SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A
1 DE LA RAMA V. VILLAROSA
FACTS:
Lessor Lourdes de la Rama brought an action in the Court of first Instance against lessee Augusto R. Villarosa and the Villarosas surety, the Luzon Surety Co., Inc. for judicial confirmation of the cancellation, rescission and annulment of a contract of lease of sugarland. CFI rendered a partial summary judgment decreeing the lease rescinded, cancelled and annulled and ordering defendant Augusto R. Villarosa to surrender and deliver to De LaRama or her representatives the possession of the leased premises, etc. and ordering Villarosa and Surety to jointly and severally pay De La Rama for the unpaid rents etc. Subsequently, the court issued order for the immediate execution of the above judgment. Upon the application of De La Rama, the lower court issued order for the issuance of a third alias writ of execution directing the sheriff to satisfy the judgment. Accordingly, the sheriff of Manila garnished the Villarosa with the Philippine Trust Co. (PTC) to the amount of P71,533.99. and required the PTC not to deliver, transfer or otherwise dispose of the said amount belonging to Villarosa, to any person except to the sheriff, or suffer the penalties prescribed by law. PTC complying with such notice, set aside the amount of P71,533.99 out of the deposit of the Villarosa in its possession for the benefit of the sheriff of Manila and the De La Rama. Luzon Surety perfected an appeal However, the garnishee, PTC., refused to deliver to the sheriff of Manila, the said amount garnished to satisfy the writ of execution. The lower court, ordered PTC to pay the sheriff out of the deposit of the Luzon Surety Co., Inc. the amount stated in the garnishment. Before the order could be complied with by the garnishee, the defendant Luzon Surety Co. filed a petition for certiorari with preliminary injunction with the Court of Appeals against the Court of First Instance, the sheriff and the PTC. Hence, sheriff was enjoined from enforcing the order against PTC. So the garnishee did not deliver to the sheriff any portion of the amount garnished and De la Rama never received any for satisfaction of the original judgment. CA held Luzon Surety is hereby ordered to pay the sum of P24,864.78 solidarity with Villarosa, to Lourdes de la Rama. Villarosa, invoking the provisions of section 5 of Rule 39, Rules of Court, filed with the lower court a verified motion for the restitution of the amount of P39,998.42 (P71,533.99 minus P33,002.72 equals P38,531.27), plus interest thereon at the rate of 6% per annum from August 18, 1959 until paid. The above amount represents the balance refundable to it after the Court of Appeals modified the decision of the lower court, plus a 6% interest thereon, invoking the provision of section 5 of Rule 39. But this was opposed by De La Rama alleging that by virtue of the writ of preliminary injunction issued by the Court of Appeals the sheriff was never able to collect from the Philippine Trust Company any portion of the amount garnished. The above order is the subject of this appeal to this Court. The gist of the Villarosa's appeal is inasmuch as the full amount of P71,533.99 was garnished but only the sum of P31,535.57 was paid, the amount of the judgment awarded in the Court of Appeals, plaintiff-De La Rama should pay an interest of 6% of the difference between the total sum actually garnished and the sum obtained by the plaintiff in the final judgment or an interest of 6% etc. Basis for this petition is Section 5 of Rule 39 which reads as follows: SEC. 5. Effect of reversal of judgment executed. Where the judgment executed is reversed totally or partially on appeal the trial court, on motion, after the case is remanded to it, may issue such orders of restitution as equity and justice may warrant under the circumstances. (Rules of Court) ISSUE: W/N the interest on the balance of amount garnished be granted to Villarosa. HELD: No.There are various reasons why the petition for interest on the balance of the amount garnished cannot be awarded to the defendant- appellant. In the first place, the amount garnished was not actually taken possession of by the sheriff, even from the time of the garnishment, because SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 2 upon the perfection of the defendant-appellant's appeal to the Court of Appeals this Court issued an injunction prohibiting execution of the judgment. The plaintiff-appellee was, therefore, able to secure a full satisfaction of the judgment only upon final judgment of the Court on August 6, 1960. The total sum garnished was not delivered to the sheriff in execution, because the order for the execution of the judgment of the lower court was suspended in time by the appeal and the preliminary injunction issue on appeal. In the second place, the mere garnishment of funds belonging to the party upon order of the court does not have the effect of delivering the money garnished to the sheriff or to the party in whose favor the attachment is issued. The fund is retained by the garnishee or the