguing in this manner: PDIC is not a quasi-judicial agency and it does
ground of splitting of deposits which is prohibited by law. 12
not possess any quasi-judicial power under its Charter; It merely performs fact-finding functions based on its
regulatory power. As such, applying Section 4, Rule 65 of the Rules of Court, as amended by A.M. 07-7-12-
It also declared that, pursuant to its Charter (RA 3591), PDIC is empowered to determine and pass upon the SC, which in part states that if the petition relates to an act or omission of a corporation, such as the PDIC,
validity of the insurance deposits claims, it being the deposit insurer. As such, when it rules on such claims, it shall be filed with the RTC exercising jurisdiction over the territorial area as defined by this Court; Also,
it is exercising a quasi-judicial function. Thus, it was held that petitioner's remedy to the dismissal of his Batas Pambansa Blg. 129 or the Judiciary Reorganization Act provides that this Court, the CA, and the RTC
claim is to file a petition for certiorari with the Court of Appeals under Section 4,13 Rule 65, stating that if the have original concurrent jurisdiction over petitions for certiorari, prohibition, and mandamus. Applying the
petition involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or the principle of hierarchy of courts, the RTC indeed has jurisdiction over such petition for certiorari.
rules, it shall be filed in and cognizable only by the Court of Appeals (CA). 14
We do not agree.
On June 22, 1963, PDIC was created under RA 3591 as an insurer of deposits in all banks entitled to the area as defined by the Supreme Court. It may also be filed with the Court of Appeals or with the
benefits of insurance under the said Act to promote and safeguard the interests of the depositing public. 17 As Sandiganbayan, whether or not the same is in aid of the court's appellate jurisdiction. If the petition
such, PDIC has the duty and authority to determine the validity of and grant or deny deposit insurance involves an act or an omission of a quasi-judicial agency, unless otherwise provided by law or
claims. Section 16(a) of its Charter, as amended, provides that PDIC shall commence the determination of these rules, the petition shall be filed with and be cognizable only by the Court of
insured deposits due the depositors of a closed bank upon its actual take over of the closed bank. Also, Appeals. (emphasis supplied)
Section 1 of PDIC's Regulatory Issuance No. 2011-03, provides that as it is tasked to promote and safeguard
the interests of the depositing public by way of providing permanent and continuing insurance coverage on
Clearly, a petition for certiorari, questioning the PDIC's denial of a deposit insurance claim should be filed
all insured deposits, and in helping develop a sound and stable banking system at all times, PDIC shall pay
before the CA, not the RTC. This further finds support in Section 22 of the PDIC's Charter, as amended,
all legitimate deposits held by bona fide depositors and provide a mechanism by which depositors may seek
which states that:
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 denying a deposit insurance claim,
is considered as final and executory and may be reviewed by the court only through a petition Section 22. No court, except the Court of Appeals, shall issue any temporary restraining order,
for certiorari on the ground of grave abuse of discretion. preliminary injunction or preliminary mandatory injunction against the Corporation for any action under this
Act. xxx.
Considering the foregoing, the legislative intent in creating the PDIC as a quasi-judicial agency is clearly
manifest. 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.
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.: xxxx

Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative Finally, the new amendment in PDIC's Charter under RA 10846, specifically Section 5(g) thereof, confirms
agency to adjudicate the rights of persons before it. It is the power to hear and determine questions of fact such conclusion, viz.:
to which the legislative policy is to apply and to decide in accordance with the standards laid down by the
law itself in enforcing and administering the same law. The administrative body exercises its quasi-judicial
power when it performs in a judicial manner an act which is essentially of an executive or administrative The actions of the Corporation taken under Section 5(g) shall be final and executory, and may only be
nature, where the power to act in such manner is incidental to or reasonably necessary for the performance restrained or set aside by the Court of Appeals, upon appropriate petition for certiorari on the ground
of the executive or administrative duty entrusted to it. In carrying out their quasi-judicial functions the that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a
administrative officers or bodies are required to investigate facts or ascertain the existence of lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from notice
facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official of denial of claim for deposit insurance. (Emphasis Ours)
action and exercise of discretion in a judicial nature.
As it stands, the controversy as to which court has jurisdiction over a petition for certiorari filed to question
The Court has laid down the test for determining whether an administrative body is exercising judicial or the PDIC's action is already settled. Therefore, We find no reversible error from the findings and conclusion
merely investigatory functions: adjudication signifies the exercise of the power and authority to of the court a quo.
adjudicate upon the rights and obligations of the parties. Hence, if the only purpose of an
investigation is to evaluate the evidence submitted to an agency based on the facts and circumstances WHEREFORE, the instant petition is DENIED for lack of merit. SO ORDERED.
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 discretion and judgment. (emphasis supplied)

Thus, the legislative intent in creating PDIC as a quasi-judicial agency is clearly manifest. Indeed, PDIC
exercises judicial discretion and judgment in determining whether a claimant is entitled to a deposit
insurance claim, which determination results from its investigation of facts and weighing of evidence
presented before it. Noteworthy also is the fact that the law considers PDIC's action as final and executory
and may be reviewed only on the ground of grave abuse of discretion.

That being established, We proceed to determine where such petition for certiorari should be filed. In this
matter, We cite the very provision invoked by the petitioner, i.e., Section 4, Rule 65 of the Rules, as
amended by A.M. No. 07-7-12-SC:

Sec. 4. When and where to file the petition. - The petition shall be filed not later than sixty (60) days from
notice of the judgment, order or resolution. In 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) days counted from
the notice of the denial of the motion.

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
 G.R. No. 214866, October 02, 2017 was insolvent, the Monetary Board passed Resolution No. 571 on April 4, 2013 directing PDIC to proceed
with the liquidation of EIB.14
APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, INC., ASIA WIDE
On April 29, 2013, petitioners, who are stockholders representing the majority stock of EIB, 15 filed a petition
REFRESHMENTS CORPORATION, MEDCO ASIA INVESTMENT CORPORATION, ZEST-O
for certiorari16 before the CA challenging Resolution No. 571. In essence, petitioners blame PDIC for the
CORPORATION, HARMONY BANCSHARES HOLDINGS, INC., EXCALIBUR HOLDINGS, INC., AND
failure to rehabilitate EIB, contending that PDIC: (a) imposed unreasonable and oppressive conditions which
ALFREDO M. YAO, Petitioners, v. BANGKO SENTRAL NG PILIPINAS AND PHILIPPINE DEPOSIT
delayed or frustrated the transaction between BDO and EIB; (b) frustrated EIB's efforts to increase its
INSURANCE CORPORATION, Respondents.
liquidity when PDIC disapproved EIB's proposal to sell its MRT bonds to a private third party and, instead,
required EIB to sell the same to government entities; (c) imposed impossible and unnecessary bidding
DECISION requirements; and (d) delayed the public bidding which dampened investors' interest.17

In defense, PDIC countered18 that petitioners were already estopped from assailing the placement of EIB
PERLAS-BERNABE, J.: under receivership and its eventual liquidation since they had already 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
Before the Court is a petition for review on certiorari1 filed by petitioners Apex Bancrights Holdings, Inc., to order EIB's liquidation.21
Lead Bancfund Holdings, Inc, Asia Wide Refreshments Corporation, Medco Asia Investment Corporation, The CA Ruling
Zest-O Corporation, Harmony Bancshares Holdings, Inc., Excalibur Holdings, Inc., and Alfredo M. Yao
(petitioners) assailing the Decision2 dated January 21, 2014 and the Resolution3 dated October 10, 2014 of In a Decision22 dated January 21, 2014, the CA dismissed the petition for lack of merit. It ruled that the
the Court of Appeals in CA-G.R. SP No. 129674, which affirmed Resolution No. 571 dated April 4, 2013 of Monetary Board did not gravely abuse its discretion in ordering the liquidation of EIB pursuant to the PDIC's
the Monetary Board of respondent Bangko Sentral ng Pilipinas (BSP) ordering the liquidation of the Export findings that the rehabilitation of the bank is no longer feasible. In this regard, the CA held that there is
and Industry Bank (EIB). nothing in Section 30 of RA 7653 that requires the Monetary Board to make its own independent factual
The Facts determination on the bank's viability before ordering its liquidation. According to the CA, the law only
provides that the Monetary Board "shall notify in writing the board of directors of its findings and direct the
Sometime in July 2001, EIB entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp receiver to proceed with the liquidation of the institution," 23 which it did in this case.
Investments, Inc. (UII) in an attempt to rehabilitate UBI which was then under receivership. 4 In September
2001, following the said merger, EIB itself encountered financial difficulties which prompted respondent the Undaunted, petitioners moved for reconsideration 24 which was, however, denied by the CA in its
Philippine Deposit Insurance Corporation (PDIC) to extend financial assistance to it. However, EIB still failed Resolution25 dated October 10, 2014; hence, this petition.
to overcome its financial problems, thereby causing PDIC to release in May 2005 additional financial The Issue Before the Court
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%. Despite this, EIB failed to comply with the The sole issue before the Court is whether or not the CA correctly ruled that the Monetary Board did not
BSP's capital requirements, causing EIB's stockholders to commence the process of selling the bank. 5 gravely abuse its discretion in issuing Resolution No. 571 which directed the PDIC to proceed with the
liquidation of EIB.
Initially, Banco de Oro (BDO) expressed interest in acquiring EIB. However, certain issues derailed the The Court's Ruling
acquisition, including BDO's unwillingness to assume certain liabilities 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 The petition is without merit.
financial condition worsened. Thus, in a letter6 dated April 26, 2012, EIB's president and chairman
voluntarily turned-over the full control of EIB to BSP, and informed the latter that the former will declare a Section 30 of RA 7653 provides for the proceedings in the receivership and liquidation of banks and quasi-
bank holiday on April27, 2012.7 banks, the pertinent portions of which read:
Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the
On April 26, 2012, the BSP, through the Monetary Board, issued Resolution No. 686 8 prohibiting EIB from supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
doing business in the Philippines and placing it under the receivership of PDIC, in accordance with Section 30 (a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That
of Republic Act No. (RA) 7653, otherwise known as "The New Central Bank Act." 9 Accordingly, PDIC took this shall not include inability to pay caused by extraordinary demands induced by financial panic in
over EIB.10 the banking community;