person holding the money for the defendant. The garnishee, or one in whose hands property is attached or garnished, is universally regarded as charged with its legal custody pending the outcome of the attachment of garnishment, unless, by local statute and practice, he is permitted to surrender or pay the garnished property or funds into court, to the attaching officer, or to a receiver or trustee appointed to receive them. (5 Am. Jur. 14) The effect of the garnishment, therefore, was to require the Philippine Trust Company, holder of the funds of the Luzon Surety Co., to set aside said amount from the funds of the Luzon Surety Co. and keep the same subject to the final orders of the Court. In the case at bar there was never in order to deliver the full amount garnished to the plaintiff-appellee; all that was ordered to be delivered after the judgment had become final was the amount found by the Court of Appeals to be due. The balance of the amount garnished, therefore, remained all the time in the possession of the bank as part of the funds of the Luzon Surety Co., although the same could not be disposed of by the owner. In the third place, the motion by the defendant- appellant for the payment of damages or interest was presented when the judgment had already become final. Damages incident to the issuance of an attachment may only be claimed before final judgment. (Rule 59, See. 20). In the case at bar the judgment of the Court of Appeals was issued on January 14, 1960. But the defendant-appellant's request for interest or damages is dated July 22, 1960. The defendant-appellant's own record on appeal shows that the decision of the Court of Appeals had already become final and executory time of the perfection of the appeal to this Court. A last reason is the absence of any allegation to the effect that the garnishment of appellant's funds in the Philippine Trust Company caused actual damages to defendant-appellant, for example, that the funds could not be utilized to pay a pending obligation as a result of which interest was paid on such obligation. 2. PNB V. GANCAYCO FACTS:. Defendants Emilio A. Gancayco and Florentino Flor, as special prosecutors of the Department of Justice, required the Philippine National Bank (PNB) to produce at a hearing the records of the bank deposits of Ernesto T. Jimenez, former administrator of the Agricultural Credit and Cooperative Administration, who was then under investigation for unexplained wealth. In declining to reveal its records, the PNB invoked Republic Act No. 1405 which provides: SEC. 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. On the other hand, the defendants cited the Anti- Graft and Corrupt Practices Act (Republic Act No. 3019) in support of their claim of authority and demanded anew that plaintiff Eduardo Z. Romualdez, as bank president, produce the records or he would be prosecuted for contempt. The law invoked by the defendant states: SEC. 8. Dismissal due to unexplained wealth. - If in accordance with the provisions of RA 1379, a public official has been found to have acquired during his incumbency, whether in his name or in the name of other persons, an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income, that fact shall be a ground for dismissal or removal. Properties in the name of the spouse and unmarried children of such public official may be SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 3 taken into consideration, when their acquisition through legitimate means cannot be satisfactorily shown. Bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary. Because of the threat of prosecution, plaintiffs filed an action for declaratory judgment in the Court of First Instance. After trial, during which Senator Arturo M. Tolentino, author of the Anti- Graft and Corrupt Practices Act testified, the court rendered judgment, sustaining the power of the defendants to compel the disclosure of bank accounts of ACCFA Administrator Jimenez. The court said that, by enacting section 8 of, the Anti- Graft and Corrupt Practices Act, Congress clearly intended to provide an additional ground for the examination of bank deposits. Without such provision, the court added prosecutors would be hampered if not altogether frustrated in the prosecution of those charged with having acquired unexplained wealth while in public office.c From that judgment, PNB appealed to this Court. In brief, plaintiffs' position is that section 8 of the Anti-Graft Law "simply means that such bank deposits may be included or added to the assets of the Government official or employee for the purpose of computing his unexplained wealth if and when the same are discovered or revealed in the manner authorized by Section 2 of Republic Act 1405, which are (1) Upon written permission of the depositor; (2) In cases of impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) In cases where the money deposited or invested is the subject matter of the litigation." PNB argues that to construe section 8 of the Anti-Graft Law as allowing inquiry into bank deposits would be to negate the policy expressed in section 1 of Republic Act No. 1405 which is "to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be utilized by banks in authorized loans to assist in the economic development of the country." ISSUE: W/N a bank can be compelled to disclose the records of accounts of a depositor who is under investigation for unexplained wealth. HELD: YES. The truth is that these laws are so repugnant to each other than no reconciliation is possible. Thus, while Republic Act No. 1405 provides that bank deposits are "absolutely confidential ... and [therefore] may not be examined, inquired or looked into," except in those cases enumerated therein, the Anti-Graft Law directs in mandatory terms that bank deposits "shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary." The only conclusion possible is that section 8 of the Anti- Graft Law is intended to amend section 2 of Republic Act No. 1405 by providing additional exception to the rule against the disclosure of bank deposits. With regard to the claim that disclosure would be contrary to the policy making bank deposits confidential, it is enough to point out that while section 2 of Republic Act 1405 declares bank deposits to be "absolutely confidential," it nevertheless allows such disclosure in the following instances: (1) Upon written permission of the depositor; (2) In cases of impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; (4) In cases where the money deposited is the subject matter of the litigation. Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy express the motion that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny. 3. BANCO FILIPINO SAVINGS BANK AND MORTGAGE V. PURISIMA FACTS: The Bureau of Internal Revenue accused Customs special agent Manuel Caturla before the Tanodbayan of having illegal acquired property manifestly out of proportion to his salary and other lawful income. During the preliminary investigation, the Tanodbayan issued a subpoena duces tecum to the Banco Filipino Savings and Mortgage Bank, commanding its representative to appear at a specified time at the Office of the Tanodbayan and furnish the latter with duly certified copies of the records in all its branches and extension offices of the loans, savings and time deposits and other banking transactions, in the names of Caturla, his wife, Purita, their children, and/or Pedro Escuyos. Caturla moved to quash the subpoena for violating Sections 2 and 3 of RA 1405 which was denied by the Tanodbayan. In fact, the Tanodbayan issued another subpoena which expanded its scope SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 4 including the production of bank records not only of the persons enumerated above but of additional persons and entities as well. The Banco Filipino filed an action for declaratory relief with the CFI of Manila which was denied by the lower court. Thus this special civil action of certiorari in the SC.
ISSUE: Whether or not the Law on Secrecy of Bank Deposits precludes production by subpoena duces tecum of bank records of transactions by or in the names of the wife, children and friends of a special agent of the Bureau of Customs accused before the Tanodbayan of having allegedly acquired property manifestly out of proportion to his salary and other lawful income in violation of RA 3019?
HELD: NO. In PNB v. Gancayco, we ruled that: while Section 2 of Republic Act No. 1405 provides that bank deposits are absolutely confidential and, therefore, may not be examined, inquired or looked into, except in those cases enumerated therein, Section 8 of Republic Act No. 3019 (Anti- graft law) directs in mandatory terms that bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary. The only conclusion possible is that Section 8 of the Anti- Graft Law is intended to amend Section 2 of Republic Act No. 1405 by providing an additional exception to the rule against the disclosure of bank deposits. The inquiry into illegally acquired property or property not legitimately acquired extends to cases where such property is concealed by being held by or recorded in the name of other persons. This proposition is made clear by RA 3019 which quite categorically states that the term legitimately acquired property of a public officer or employee shall not include property unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the name of, of held by, respondents spouse, ascendants, descendants, relatives or any other persons. To sustain the petitioners theory, and restrict the inquiry only to property held by or in the name of the government official or employee, or his spouse and unmarried children is unwarranted in the light of the provisions of the statutes in question, and would make available to persons in government who illegally acquire property an easy and fool- proof means of evading investigation and prosecution; all they 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. 4. RCBC V. DE CASTRO FACTS: In a prior case of action for recovery of unpaid tobacco deliveries, the court issued an order directing the Philippine Tobacco Industries Admin (PVTA) to pay BADOC Planters a certain amount of money.