In due course, PDIC submitted its initial receivership report to the Monetary Board which contained its (b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or
finding that EIB can be rehabilitated or permitted to resume business; provided, that a bidding for its
(c) cannot continue in business without involving probable losses to its depositors or creditors; or
rehabilitation would be conducted, and that the following conditions would be met: (a) there are qualified
interested banks that will comply with the parameters for rehabilitation of a closed bank, capital (d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts
strengthening, liquidity, sustainability and viability of operations, and strengthening of bank governance; or transactions which amount to fraud or a dissipation of the assets of the institution; in which
and (b) all parties (including creditors and stockholders) agree to the rehabilitation and the revised payment cases, the Monetary Board may summarily and without need for prior hearing forbid the
terms and conditions of outstanding liabilities.11 Accordingly, the Monetary Board issued Resolution No. 1317 institution from doing business in the Philippines and designate the Philippine Deposit
on August 9, 2012 noting PDIC's initial report, and its request to extend the period within which to submit Insurance Corporation as receiver of the banking institution.
the final determination of whether or not EIB can be rehabilitated. Pursuant to the rehabilitation efforts, a
public bidding was scheduled by PDIC on October 18, 2012, but the same failed as no bid was submitted. A
xxxx
re-bidding was then set on March 20, 2013 which also did not materialize as no bids were submitted. 12
The receiver shall immediately gather and take charge of all the assets and liabilities of the
On April 1, 2013, PDIC informed BSP that EIB can hardly be rehabilitated.13 Based on PDIC's report that EIB
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[.] 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
If the receiver determines that the institution cannot be rehabilitated or permitted to resume directors of its findings and direct the receiver to proceed with the liquidation of the institution.
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 x x x31
liquidation of the institution. The receiver shall: 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
xxxx 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
The actions of the Monetary Board taken under this section or under Section 29 of this Act shall umbrella agency of the Monetary Board), in its capacity as government regulator of banks, and the PDIC, as
be final and executory, and may not be restrained or set aside by the court except on petition statutory receiver of banks under RA 7653, are the principal agencies mandated by law to determine the
for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave financial viability of banks and quasi-banks, and facilitate the receivership and liquidation of closed financial
abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only institutions, upon a factual determination of the latter's insolvency. 32 Thus, following the maxim verba legis
be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from non est recedendum  which means "from the words of a statute there should be no departure" - a statute
receipt by the board of directors of the institution of the order directing receivership, liquidation or that is clear, plain, and free from ambiguity must be given its literal meaning and applied without any
conservatorship. attempted interpretation,33 as in this case.

The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this In sum, the Monetary Board's issuance of Resolution No. 571 ordering the liquidation of EIB cannot be
section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator considered to be tainted with grave abuse of discretion as it was amply supported by the factual
is not a precondition to the designation of a receiver. (Emphases and underscoring supplied) circumstances at hand and made in accordance with prevailing law and jurisprudence. To note, the "actions
It is settled that "[t]he power and authority of the Monetary Board to close banks and liquidate them of the Monetary Board in proceedings on insolvency are explicitly declared by law to be 'final and executory.'
thereafter when public interest so requires is an exercise of the police power of the State. Police power, They may not be set aside, or restrained, or enjoined by the courts, except upon 'convincing proof that the
however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set action is plainly arbitrary and made in bad faith,'"34 which is absent in this case.
aside if it is either capricious, 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 the above WHEREFORE, the petition is hereby DENIED. The Decision dated January 21, 2014 and the Resolution
provision, the actions of the Monetary Board shall be final and executory and may not be restrained or set dated October 10, 2014 of the Court of Appeals in CA-G.R. SP No. 129674 are hereby AFFIRMED.
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 jurisdiction. "There is SO ORDERED.
grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and
evidence but on caprice, whim and despotism."27

In line with the foregoing considerations, the Court agrees with the CA that the Monetary Board did not
gravely abuse its discretion in ordering the liquidation ofEIB through its Resolution No. 571.

To recount, after the Monetary Board issued Resolution No. 686 which placed EIB under the receivership of
PDIC, the latter submitted its initial findings to the Monetary Board, stating that EIB can be rehabilitated or
permitted to resume business; provided, that a bidding for its rehabilitation would be conducted, and that
the following conditions would be met: (a) there are qualified interested banks that will comply with the
parameters for rehabilitation of a closed bank, capital strengthening, liquidity, sustainability and viability of
operations, and strengthening of bank governance; and (b) all parties (including creditors and stockholders)
agree to the rehabilitation and the revised payment terms and conditions of outstanding
liabilities.28 However, the foregoing conditions for EIB's rehabilitation "were not met because the bidding and
re-bidding for the bank's rehabilitation were aborted since none of the pre-qualified Strategic Third Party
Investors (STPI) submitted a letter of interest to participate in the bidding," 29 thereby resulting in the PDIC's
finding that EIB is already insolvent and must already be liquidated - a finding which eventually resulted in
the Monetary Board's issuance ofResolution No. 571.

In an attempt to forestall EIB's liquidation, petitioners insist that the Monetary Board must first make its own
independent finding that the bank could no longer be rehabilitated - instead of merely relying on the findings
of the PDIC before ordering the liquidation of a bank. 30

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.:
 SECOND DIVISION On the other hand, Philbank filed its Answer8Ï‚rνll asserting that it is an innocent mortgagee for value
without notice of the defect in the title of the Dys. It filed a cross-claim against Sps. Delgado and the Dys for
all the damages that may be adjudged against it in the event they are declared seller and purchaser in bad
G.R. No. 183774 : November 14, 2012
faith, respectively.

PHILIPPINE BANKING CORPORATION, Petitioner, v. ARTURO DY, BERNARDO DY, JOSE DELGADO

In answer to the cross-claim, Sps. Delgado insisted that Philbank was not a mortgagee in good faith for
AND CIPRIANA DELGADO, Respondents.
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 Lot No. 6966. They
DECISION thereby prayed for the cancellation of the mortgage in Philbank's favor.

PERLAS-BERNABE, J.: Subsequently, Sps. Delgado amended their cross-claim against the Dys to include a prayer for the
nullification of the deeds of absolute sale in the latter's favor and the corresponding certificates of title, and
for the consequent reinstatement of Ciprianas title.9ςrνll
This Petition for Review on Certiorari assails the January 30, 2008 Decision 1Ï‚rνll of the Court of Appeals
(CA) in CA-G.R. CV No. 51672, which set aside the October 5, 1994 Decision2Ï‚rνll of the Regional Trial
Court of Cebu City, Branch 22 (RTC) and directed the Register of Deeds of Cebu City to cancel Transfer The complaints against the Dys and Philbank were subsequently withdrawn. On the other hand, both the
Certificate of Title (TCT) Nos. 517683Ï‚rνll and 519014Ï‚rνll in the names of respondents Arturo Dy and buyer and Sps. Delgado never presented any evidence in support of their respective claims. Hence, the RTC
Bernardo Dy (Dys) and to issue the corresponding TCTs in the name of respondent Cipriana Delgado limited itself to the resolution of the claims of Sps. Delgado, Philbank and the Dys against one another.
(Cipriana).
The RTC Ruling
The Factual Antecedents
In the Decision10Ï‚rνll dated October 5, 1994, the RTC dismissed the cross-claims of Sps. Delgado against
Cipriana was the registered owner of a 58,129-square meter (sq.m.) lot, denominated as Lot No. 6966, the Dys and Philbank. It noted that other than Sps. Delgado's bare allegation of the Dys' supposed non-
situated in Barrio Tongkil, Minglanilla, Cebu, covered by TCT No. 18568. She and her husband, respondent payment of the full consideration for Lot Nos. 6966 and 4100-A, they failed to adduce competent evidence to
Jose Delgado (Jose), entered into an agreement with a certain Cecilia Tan (buyer) for the sale of the said support their claim. On the other hand, the Dys presented a cash voucher 11Ï‚rνll dated April 6, 1983 duly
property for a consideration of P10.00/sq.m. It was agreed that the buyer shall make partial payments from signed by Sps. Delgado acknowledging receipt of the total consideration for the two lots.
time to time and pay the balance when Cipriana and Jose (Sps. Delgado) are ready to execute the deed of
sale and transfer the title to her.
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 mortgage documents and the release of the loan proceeds to the
At the time of sale, the buyer was already occupying a portion of the property where she operates a noodle latter, negating their claim of bad faith. Moreover, they subsequently notified the bank of the Dys' full
(bihon) factory while the rest was occupied by tenants which Sps. Delgado undertook to clear prior to full payment for the two lots mortgaged to it.
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. Eventually, the buyer learned of the sale of the
The CA Ruling
property to the Dys and its subsequent mortgage to petitioner Philippine Banking Corporation (Philbank),
prompting the filing of the Complaint5Ï‚rνll for annulment of certificate of title, specific performance and/or
reconveyance with damages against Sps. Delgado, the Dys and Philbank. However, on appeal, the CA set aside12Ï‚rνll the RTC's decision and ordered the cancellation of the Dys'
certificates of title and the reinstatement of Cipriana's title. It ruled that there were no perfected contracts of
sale between Sps. Delgado and the Dys in view of the latter's admission that the deeds of sale were
In their Answer, Sps. Delgado, while admitting receipt of the partial payments made by the buyer, claimed
purposely executed to facilitate the latter's loan application with Philbank and that the prices indicated
that there was no perfected sale because the latter was not willing to pay their asking price of P17.00/sq.m.
therein were not the true consideration. Being merely simulated, the contracts of sale were, thus, null and
They also interposed a cross-claim against the Dys averring that the deeds of absolute sale in their favor
void, rendering the subsequent mortgage of the lots likewise void.
dated June 28, 19826Ï‚rνll and June 30, 19827Ï‚rνll covering Lot No. 6966 and the adjoining Lot No. 4100-
A (on which Sps. Delgado's house stands), were fictitious and merely intended to enable them (the Dys) to
use the said properties as collateral for their loan application with Philbank and thereafter, pay the true The CA also declared Philbank not to be a mortgagee in good faith for its failure to ascertain how the Dys
consideration of P17.00/sq.m. for Lot No. 6966. However, after receiving the loan proceeds, the Dys reneged acquired the properties and to exercise greater care when it conducted an ocular inspection thereof. It
on their agreement, prompting Sps. Delgado to cause the annotation of an adverse claim on the Dys' titles thereby canceled the mortgage over the two lots.
and to inform Philbank of the simulation of the sale. Sps. Delgado, thus, prayed for the dismissal of the
complaint, with a counterclaim for damages and a cross-claim against the Dys for the payment of the
The Petition
balance of the purchase price plus damages.

In the present petition, Philbank insists that it is a mortgagee in good faith. It further contends that Sps.
For their part, the Dys denied knowledge of the alleged transaction between cross-claimants Sps. Delgado
Delgado are estopped from denying the validity of the mortgage constituted over the two lots since they
and buyer. They claimed to have validly acquired the subject property from Sps. Delgado and paid the full
participated in inducing Philbank to grant a loan to the Dys.
consideration therefor as the latter even withdrew their adverse claim and never demanded for the payment
of any unpaid balance.
On the other hand, Sps. Delgado maintain that Philbank was not an innocent mortgagee for value for failure Indeed, a finding of negligence must always be contextualized in line with the attendant circumstances of a
to exercise due diligence in transacting with the Dys and may not invoke the equitable doctrine of estoppel particular case. As aptly held in Philippine National Bank v. Heirs of Estanislao Militar,25Ï‚rνll "the diligence
to conceal its own lack of 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."26Ï‚rνll Thus, without diminishing the time-honored principle that nothing short of extraordinary
For his part, Arturo Dy filed a Petition-in-Intervention 13Ï‚rνll arguing that while the deeds of absolute sale
diligence is required of banks whose business is impressed with public interest, Philbank's inconsequential
over the two properties were admittedly simulated, the simulation was only a relative one involving a false
oversight should not and cannot serve as a bastion for fraud and deceit.
statement of the price. Hence, the parties are still bound by their true agreement. The same was
opposed/objected to by both Philbank14Ï‚rνll and Sps. Delgado15Ï‚rνll as improper, considering that the CA
judgment had long become final and executory as to the Dys who neither moved for reconsideration nor To be sure, fraud comprises "anything calculated to deceive, including all acts, omissions, and concealment
appealed the CA Decision. 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."27Ï‚rνll In this light, the
Dys' and Sps. Delgado's deliberate simulation of the sale intended to obtain loan proceeds from and to
The Ruling of the Court
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 favor of Philbank as to hold otherwise would
The petition is meritorious. effectively sanction their blatant bad faith to Philbank's detriment.

At the outset, the Court takes note of the fact that the CA Decision nullifying the questioned contracts of sale Accordingly, in the interest of public policy, fair dealing, good faith and justice, the Court accords Philbank
between Sps. Delgado and the Dys had become final and executory. Accordingly, the Petition-in-Intervention the rights of a mortgagee in good faith whose lien to the securities posted must be respected and protected.
filed by Arturo Dy, which seeks to maintain the subject contracts' validity, can no longer be entertained. The In this regard, Philbank is entitled to have its mortgage carried over or annotated on the titles of Cipriana
cancellation of the Dys' certificates of title over the disputed properties and the issuance of new TCTs in Delgado over the said properties.
favor of Cipriana must therefore be upheld.
WHERFORE, the assailed January 30, 2008 Decision of the Court of Appeals in CA-G.R. CV No. 51672 is
However, Philbank's mortgage rights over the subject properties shall be maintained. While it is settled that hereby AFFIRMED with MODIFICATION upholding the mortgage rights of petitioner Philippine Banking
a simulated deed of sale is null and void and therefore, does not convey any right that could ripen into a Corporation over the subject properties.ςrαlαωlιbrαr
valid title,16Ï‚rνll it has been equally ruled that, for reasons of public policy, 17Ï‚rνll the subsequent
nullification of title to a property is not a ground to annul the contractual right which may have been derived
SO ORDERED.
by a purchaser, mortgagee or other transferee who acted in good faith. 18ςrνll

The ascertainment of good faith or lack of it, and the determination of whether due diligence and prudence
were exercised or not, are questions of fact 19Ï‚rνll which are generally improper in a petition for review on
certiorari under Rule 45 of the Rules of Court (Rules) where only questions of law may be raised. A
recognized exception to the rule is when there are conflicting findings of fact by the CA and the
RTC,20Ï‚rνll as in this case.