BADOC filed an Urgent Ex-Parte Motion for a Writ of Execution of the said Partial Judgment which was granted on the same. Accordingly, the Branch Clerk of Court on the very same day, issued a Writ of Execution addressed to Special Sheriff, who then issued a Notice of Garnishment addressed to the General Manager and/or Cashier of Rizal Commercial Banking Corporation. The respondent Judge issued an Order directing RCBC "to deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff Rigor in turn is ordered to cash the check and deliver the amount to the BADOCs representative. In compliance with said Order, RCBC delivered to Sheriff Rigor a certified check in the sum of P 206,916.76. PVTA filed a MR, which was granted. It ordered RCBC and BADOC "to restore, jointly and severally, the account of PVTA with the said bank in the same condition and state it was before the issuance of the aforesaid Orders by reimbursing the PVTA of the amount of P 206, 916.76 with interests at the legal rate. RCBC then filed a MR, which was denied, by the court. Hence, this petition. ISSUE: W/N the bank is liable for releasing its depositor's funds upon orders of the court, pursuant to a writ of garnishment. HELD: No. It is important to stress, at this juncture, that there was nothing irregular in the delivery of the funds of PVTA by check to the sheriff, whose custody is equivalent to the custody of the court, he being a court officer. The order of the court dated January 27, 1970 was composed of two parts, requiring: 1) RCBC to deliver in check the amount garnished to the designated sheriff and 2) the sheriff in turn to cash the check and deliver the amount to the plaintiffs representative and/or SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 5 counsel on record. It must be noted that in delivering the garnished amount in check to the sheriff, the RCBC did not thereby make any payment, for the law mandates that delivery of a check does not produce the effect of payment until it has been cashed. [Article 1249, Civil Code.] Moreover, by virtue of the order of garnishment, the same was placed in custodia legis and therefore, from that time on, RCBC was holding the funds subject to the orders of the court a quo. That the sheriff, upon delivery of the check to him by RCBC encashed it and turned over the proceeds thereof to the plaintiff was no longer the concern of RCBC as the responsibility over the garnished funds passed to the court. Thus, no breach of trust or dereliction of duty can be attributed to RCBC in delivering its depositor's funds pursuant to a court order which was merely in the exercise of its power of control over such funds. ... The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court [De Leon v. Salvador, G.R. Nos. L-30871 and L-31603, December 28,1970, 36 SCRA 567, 574.] The respondent judge however, censured the petitioner for having released the funds "simply on the strength of the Order of the court which. far from ordering an immediate release of the amount involved, merely serves as a standing authority to make the release at the proper time as prescribed by the rules." [Rollo, p. 81.] This argument deserves no serious consideration. As stated earlier, the order directing the bank to deliver the amount to the sheriff was distinct and separate from the order directing the sheriff to encash the said check. The bank had no choice but to comply with the order demanding delivery of the garnished amount in check. The very tenor of the order called for immediate compliance therewith. On the other hand, the bank cannot be held liable for the subsequent encashment of the check as this was upon order of the court in the exercise of its power of control over the funds placed in custodia legis by virtue of the garnishment.
5. MELLON BANK V. MAGSINO
FACTS: This case involves the erroneous transfer of US $1,000,000 to Victoria Javier instead of US $1,000 only. Dolores Ventosa requested the transfer of $1000 from the First National Bank of West Virginia, USA to Victoria Javier in Manila through the Prudential Bank. Accordingly, the First National Bank requested the petitioner, Mellon Bank, to effect the transfer. Unfortunately, the wire sent by Mellon Bank to Manufacturers Hanover Bank, a correspondent of Prudential Bank, indicated the amount transferred as US $1,000,000.00 instead of US $1,000.00. Hence, Manufacturers Hanover Bank transferred one million dollars less bank charges of $6.30 to the Prudential Bank for the account of Victoria Javier. Javier opened a new dollar account in Prudential Bank and deposited $999,943. Immediately, thereafter, Javier and her husband made withdrawals from the account, deposited them in several banks only to withdraw them later in an apparent plan to conceal, launder and dissipate the erroneously sent amount. One of the things they bought was real property in California, USA which was the subject of an action for recovery by Mellon Bank. Later, it filed a case in the Philippines for the recovery of the whole amount, including the purchase price of the real property located in the US. Among other things, private respondents raised the issue of whether or not, by virtue of the principle of election of remedies, an action filed in California, USA, to recover real property located therein and to constitute a constructive trust on said property precludes the filing in our jurisdiction of an action to recover the purchase price of said real property. SC ruled that the filing of a recovery suit in the US does not preclude the filing of an action in the Philippines for the recovery of the purchase price. With regard to our subject matter, Erlinda Baylosis of the Philippine Veterans Bank and Pilologo Red, Jr. of Hongkong and Shanghai Banking Corporation were required to give testimonies with regard to the deposits and checks issued by the private respondents Javier, et. al.. These testimonies were questioned for being immaterial and irrelevant as well as covered by RA 1405 on confidentiality.
HELD: Private respondents protestations that to allow the questioned testimonies to remain on record would be in violation of the provisions of RA SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 6 1405 on the secrecy of bank deposits is unfounded. Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as the civil case is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition. 6.PCIB V. COURT OF APPEALS FACTS: The case originated from an action filed with NLRC by laborers of Marinduque Mining Corporation. The said laborers obtained a favorable judgment whereby the NLRC Commissioner issued a writ of execution to satisfy the award of backwages amounting to 205K against their employer Mining Corporation. The sheriff served the writ but nothing happened. Hence, the Sheriff prepared on his own a Notice of Garnishment addressed to six (6) banks, including PCIB, directing the bank concerned to immediately issue a check in the name of the Deputy Provincial Sheriff in an amount equivalent to the amount of the garnishment. Atty. Alejano the in house counsel of the Mining Corporation learned about the execution of Judgment. Atty. Alejano called the bank manager, Jose Hernas to withhold any claim against the deposit account of Mining Corporation. Subsequently, Sheriff went to the PCIB and presented the Writ. Jose, upon knowing from the Acting Provincial Sheriff that there was no restraining order from the National Labor Relations Commission and on the favorable advice of the bank's legal counsel, issued a debit memo for the full balance of the private respondent's account with the petitioner bank. Thereafter, he issued a manager's check in the name of the Deputy Provincial Sheriff of Negros Occidental for the amount of P37,466.18, which was the exact balance of the private respondent's account as of that day. On the following day since there was no TRO issued by NLRC, when sheriff asked for its enforcement, Jose Hernas allowed the same.
Hence, Mining Corporartion, filed a complaint before the RTC against Sheriff, PCIB, alleging that the former's current deposit with the petitioner bank was levied upon, garnished, and with undue haste unlawfully allowed to be withdrawn, and notwithstanding the alleged unauthorized disclosure of the said current deposit and unlawful release thereof, the latter have failed and refused to restore the amount of P37,466.18 to the former's account despite repeated demands. Trial court rendered judgment in favor of Marinduque Mining Corporation. On appeal, the Court of Appeals initially reversed the trial courts order but later affirmed it. Thus, this petition to the SC.
ISSUE: Whether or not the petitioners violated the Secrecy of Bank Deposits Act, when they allowed the sheriff to garnish the deposit of Marinduque Mining Corporation?