Primarily, it bears noting that the doctrine of "mortgagee in good faith" is based on the rule that all persons
dealing with property covered by a Torrens Certificate of Title are not required to go beyond what appears
on the face of the title. This is in deference to the public interest in upholding the indefeasibility of a
certificate of title as evidence of lawful ownership of the land or of any encumbrance thereon. 21Ï‚rνll In the
case of banks and other financial institutions, however, greater care and due diligence are required since
they are imbued with public interest, failing which renders the mortgagees in bad faith. Thus, before
approving a loan application, it is a standard operating practice for these institutions to conduct an ocular
inspection of the property offered for mortgage and to verify the genuineness of the title to determine the
real owner(s) thereof.22Ï‚rνll 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, interest or claim thereon from a usurper who may
have acquired a fraudulent certificate of title thereto.23ςrνll

In this case, while Philbank failed to exercise greater care in conducting the ocular inspection of the
properties offered for mortgage,24Ï‚rνll its omission 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 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
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.
 BANK OF THE PHILIPPINE ISLANDS AND ANA C. GONZALES, PETITIONERS, VS. SPOUSES imprisonment in a foreign country due to BPI's negligence and bad faith.
FERNANDO V. QUIAOIT AND NORA L. QUIAOIT, RESPONDENTS.
CARPIO, J.: BPI countered that it is the bank's standing policy and part of its internal control to mark all dollar bills with
The Case "chapa" bearing the code of the branch when a foreign currency bill is exchanged or withdrawn. BPI alleged
that any local or foreign currency bill deposited or withdrawn from the bank undergoes careful and
Before the Court is a petition for review on certiorari [1] assailing the 22 September 2011 Decision[2] and the meticulous scrutiny by highly-trained and experienced personnel for genuineness and authenticity. BPI
29 November 2011 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 94141. The Court of Appeals alleged that the US$20,000 in US$100 bills encashed by Fernando through Lambayong were inspected,
affirmed the 15 May 2009 Decision[4] of the Regional Trial Court of Quezon City, Branch 100 in Civil Case No. counted, personally examined, and subjected to a counterfeit detector machine by the bank teller under
Q-00-42619. Gonzales' direct supervision. Gonzales also personally inspected and "piece-counted" the dollar bills which
The Antecedent Facts bore the identifying "chapa" and examined their genuineness and authenticity. BPI alleged that after its
investigation, it was established that the 44 US$100 bills surrendered by the spouses Quiaoit were not the
Fernando V. Quiaoit (Fernando) maintains peso and dollar accounts with the Bank of the Philippine Islands same as the dollar bills disbursed to Lambayong. The dollar bills did not bear the identiying "chapa" from BPI
(BPI) Greenhills-Crossroads Branch (BPI Greenhills). On 20 April 1999, Fernando, through Merlyn Greenhills and as such, they came from another source.
Lambayong (Lambayong), encashed BPI Greenhills Check No. 003434 dated 19 April 1999 for US$20,000. The Decisions of the Trial Court and the Court of Appeals

In a complaint filed by Fernando and his wife Nora L. Quiaoit (Nora) against BPI, they alleged that In its 15 May 2009 Decision, the Regional Trial Court of Quezon City, Branch 100 (trial court), ruled in favor
Lambayong did not count the US$20,000 that she received because the money was placed in a large Manila of the spouses Quiaoit. The dispositive portion of the trial court's Decision reads:
envelope. They also alleged that BPI did not inform Lambayong that the dollar bills were marked with its WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
"chapa" and the bank did not issue any receipt containing the serial number of the bills. Lambayong defendants.
delivered the dollar bills to the spouses Quiaoit in US$100 denomination in US$10,000 per bundle. Nora then
purchased plane tickets worth US$13,100 for their travel abroad, using part of the US$20,000 bills Accordingly, defendants are ordered to pay jointly and severally the plaintiffs the following:
withdrawn from BPI.
1. the amount of Four Thousand Four Hundred US Dollars (US$4,400) as and for actual damages;
On 22 April 1999, the spouses Quiaoit left the Philippines for Jerusalem and Europe. Nora handcarried
US$6,900 during the tour. The spouses Quiaoit alleged that on 19 May 1999, Nora was placed in a shameful 2. the amount of Two Hundred Thousand Pesos (P200,000.00) as and for moral damages;
and embarrassing situation when several banks in Madrid, Spain refused to exchange some of the US$100
bills because they were counterfeit. Nora was also threatened that she would be taken to the police station 3. the amount of Fifty Thousand Pesos (P50,000.00) as and for exemplary damages;
when she tried to purchase an item in a shop with the dollar bills. The spouses Quiaoit were also informed by
their friends, a priest and a nun, that the US dollar bills they gave them were refused by third persons for 4. the amount of Fifty Thousand Pesos (P50,000.00) as and for attorney's fees.
being counterfeit. Their aunt, Elisa Galan (Galan) also returned, via DHL, the five US$100 bills they gave her
and advised them that they were not accepted for deposit by foreign banks for being counterfeit. SO ORDERED.[6]

On 21 May 1999, while the spouses Quiaoit were still abroad, they asked their daughter Maria Isabel, who In its 22 September 2011 Decision, the Court of Appeals affirmed the trial court's Decision. The Court of
was employed with BPI Makati, to relay their predicament to BPI Greenhills. However, Ana C. Appeals ruled that BPI did not follow the normal banking procedure of listing the serial numbers of the dollar
Gonzales[5] (Gonzales), branch manager of BPI Greenhills, failed to resolve their concern or give them a bills considering the reasonable length of time from the time Fernando advised them of the withdrawal until
return call. When the spouses Quiaoit returned, they personally complained to Gonzales who went to Lambayong's actual encashment of the check. The Court of Appeals noted that BPI only listed down the
Fernando's office with three bank personnel. Gonzales took from Fernando the remaining 44 dollar bills serial numbers of the dollar bills when Fernando, through Edgardo, withdrew his remaining money from the
worth US$4,400 and affixed her signature on the photocopy of the bills, acknowledging that she received bank. According to the Court of Appeals, BPI had been negligent in not listing down the serial numbers of
them. Chito Bautista (Bautista), a bank representative, and another bank employee informed the spouses the dollar bills. The Court of Appeals further ruled that, assuming BPI had not been negligent, it had the last
Quiaoit that an investigation would be conducted but they were not furnished any report. They gathered clear chance or the last opportunity to avert the injury incurred by the spouses Quiaoit abroad. The Court of
from a telephone conversation with Clemente Banson (Banson), the bank-designated investigator, that the Appeals ruled that BPI was the proximate, immediate, and efficient cause of the loss incurred by the spouses
dollar bills came from BPI Vira Mall and were marked with "chapa" by the BPI Greenhills. On 9 June 1999, Quiaoit.
Fernando tried to submit to Banson the five US$100 bills returned by Galan but Banson refused to accept
them because they were counterfeit. On 18 August 1999, Gonzales informed Fernando that the absence of The Court of Appeals noted that BPI failed to return the call and to attend to the needs of the spouses
the identification mark ("chapa") on the dollar bills meant they came from other sources and not from BPI Quiaoit even when their daughter Maria Isabel called the attention of the bank about the incidents abroad.
Greenhills. Gonzales also failed to disclose to Fernando about the identifying "chapa" when she accepted the US$4,400
from him.
On 7 July 1999, Fernando withdrew the remaining balance of his account through his representative, Henry The dispositive portion of the Court of Appeals' Decision reads:
Mainot (Mainot). The dollar bills withdrawn by Mainot were marked and the serial numbers were listed. On 7
July 1999, Fernando's brother Edgardo encashed a US$500 check from BPI San Juan Branch and while the WHEREFORE, premises considered, the Decision dated May 15, 2009 of the RTC, Branch 100, Quezon City in
dollar bills were not marked, the serial numbers thereof were listed. Civil Case No. Q-00-42619 is hereby AFFIRMED.

The spouses Quiaoit alleged that Nora Cayetano, area manager of BPI San Juan, called up Fernando and SO ORDERED.[7]
promised to do something about the refund of the US$4,400 they surrendered to Gonzales. On 17 January BPI filed a' motion for reconsideration. In its 29 November 2011
2000, the spouses Quiaoit demanded in writing for the refund of the US$4,400 from Gonzales. On 9
February 2000, BPI sent its written refusal to refund or reimburse the US$4,400. Resolution, the Court of Appeals denied the motion for lack of merit.

The spouses Quiaoit alleged that BPI failed in its duty to ensure that the foreign currency bills it furnishes its Thus, BPI came to this Court for relief.
clients are genuine. According to them, they suffered public embarrassment, humiliation, and possible
 not informed about the "chapa" on the bills so that they could have checked the same. BPI cannot pass the
BPI raised the following issues in its petition: burden on the spouses Quiaoit to verify the genuineness of the bills, even if they did not check or count the
A. The Court of Appeals erred in its legal conclusions in disregarding the preponderance of evidence dollar bills in their possession while they were abroad.
showing no irreconcilable inconsistencies in the testimonies of the bank's witnesses. The "listing
process" being imposed by the [court a quo] did not impeach the credibility of petitioner[s'] witnesses The Court has also applied the doctrine of last clear chance in banking transactions. In Allied Banking
which proved that the 44 pieces of fake USD 100 dollar bills shown by Mr. [Quiaoit] could not have Corporation v. Bank of the Philippine Islands, [15] the Court explained:
come from BPI Greenhills-Crossroads branch. The doctrine of last clear chance, stated broadly, is that the negligence of the plaintiff does not preclude a
  recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable
care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's
negligence. The doctrine necessarily assumes negligence on the part of the defendant and contributory
B. The Court of Appeals erred in its legal conclusions by holding that there [was] "gross negligence
negligence on the part of the plaintiff, and does not apply except upon that assumption. Stated differently,
amounting to bad faith" because petitioner bank, through its officers and employees[,] followed its
the antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the
[then] existing procedure in handling dollar withdrawals. Respondents' own negligence was the
supervening negligence of the defendant, who had the last fair chance to prevent the impending harm by the
proximate cause of the loss. [8]
exercise of due diligence. Moreover, in situations where the doctrine has been applied, it was defendant's
The Issues
failure to exercise such ordinary care, having the last clear chance to avoid loss or injury, which was the
proximate cause of the occurrence of such loss or injury. [16]
Whether the counterfeit US dollar bills came from BPI;
As pointed out by the Court of Appeals, BPI had the last clear chance to prove that all the dollar bills it
issued to the spouses Quiaoit were genuine and that the counterfeit bills did not come from it if only it listed
Whether BPI exercised due diligence in handling the withdrawal of the US dollar bills; and
down the serial numbers of the bills. BPI's lapses in processing the transaction fall below the extraordinary
diligence required of it as a banking institution. Hence, it must bear the consequences of its action.
Whether BPI is liable for damages.
The Ruling of this Court
Respondents are entitled to moral damages and attorney's fees
We deny the petition.
We sustain the award of moral damages to the spouses Quiaoit.
BPI failed to exercise due diligence
in the transaction
In Pilipinas Bank v. Court of Appeals,[17] the Court sustained the award of moral damages and explained that
[9] while the bank's negligence may not have been attended with malice and bad faith, it caused serious
In Spouses Carbonell v. Metropolitan Bank and Trust Company,  the Court emphasized that the General
anxiety, embarrassment, and humiliation to respondents. We apply the same in this case. In this case, it
Banking Act of 2000 demands of banks the highest standards of integrity and performance. The Court ruled
was established that the spouses Quiaoit suffered serious anxiety, embarrassment, humiliation, and even
that banks are under obligation to treat the accounts of their depositors with meticulous care. [10] The Court
threats of being taken to police authorities for using counterfeit bills. Hence, they are entitled to the moral
ruled that the bank's compliance with this degree of diligence has to be determined in accordance with the
damages awarded by the trial court and the Court of Appeals.
particular circumstances of each case.[11]
Nevertheless, we delete the award of exemplary damages since it does not appear that BPI's negligence was
In this case, BPI failed to exercise the highest degree of diligence that is not only expected but required of a
attended with malice and bad faith. We sustain the award of attorney's fees because the spouses Quiaoit
banking institution.
were forced to litigate to protect their rights.
It was established that on 15 April 1999, Fernando informed BPI to prepare US$20,000 that he would
WHEREFORE, we DENY the petition. We AFFIRM the 22 September 2011 Decision and the 29 November
withdraw from his account. The withdrawal, through encashment of BPI Greenhills Check No. 003434, was
2011 Resolution of the Court of Appeals in CA-G.R. CV No. 94141 with MODIFICATION by deleting the
done five days later, or on 20 April 1999. BPI had ample opportunity to prepare the dollar bills. Since the
award of exemplary damages.
dollar bills were handed to Lambayong inside an envelope and in bundles, Lambayong did not check them.
However, as pointed out by the Court of Appeals, BPI could have listed down the serial numbers of the dollar
SO ORDERED.
bills and erased any doubt as to whether the counterfeit bills came from it. While BPI Greenhills marked the
dollar bills with "chapa" to identify that they came from that branch, Lambayong was not informed of the
markings and hence, she could not have checked if all the bills were marked.

BPI insists that there is no law requiring it to list down the serial numbers of the dollar bills. However, it is
well-settled that the diligence required of banks is more than that of a good father of a family. [12] Banks are
required to exercise the highest degree of diligence in its banking transactions. [13] In releasing the dollar bills
without listing down their serial numbers, BPI failed to exercise the highest degree of care and diligence
required of it. BPI exposed not only its client but also itself to the situation that led to this case. Had BPI
listed down the serial numbers, BPI's presentation of a copy of such listed serial numbers would establish
whether the returned 44 dollar bills came from BPI or not.

We agree with the Court of Appeals that the action of BPI is the proximate cause of the loss suffered by the
spouses Quiaoit. Proximate cause is defined as the cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces injury and without which the result would not have
occurred. [14] Granting that Lambayong counted the two bundles of the US$100 bills she received from the
bank, there was no way for her, or for the spouses Quiaoit, to determine whether the dollar bills were
genuine or counterfeit. They did not have the expertise to verify the genuineness of the bills, and they were
 FIRST DIVISION Accordingly, the Branch Manager of the [BPI], Del Monte Branch, or any authorized representative is hereby
[o]rdered to immediately RELEASE in favor of the Administrator, [Emilio], the total amount of Four Hundred
Thirty Thousand Pesos (Php 430,000.00) from Account No. 003248-2799-14 while the difference shall
G.R. No. 214415, October 15, 2018
remain in the custody of the said bank under the same type of account until further orders from this court.

IN THE MATTER OF THE INTESTATE ESTATE OF MIGUELITA C. PACIOLES AND EMMANUEL C.

Thereafter, the said Branch Manager and the Administrator or any authorized representative are each
CHING, Petitioner, v. EMILIO B. PACIOLES, JR., Respondent.
[o]rdered to SUBMIT to this Court a Compliance/Report with the pertinent document/s on the matter within
five (5) days from receipt thereof.
DECISION
SO ORDERED.13
TIJAM, J.:
BPI-SFDM, through its bank manager, requested for a clarification on the abovementioned Order and gave
Before Us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the an opinion that the subject BPI account is covered by the Foreign Currency Deposit Act of the Philippines. As
Decision2 dated February 27, 2014 and the Resolution3 dated September 4, 2014 of the Court of Appeals such, it is exempt from orders of judicial and quasi-judicial bodies and that withdrawals therefrom can only
(CA) in CAG.R. SP No. 130666, affirming the Orders dated May 31, 20124 and September 3, 20125 of the be made with the written consent of the account holders, who are Emilio and Emmanuel. 14
Regional Trial Court (RTC) of Quezon City, Branch 224, in SP. Proc. No. Q-92-13155, which ordered the
release of funds from a joint foreign currency deposit account.
In an Order15 dated May 31, 2012, the intestate court held that:

Facts of the Case

WHEREFORE, premises considered, this Court affirms and reiterates the Order dated November 28, 2011 as
substantial justice requires. To further clarify the same, the Administrator, [Emilio], shall personally express
Upon the death of Miguelita Ching Pacioles (Miguelita), she left several real properties, stock investments, his conformity and consent to the Branch Manager of the [BPI], Del Monte Branch, or any authorized
bank deposits and interests. She was survived by her husband, respondent Emilio B. Pacioles, Jr. (Emilio), representative for the withdrawal of the subject amount of money which shall be deemed sufficient for the
their two minor children, Miguelita's mother, Miguela Chuatoco-Ching (Miguela), now deceased and purpose.
Miguelita's brother, herein petitioner Emmanuel C. Ching (Emmanuel). 6
After such conformity and consent are expressed, the said Branch Manager or any authorized representative
On August 20, 1992, Emilio filed a petition for the settlement of Miguelita's estate with prayer for his is [o]rdered to immediately RELEASE in favor of the said Administrator, [Emilio], the total amount of Four
appointment as its regular administrator. Thereafter, Emilio and Emmanuel were appointed as co-- Hundred Thirty Thousand Pesos (Php 430,000.00) from Account No. 003248-2799-14 while the difference
administrators.7 shall remain in the custody of the said bank under the same type of account until further orders from this
Court.
However, the appointment of Emmanuel was nullified in the CA Decision8 dated July 22, 2002 in CA-G.R. CV
No. 46763. Accordingly, the said Branch Manager and the Administrator or any authorized representative are each
[o]rdered to SUBMIT to this Court a Compliance/Report with the pertinent document/s on the matter within
five (5) days from receipt thereof.
Among the properties left by Miguelita and included in the inventory of her estate were her two dollar
accounts with the Bank of the Philippine Islands (BPI)-San Francisco Del Monte (SFDM) Branch (subject BPI
account), the subject matter of the instant case.9 SO ORDERED.16

However, said dollar accounts were closed and consolidated into a single account (consolidated account) Emmanuel filed a motion for reconsideration.17 In his motion, he asserted that the trial court erred in
which is Account No. 003248-2799-14 under the names of Emilio and Miguela Chuatoco or Emmanuel upon directing the withdrawal of funds from the subject BPI account. Such motion was however denied in an
their written request addressed to the bank.10 Order18 dated September 3, 2012.