HELD: NO. The SC first ruled that the release of the deposit by the bank was not done in undue and indecent haste. We find the immediate release of the funds by the petitioner bank on the strength of the notice of garnishment and writ of execution, whose issuance, absent any patent defect, enjoys the presumption of regularity. The SC likewise did not find any violation whatsoever by the petitioners of RA 1405, otherwise known as the Secrecy of Bank Deposits Act. The Court, in China Banking Corporation v. Ortega, had the occasion to dispose of this issue when it stated, to wit: It is clear from the discussion of the conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act No. 1405, that the prohibition against examination of or inquiry into a bank deposit under Republic Act No. 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed, there is no real inquiry in such a case, and if existence of the deposit is disclosed, the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank. Since there is no evidence that the petitioners themselves divulged the information that the private respondent had an account with the petitioner bank and it is undisputed that the said account was properly the object of the notice of garnishment and writ of execution carried out by the deputy sheriff, a duly authorized officer of the SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 7 court, we cannot therefore hold the petitioners liable under RA 1405. 7. ALEXANDER VAN TWEST V. COURT OF APPEALS FACTS: Alexander Van Twest (Van Twest) and Gloria Anacieto (Gloria) opened a joint foreign currency savings account with International Corporate Bank (Interbank) to hold funds which "belonged entirely and exclusively" to Van Twest, to "facilitate the funding of certain business undertakings" of Van Twest and Gloria and which funds were to be "temporarily (held) in trust" by Gloria, who "shall turnover the same to Van Twest upon demand."
Van Twest further alleged that withdrawals from the account were always made through their joint signatures; that when his business relationship with Gloria turned sour, Gloria unilaterally closed their joint account, withdrew the remaining balance of Deutschmark (DM) 269,777.37 and placed the money in her own personal account with the same bank.
Hence, Van Twest filed a complaint against Gloria and interbank for recovery of a sum of money.
Van Twest thus sought an injunctive writ to prevent Gloria from withdrawing the money at any time and thereby defeat Van Twests claim in pending action in the above stated case.
TRO was issued. After the hearing, the enjoined ordered Gloria and Interbank from effecting and allowing withdrawals from the Foreign Currency Deposit Account until further orders of the court. But such order was questioned by Gloria by filing a petition for Certiora before CA in order to annul the RTCs order, which the CA granted. Van Twest filed a MR but it was denied. Hence, this present petition. In a Resolution dated 12 August 1992, the Court motu proprio issued an indefinite temporary restraining order enjoining the Court of Appeals from enforcing its questioned Decision and Resolution. 7 The parties subsequently complied with the requirement of the Court to submit responsive pleadings in amplification of their respective positions regarding the soundness of the Court of Appeals' Decision under review. 8 The Court then resolved to give due course to the Petition and required the parties to submit their memoranda. The parties did. 9
Deliberating on the present Petition for Review, the Court considers that the Court of Appeals was in reversible Deliberating on the present Petition for Review, the Court considers that the Court of Appeals was in reversible error in annulling the writ of preliminary injunction issued in petitioner's favor by the Regional Trial Court. In ruling that petitioner was not entitled to the provisional remedy of preliminary injunction during the pendency of Civil Case No. 90-659, the Court of Appeals said: ISSUE:
HELD: On a substantive, the Court holds that the privileges extended by the statute cited by private respondent are actually enjoyed, and are invocable only, by the petitioner, both because private respondent's transactions fall outside the ambit of the statute, and because petitioner is the owner of the foreign exchange fund subject of this case. This conclusion is anchored on the consistent and contemporaneous administrative construction by the Central Bank of the basic statute, as manifested in the relevant circulars issued by it in implementation of that law, which are entitled to great respect by the courts. 25