On September 30, 2011, Emilio filed a motion to allow him to withdraw money from the subject BPI account Undaunted, Emmanuel filed a Petition for Certiorari,19 assailing the abovecited Orders of the trial court,
to defray the cost of property taxes due on the real properties of Miguelita's estate. 11 before the CA.

Ruling of the RTC Ruling of the CA

In an Order12 dated November 28, 2011, the intestate court granted the motion, to wit: In a Decision20 dated February 27, 2014, the CA dismissed the petition. The CA found that the intestate court
did not err in allowing the withdrawal of funds from the subject BPI account as such court has jurisdiction
over the properties of Miguelita until the same have been distributed among the heirs entitled thereto.
WHEREFORE, in the interest of substantial justice, the instant Motion to Allow Withdrawal of Bank Deposit The  fallo the Decision reads:
filed by the Administrator is partly GRANTED for the sole purpose of paying the subject realty obligation and
the costs thereof.
WHEREFORE, premises considered, the instant Petition for Certiorari is DENIED for lack of merit and the It is apparent that in ordering the branch manager or any representative of BPI to release the money
assailed orders of the [RTC] of Quezon City, Branch 224 dated 31 May 2012 and 03 September 2012 are contained in a foreign currency deposit account, the intestate court committed a violation of the law, which
hereby AFFIRMED. expressly provides that all foreign currency deposits as defined by applicable laws are not subject to any
form of attachment, garnishment, or any other order or process of any court, legislative body, government
agency or any administrative body.
SO ORDERED.21

Moreover, the subject BPI account is in the nature of a joint account. "[It] is one that is held jointly by two
A motion for reconsideration22 filed by Emmanuel was denied by the CA in a Resolution23 dated September 4,
or more natural persons, or by two or more juridical persons or entities. Under such setup, the depositors
2014, viz.:
are joint owners or co-owners of the said account, and their share in the deposits shall be presumed equal,
unless the contrary is proved."28 In an "and" joint account, as in this case, the depositors are joint creditors
WHEREFORE, premises considered, the motion for reconsideration is hereby DENIED for lack of merit. of the bank and the signatures of all depositors are necessary to allow withdrawal.29

SO ORDERED.24 Thus, it is indispensable that all the persons named as account holders give their consent before any
withdrawal could be made.
Hence, this Petition.
In its disposition, the intestate court simply deemed sufficient the consent of Emilio to allow the withdrawal
from the subject BPI account without further reasons therefor, to wit:
Issue

It must also be noted that the subject Time Deposit Certificate with Account No. 003248-2799-14 appears to
Essentially, the issue in the present case is whether or not the order of release of funds from a joint foreign be under the names of herein Administrator and [Miguela] or [Emmanuel], hence the consent or conformity
currency deposit account without securing the consent of a co-depositor is proper. of the depositor or herein Administrator [Emilio] is already deemed sufficient for this purpose. x x x. 30

Ruling of the Court Thus, the intestate court likewise erred in allowing the withdrawal of funds sans the consent of a co-
depositor.
We proceed with the nature of the subject BPI account.
Nevertheless, We recognize the functions and duties of an administrator of an estate. One of which is to
It is established that the subject joint account, which involves foreign currency deposits, is under the names administer all goods, chattels, rights, credits, and estate which shall at any time come to his possession or to
of Emilio and Miguela (now deceased) or Emmanuel. the possession of any other person for him, and from the proceeds to pay and discharge all debts, legacies,
and charges on the same, or such dividends thereon.31

The rule on foreign currency deposits is embodied in Section 8 of Republic Act No. 6426, 25 also known as the
Foreign Currency Deposit Act of the Philippines, which provides that: In this case, there were two administrators of Miguelita's estate,  i.e., Emilio and Emmanuel. However, it is
important to highlight that Emmanuel's appointment was revoked by the CA in its Decision in CA-G.R. CV
No. 46763. Necessarily, as the revocation of Emmanuel's appointment as administrator was established, his
Sec. 8. Secrecy of foreign currency deposits. – All foreign currency deposits authorized under this Act, as right over the funds contained in the joint account no longer exists. It must be emphasized that his right
amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby over the same merely emanates from his being a co-administrator.
declared as and considered of an absolutely confidential nature and, except upon the written permission of
the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any
person, government official, bureau or office whether judicial or administrative or legislative, or any other Considering the nature of a joint account, we cannot but adhere to banking laws which requires the consent
entity whether public or private; Provided, however, That said foreign currency deposits shall be exempt of all the depositors before any withdrawal could be made. However, since Emmanuel no longer has a right
from attachment, garnishment, or any other order or process of any court, legislative body, government over the subject joint account in view of his removal as a co-administrator, it is necessary that his name
agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD should be removed as an account holder and co-depositor of Emilio in a proper forum for Emilio to be able to
No. 1246, prom. Nov. 21, 1977.) completely perform his functions and duties as an administrator.

This provision was reproduced in Section 8726 of the Central Bank of the Philippines Circular No. 1318 series On this note, emphasis must be made on the jurisdiction of a trial court, sitting as an intestate court, as
of 1992. regards the proper disposition of the estate of the deceased. Such jurisdiction continues until after the
payment of all the debts and the remaining estate delivered to the heirs entitled to receive the same. 32 Thus,
proper proceedings must be had before the intestate court so that the subject joint account should be
In this case, the intestate court's assailed May 31, 2012 Order, ordered the bank and its officers to release administered solely by Emilio, who is the lone administrator.
the money contained in the subject BPI account, thus:

WHEREFORE, the petition is partly GRANTED. Accordingly, the Decision dated February 27, 2014 and the
[T]he said Branch Manager [of the BPI, Del Monte Branch], or any authorized representative is hereby Resolution dated September 4, 2014 of the Court of Appeals in CA-G.R. SP No. 130666
[o]rdered to immediately RELEASE in favor of the Administrator, [Emilio], the total amount of Four Hundred are REVERSED and SET ASIDE.
Thirty Thousand Pesos (Php 430,000.00) from Account No. 003248-2799-14 x x x.27

The case is remanded to the intestate court for proper proceedings. SO ORDERED.
 FIRST DIVISION Dela Peña (Exhibit "F" to "F-6");

4. Withdrawal slips bearing Dela Peña's lone signature (Exhibits "G" to "G-1"); withdrawal slips bearing Dela
G.R. No. 198237, October 08, 2018
Pena's lone signature and in some cases, together with the forged signature of Fariñas (Exhibits "H" to "H-
28"); checks bearing the signatures of Dela Peña with the forged signatures of Fariñas (Exhibits "I" to "I-
BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. LAND INVESTORS AND DEVELOPERS 80"); and
CORPORATION, Respondent.
5. Sample signatures of Fariñas (Exhibits "Q" to "Q-17"); NBI Comparison Charts showing the sample and
questioned signatures of Fariñas (Exhibits "S" to "S-12" and "T" to "T-17"); and the NBI Report with the
DECISION conclusion that the questioned and standard/sample signatures of Fariñas were not written by one and the
same person (Exhibit "R"). 11
TIJAM, J.: Respondent's exhibits were all admitted by the court a quo.12

For its part, BPI filed a demurrer to evidence on the ground that respondent has shown no right to relief with
Through this petition for review on certiorari1 under Rule 45 of the Rules of Court, petitioner Bank of the respect to: (a) Exhibits H, H-1 up to H-28 representing various withdrawal slips bearing the allegedly forged
Philippine Islands (BPI) seeks to annul the Decision2 dated February 28, 2011 of the Court of Appeals (CA) in signature of Fariñas because no evidence whatsoever was adduced to prove the alleged forgery of Fariñas'
CA-G.R. CV No. 93752 which reversed and set aside the Resolutions dated April 14, 2009 and June 26, 2009 signatures in these exhibits; (b) Exhibits D, D-1, D-2, F, F-1, F-2, F-3, F-4, F-5, F-6, G and G-1 representing
of the Regional Trial Court (RTC) of Makati City, Branch 61. counterchecks, checks, withdrawal slips because these exhibits were not identified by any of respondent's
witnesses as required by Section 20, Rule 132 of the Rules of Court; (c) Exhibits I-1 to Exhibits I-12
In its assailed Decision, the CA found BPI liable to its depositor, respondent Land Investors and Development representing various checks with the alleged forged signature of Fariñas which were examined by NBI
Corporation for breach of fiduciary duty. Document Examiner because it was not proved that the alleged sample or specimen signatures used for
Antecedent Facts comparison were indeed genuine signatures of Fariñas; (d) Exhibits I to I-80 representing various checks
with the allegedly forged signature of Fariñas because no corroborative evidence was adduced to prove the
Between the years 1995 and 1999, respondent maintained savings and current accounts with the Pamplona, alleged forgeries; (e) claims covering allegedly unauthorized withdrawals prior to September 30, 1998
Las Piñas Branch of Far East Bank & Trust Company (FEBTC). FEBTC later on merged with BPI.3 In its because these claims are barred by prescription; (f) the entirety of its claims because its loss or damage is
transactions with the bank, respondent authorized any two of its Ruth Fariñas (Fariñas), Orlando Dela Peña attributable to its own fault or negligence.13
(Dela Peña) and Juanito Collas (Collas) as bank signatories. Dela Peña was respondent's President. 4
The RTC granted BPI's demurrer to evidence, reasoning thus:
Sometime in 2001, Dela Peña was convicted for estafa and was consequently dismissed from employment. It "In a nutshell, the grievance of [respondent] against BPI is that the latter, through the 'deliberate
was also around this time that respondent discovered that Dela Peña, acting in alleged conspiracy or taking malfeasance' or 'gross negligence' of its 'Pamplona Branch personnel,' conspired with the herein defendant
advantage of the gross negligence of BPI, succeeded in unlawfully withdrawing various amounts from [Dela Peña] in defrauding the former the total sum of Three Million Six Hundred Fifty-Two Thousand
respondent's deposit accounts. Respondent alleged that BPI was negligent and violated its fiduciary duties Ninety[-]Five Pesos and One Centavo (P3,652,095.01).
when it allowed the withdrawals in the total amount of P3,652,095.01 on the basis of Dela Peña's lone
signature or thru the forged signatures of his cosignatories.5 Despite demand, BPI failed to heed Necessarily, the herein [respondent] should prove by strong and convincing evidence that the defendant
respondent's claims which prompted the latter to file the complaint a quo for sum of money and damages [BPI] colluded with Mr. Dela Peña and that BPI failed to exercise the diligence higher than that of a good
against BPI and Dela Peña.6 father of a family in dealing with [respondent's] account with it.

BPI initially moved to dismiss the complaint on the ground that respondent's claims covering the withdrawals The testimonial and documentary pieces of evidence of the herein [respondent] are so barren when it comes
prior to September 30, 1998 have already prescribed. The RTC denied the motion to dismiss and reasoned to its allegation of connivance between BPI and Mr. Dela Peña. This Court has perused the record apropos
that the period of prescription is reckoned from the discovery of the fraud, or from 2001. 7 This led BPI to file over and over again but it could not find any proof of conspiracy between Mr. Dela Peña and BPI adduced by
its answer, raising the defenses of lack of cause of action, prescription, and laches. 8 On the other hand, Dela [respondent]. It would seem that [respondent] may have forgotten about this particular allegation of it
Peña failed to file his answer and was consequently declared in default.9 against BPI. Hence, on this score alone, the demurrer to evidence extant of BPI has no merit.

During the preliminary conference, respondent moved for the production of documents to compel BPI to Withal, the evidence presented by the [respondent] herein is also very inadequate to establish gross
produce the originals of the signature cards and withdrawal slips marked as Exhibits "A", "A-1", "B", "B-1", negligence on the part of defendant [BPI].14
"G", "G-1" and "H" to "H-28." Instead of producing the originals, BPI admitted said exhibits, except for Resultantly, the RTC disposed:
Exhibits "A" and "B-1", and stipulated that Exhibits "G" to "H-28" were obtained by respondent from the WHEREFORE, premises duly considered, the instant "Demurrer to Evidence" of the herein defendant [BPI]
microfilm copies of BPI.10 is hereby GRANTED.

Trial on the merits ensued until respondent filed its formal offer of exhibits, which included the following: Congruently with Section 1, Rule 33 of the Revised Rules of Court, the case extant is
1. Signature cards (Exhibits "A", "A-1", "B" and "B-1") with petitioner that show the names and specimen hereby DISMISSED apropos herein defendant [BPI] on the ground that upon the facts and the law the.
signatures of the authorized signatories of respondent; [respondent] herein has shown no right to relief.

2. Respondent's Board Resolution (Exhibit "C") showing the authority of the signatories in "any two" Vis-a-vis herein defendant [Dela Peña], who was declared in default by the Court via its fiat on 30 November
capacity; 2004, in accordance with Section 3, Rule 10 of the Revised Rules of Court, he is hereby ORDERED to pay
the herein [respondent] the following sums, to wit:
3. Counterchecks taken from the bank's checkbook which allowed Dela Peña to make encashments on the
basis of Dela Peña's lone signature (Exhibits "D" to "D-2" and "E") and checks that bear the lone signature of
1. Three Million Six Hundred Fifty-Two Thousand Ninety[-]Five Pesos and One Centavo (P3,652,095.01),
plus legal interest counted from the date of each unauthorized withdrawal until the entire amount is fully SO ORDERED.20
paid as and for actual damages; BPI's motion for reconsideration was similarly denied by the CA in its Resolution21 dated August 12, 2011.