Section 8 of R.A. No. 6426 (the Foreign Currency Deposit Act), as amended by P.D. No. 1246, which is still in force, provides: Sec. 8. Secretary of Foreign Currency Deposits All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office, whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. 26
(Emphasis supplied) Section one hundred-two of Circular No. 960, SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 8 Series of 1983, provides in relevant part: xxx xxx xxx Sec. 102. Foreign currency funds ineligible for deposits. a. Foreign exchange purchased from authorized agent banks in accordance with existing regulations such as excess travel funds; unspent financial assistance of dependents abroad of Philippine residents; foreign exchange acquired from any resident persons, firm, association and corporation; and transfers to foreign currency deposit account or receipt from another foreign currency deposit account, whether for payment of legitimate obligation or otherwise, are not eligible for deposit under the System. xxx xxx xxx 27
(Emphasis supplied) This Circular was in force at the time private respondent undertook her questioned transactions; thus, such local transfer from the original joint foreign currency account to another (personal) foreign currency account, was not an eligible foreign currency deposit within the coverage of R.A. No. 6426 and not entitled to the benefit of the confidentiality provisions of R.A. No. 6426. Circular No. 960 was superseded by Circular No. 1318, Series of 1992, which did not reenact and continue the administrative provision above- mentioned (Section 102). Nevertheless, Section seventy-four, Chapter seven of Circular No. 1318, which deals with the foreign currency deposit system, provides in relevant part; Section 74. Definition of Terms. As used in this Chapter, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: xxx xxx xxx The definition of such other terms used in this Chapter shall be consistent with the definition of terms used under the Chapter on Offshore Banking System. 28 (Emphasis supplied) Section forty-nine, Chapter five of the same Circular, dealing with the Offshore Banking System, stated in part: Section 49. Definition of Terms. . . . xxx xxx xxx d. "Deposit" shall refer to funds in foreign currencies which are accepted and held by an OBU business, with the obligation to return an equivalent amount to the owner thereof, with or without interest; xxx xxx xxx 29
(Emphasis supplied) In other words, although transfers from one foreign currency deposit account to another foreign currency deposit account in the Philippines are now eligible deposits under the Central Bank's Foreign Currency Deposit System, private respondent is still not entitled to the confidentiality provisions of the relevant circulars. For, as noted earlier, private respondent is not the owner of such foreign currency funds and her personal deposit account is not, under Section 49 of Circular No. 1318, protected 8. ONATE V. ABROGAR FACTS: Sun Life Assurance Company of Canada (Sun Life) filed a complaint for a sum of money with a prayer for the immediate issuance of a writ of attachment against Brunner Corporation, Onate, and Noel L. Dio. The following day the Judge issued an order granting the issuance of a writ of attachment. Upon Sun Life's ex-parte motion, the trial court amended the writ of attachment to reflect the alleged amount of the indebtedness. That same day, the Sheriff, accompanied by a representative of Sun Life, attempted to serve summons and a copy of the amended writ of attachment upon Brunner corporation but was not able to do so since there was no responsible officer to receive the same.
Nonetheless, Sheriff proceeded, over a period of several days, to serve notices of garnishment upon several commercial banks and financial institutions, and levied on attachment a condominium unit and a real property belonging to petitioner Oate. Aggrieved party filed an "Urgent Motion to Discharge/Dissolve Writ of Attachment." That same day, Sun Life filed an ex-parte motion to examine the books of accounts and ledgers of petitioner Brunner Development Corporation (Brunner, for brevity) at the Urban Bank and to SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 9 obtain copies thereof, which motion was granted by respondent Judge. The examination of said account was made. Hence, Brunner filed a petition to nullify the proceeding. Sun Life filed another motion for examination of bank accounts, this time seeking the examination of Account No. 0041-0277-03 with the Bank of Philippine Islands (BPI) which, incidentally, Brunner claim not to be owned by them and the records of Philippine National Bank (PNB) with regard to checks payable to Brunner. Sun Life asked the court to order both banks to comply with the notice of garnishment.