2. Five Hundred Thousand Pesos (P500,000.00) as and by way of moral damages; Hence, this petition.
Issues
3. Two Hundred Thousand Pesos ([P]200,000.00) as and by way of exemplary damages;
BPI argues that the CA erred in applying the rule on actionable documents to extend probative value to
4. One Hundred Thousand Pesos (P100,000.00) as and for attorney's fees; and respondents' Exhibits D, F, and G and its sub-markings considering that BPI was not a party nor a signatory
to said counterchecks, checks and withdrawal slips.
5. The costs of suit.
Also, BPI questions the CA's finding that Fariñas' signatures as appearing on the Exhibits "H" to "H-28" and
Serve copies of this Resolution to the plaintiff herein and herein defendant bank and to their respective Exhibits "I" to "I-80" were forged. According to BPI, the bare claim that Fariñas' signatures were forged is
counsel of record, including the defaulted defendant at his given address on record. not sufficient pursuant to the Court's ruling in Sps. Salonga v. Sps. Concepcion.22 Admitting for the sake of
argument that the signatures were forged, BPI claims that respondent is guilty of negligence which
SO ORDERED.15 precludes it from setting up forgery or want of authority.
Respondent's motion for reconsideration having been denied, it appealed to the CA.
Ruling of the CA BPI also disputes the imposition of interest and the award of attorney's fees in the absence of evident bad
faith.
While agreeing with the RTC that respondent failed to demonstrate that indeed Dela Peña conspired with Ruling of the Court
BPI, the CA nevertheless held that the non-existence of conspiracy would not necessarily exculpate BPI from
liability if there is evidence to show that the latter violated its fiduciary duty to respondent. In other words, The assailed CA decision is affirmed but with the modification that: (1) Dela Peña should not be held
the CA ruled that a negligent bank is liable regardless of any allegation of conspiracy. 16 solidarily liable with BPI considering that their specific liabilities are anchored on two separate sources of
obligations; and (2) the rate and reckoning period of the interest imposed.
In finding BPI to be negligent, the CA factually found that it allowed withdrawals from respondent's accounts
with just the signature of Dela Peña, despite respondent's instruction that the signatures of "any two" of its Time and again, the Court has stressed that only questions of law should be raised in petitions for review
authorized signatories are required to effect payment of funds. The lone signature of Dela Peña for which BPI under Rule 45 of the Rules of Court. The Court does not entertain questions of fact given that factual
allowed withdrawals are to be found on three counterchecks (Exhibits "D" to "D-2"), seven checks (Exhibits findings of the appellate court are final, binding, or conclusive on the parties and on this Court. 23 The
"F" to "F-6") and two withdrawal slips (Exhibits "G" and "G-1"). Disregarding BPI's defense that these assessment of the probative value of the evidence presented and of whether the lower courts' appreciation
exhibits were not properly identified or authenticated as required by Section 20, Rule 132 of the Rules of of the evidence is correct are questions of fact24 which the Court does not address in a Rule 45 petition.
Court, the CA ruled that BPI's failure to specifically deny under oath said exhibits resulted to an implied
admission of their genuineness and due execution pursuant to Section 8, Rule 8 of the Rules of Court. 17 While it is true that there are certain recognized exceptions 25 to the rule that factual findings of the [CA] are
binding on the Court, such as when its findings are contrary to that of the trial court, as in this case, this
As regards the other withdrawal slips (Exhibits "H" to "H-28") and checks (Exhibits "I" to "I-80"), the CA alone does not automatically warrant a review of the appellate court's factual findings.26 The binding nature
found that these carried forged signatures of Fariñas. According to the CA, the fact of forgery was proven of the factual findings of the CA was explained in Pascual v. Burgos, et al.,27 as follows:
not only by Fariñas' testimony but also by the presentation of her standard signatures and by the testimony [T]he doctrine that the findings of fact made by the Court of Appeals, being conclusive in nature, are binding
of a handwriting expert.18 The CA held that the differences between the questioned signatures appearing on on this Court, applies even if the Court of Appeals was in disagreement with the lower court as to the weight
the withdrawal slips and checks and Fariñas' standard signatures are readily apparent. Moreover, the CA of evidence with a consequent reversal of its findings of fact, so long as the findings of the Court of Appeals
found that these exhibits were in fact properly identified by Fariñas and admitted by BPI to have been are borne out by the record or based on substantial evidence. x x x. 28 (Citation omitted)
sourced from its own microfilm copies.19 As such, "only a showing, on the face of the record, of gross or extraordinary misperception or manifest bias
in the Appellate Court's reading of the evidence will justify this Court's intervention by way of assuming a
The CA, thus, held that the evidence sufficiency established that BPI breached its fiduciary duty when it function usually within the former's exclusive province."29 The instant petition demonstrates no such
honored the subject withdrawals with only Dela Peña's signature in violation of the "any two" authorized exceptional circumstance.
signatories requirement. The CA also found that BPI failed to exercise extraordinary diligence in scrutinizing
the checks. On the contrary, we find that the findings of the CA that BPI allowed several withdrawals despite the fact
that the checks and withdrawal slips used bore the lone signature of Dela Peña and/or with the forged
These findings led the CA to conclude that the RTC committed reversible error in granting BPI's demurrer to signatures of Fariñas, in opposition to respondent's "two authorized signatory" resolution, are amply
evidence. Instead, the CA ruled that BPI should be held solidarily liable with Dela Peña for actual losses plus supported by the record.
12% legal interest from the date of each unauthorized withdrawal.
BPI argues that these checks and withdrawal slips are inadmissible essentially because (1) these are private
In disposal, the CA held: documents which were not properly authenticated, and that (2) there was no satisfactory evidence
WHEREFORE, above premises considered, the instant appeal is GRANTED. The Resolutions of the RTC of presented to prove the alleged forgery. Both arguments fail to convince.
Makati City, Branch 61 dated 14 April 2009 and 26 June 2009, respectively, are REVERSED and SET
ASIDE. A private document requires authentication in the manner allowed by law or the Rules of Court before it may
be received in evidence. However, authentication of a private document is not required when:
Defendant-appellee BPI and defendant [Dela Peña], who was declared in default, are solidarily liable to (a) the document is an ancient one under Section 21, Rule 132 of the Rules of Court; (b) the genuineness
[respondent]. Defendant appellee and defendant [Dela Peña] are ORDERED to pay (1) actual damages in the and authenticity of an actionable document have not been specifically denied under oath by the adverse
amount of P3,652,095.01 plus 12% legal interest from the date of each unauthorized withdrawal until the party; (c) the genuineness and authenticity of the document have been admitted; or (d) the document is not
entire amount is fully paid and (2) P100,000.00 as attorney's fees in favor of [respondent]. being offered as genuine.30 (Citations omitted)
To begin with, the Court notes that the trial court had admitted all of respondent's exhibits to which BPI II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
raised no further objections. The admissibility of respondent's pieces of evidence should no longer be further rate of interest, as well as the accrual thereof, is imposed, as follows:
litigated. It also appears that BPI admitted and stipulated on the genuineness and due execution of the
questioned checks and withdrawal slips during the preliminary conference and further admitted that these
1. When the obligation is breached, and it consists in the payment of a sum of
checks and withdrawal slips were obtained from the microfilm copies of BPI. It was further alleged and
money, i.e., a loan or forbearance of money, the interest due should be that
admitted that these very same checks and withdrawal slips were honored by BPI. 31 Thus, the foregoing
which may have been stipulated in writing. Furthermore, the interest due shall
judicial admissions dispense with the ordinarily required proof that the checks and withdrawal slips were
itself earn legal interest from the time it is judicially demanded. In the absence
authentic.
of stipulation, the rate of interest shall be 6% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
As regards BPI's contention that there was no evidence presented to prove that Fariñas' signatures on the
provisions of Article 1169 of the Civil Code.
subject checks and withdrawal slips were forged, the CA correctly observed that Fariñas herself categorically
2. When an obligation, not constituting a loan or forbearance of money, is
denied signing the said instruments and identified her genuine signatures. Corroborating Fariñas' testimony
breached, an interest on the amount of damages awarded may be imposed at
was that of a handwriting expert who also presented her report and comparison charts to prove that the
the discretion of the court at the rate of 6% per annum. No interest, however,
signatures appearing on the checks and the withdrawal slips were not genuine signatures of Fariñas.
shall be adjudged on unliquidated claims or damages, except when or until the
Considering these other pieces of evidence, there is no reason to apply the Court's pronouncement in
demand can be established with reasonable certainty. Accordingly, where the
Salonga that a bare claim of forgery is insufficient.
demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or
At any rate, the CA itself found that there were significant variances" between Fariñas' standard signatures
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so
as appearing on her valid identification cards and the signatures appearing on the questioned withdrawal
reasonably established at the time the demand is made, the interest shall begin
slips and checks.32 We observe that the matter herein involved is not highly technical as to preclude the
to run only from the date the judgment of the court is made (at which time the
appellate court from examining the signatures and thereafter ruling on whether or not they are indeed
quantification of damages may be deemed to have been reasonably
forgeries.33 Thus, we find no reason to deviate from the CA's factual findings.
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.39 (Emphasis ours and italics in the
Nevertheless, Dela Peña cannot be held solidarily liable with BPI as held by the CA.
original)
Nacar also instructs that the new rate is to be applied prospectively, or from July 1, 2013. Applying the
To emphasize, BPI's liability proceeds from a breach of contract. Under Article 1980 of the Civil Code, "fixed,
foregoing guidelines to the instant case, the amount of P3,652,095.01 shall earn interest at the rate of
savings, and current deposits of money in banks x x x shall be governed by the provisions concerning simple
12% per annum from September 16, 2002, or the date when judicial demand was made, until June 30, 2013
loan[s]." By the contract of loan or mutuum, one party delivers money to another upon the condition that
and 6% per annum from July 1, 2013 until satisfaction thereof.
the same amount shall be paid.34
Finally, there is no reason to disturb the award of attorney's fees where the court deems it just and equitable
To recall, respondent was defrauded by several withdrawals from its deposit accounts being allowed by BPI
that attorney's fees and expenses of litigation should be recovered.40
solely on the basis of Dela Peña's signature despite specific instructions that withdrawals be done only upon
the signatures of any two of respondent's authorized signatories, and additional withdrawals being allowed
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated February 28, 2011 of the Court of
on the basis of the forged signatures of respondent's other authorized signatory. It is basic that those who,
Appeals in CA-G.R. CV No. 93752 is AFFIRMED with MODIFICATION. Petitioner Bank of the Philippine
in the performance of their obligations, are guilty of negligence, and those who in any manner contravene
Islands is held liable to pay respondent Land Investors and Developers Corporation actual damages in the
the tenor thereof, are liable for damages.35 When BPI allowed Dela Peña to make unauthorized withdrawals,
amount of P3,652,095.01 with interest at the rate of twelve percent (12%) per annum from September 16,
it failed to comply with its obligation to secure said accounts by allowing only those withdrawals authorized
2002, or the date when judicial demand was made, until June 30, 2013 and six percent (6%) per
by respondent. In so doing, BPI violated the terms of its contract of loan with respondent and should be held
annum from July 1, 2013 until satisfaction of this Decision and attorney's fees in the amount of
liable in this regard.
P100,000.00.
On the other hand, Dela Peña's liability arises from the commission of the crime of estafa. Dela Peña had in
SO ORDERED.
fact been charged and convicted of estafa. Thus, respondent's action to recover actual damages against Dela
Peña was deemed instituted with the criminal action, unless waived, reserved or previously
instituted.36 There is no indication that such reservation had been done by respondent. As such, to hold Dela
Peña solidarily liable for damages in this case may result in double recovery which is proscribed. 37 In any
case, it is clear that the civil liability upon which Dela Peña was being held liable by the CA is totally distinct
and separate from the source of BPI's liability. Thus, BPI and Dela Peña's respective liabilities cannot be
deemed joint and solidary.

The computation of the rate of interest likewise needs modification. In Nacar v. Gallery Frames, et al.,38 the
Court modified the guidelines regarding the manner of computing legal interest as follows:
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are
accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of
the Civil Code govern in determining the measure of recoverable damages.