Brunner filed a petition to discharge the attachment. But the judge denied it. Hence, Brunners basic argument is that Judge acted with grave abuse of discretion in issuing ex parte the original and amended writs of preliminary attachment and the corresponding notices of garnishment and levy on attachment since the trial court had not yet acquired jurisdiction over them; and allowing the examination of the bank records though no notice was given to them. ISSUE: W/N Judge acted in excess of its Jurisdiction in ordering the examination of bank records despite no notice of the examination were ever given to them. HELD: The records show that, on January 21, 1992, respondent judge ordered the examination of the books of accounts and ledgers of Brunner at the Urban Bank, Legaspi Village branch, and on January 30, 199 the records of account of petitioner Oate at the BPI, even as he ordered the PNB to produce the records regarding certain checks deposited in it. First. Sun Life defends these court orders on the ground that the money paid by it to Brunner was subsequently withdrawn from the Urban Bank after it had been deposited by Brunner and then transferred to BPI and to the unnamed account in the petitioner Oate's account in the BPI and to the unnamed account in the PNB. The issue before the trial court, however, concerns the nature of the transaction between petitioner Brunner and Sun Life. In its complaint, Sun Life alleges that Oate, in his personal capacity and as president of Econ, offered to sell to Sun Life P46,990,000.00 worth of treasury bills owned by Econ and Brunner at the discounted price of P39,526,500.82; that on November 27, 1991, Sun Life paid the price by means of a check payable to Brunner; that Brunner, through its president Noel L. Dio, issued to it a receipt with undertaking to deliver the treasury bills to Sun Life; and that on December 4, 1991, Brunner and Dio delivered instead a promissory note, dated November 27, 1991, in which it was made to appear that the transaction was a money placement instead of sale of treasury bills. Thus the issue is whether the money paid to Brunner was the consideration for the sale of treasury bills, as Sun Life claims, or whether it was money intended for placement, as petitioners allege. Petitioners do not deny receipt of P39,526,500.82 from Sun Life. Hence, whether the transaction is considered a sale or money placement does not make the money the "subject matter of litigation" within the meaning of 2 of Republic Act No. 1405 which prohibits the disclosure or inquiry into bank deposits except "in cases where the money deposited or invested is the subject matter of litigation." Nor will it matter whether the money was "swindled" as Sun Life contends. Second. The examination of bank books and records cannot be justified under Rule 57, 10. This provision states: Sec. 10. Examination of party whose property is attached and persons indebted to him or controlling his property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in his possession or under his control any credit or other personal property belonging to such party, may be required to attend before the court in which the action is pending, or before a commissioner appointed by the court, and be examined on oath respecting the same. The party whose property is attached may also be required to attend for the purpose of giving information respecting his property, and may be examined on oath. The court may, after such examination, order personal property capable of manual delivery belonging to him, in the possession of the person so required to attend before the court, to be delivered to the clerk of the court, sheriff, or other proper officer on such terms as may be just, having reference to any lien thereon or claims against the same, to await the judgment in the action. Since, as already stated, the attachment of petitioners' properties was invalid, the examination ordered in connection with such attachment must likewise be considered invalid. Under Rule 57, 10, as quoted above, such examination is only proper where the property of the person examined has been validly attached. SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 10 9. SALVACION V. CENTRAL BANK Facts: Greg Bartelli, an American tourist, was arrested for committing four counts of rape and serious illegal detention against Karen Salvacion. Police recovered from him several dollar checks and a dollar account in the China Banking Corp. He was, however, able to escape from prison. In a civil case filed against him, the trial court awarded Salvacion moral, exemplary and attorneys fees amounting to almost P1,000,000.00. Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China Banking Corp. but the latter refused arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Salvacion therefore filed this action for declaratory relief in the Supreme Court. ISSUE: Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426, as amended by PD 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient?
HELD: The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of Republic Act No. 6426, are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby required to comply with the writ of execution issued in the civil case and to release to petitioners the dollar deposit of Bartelli in such amount as would satisfy the judgment.
Supreme Court ruled that the questioned law makes futile the favorable judgment and award of damages that Salvacion and her parents fully deserve. It then proceeded to show that the economic basis for the enactment of RA No. 6426 is not anymore present; and even if it still exists, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the law may be good when enacted. The law failed to anticipate the iniquitous effects producing outright injustice and inequality such as the case before us. The SC adopted the comment of the Solicitor General who argued that the Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits from foreign lenders and investors and, subsequently, to give the latter protection. However, 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. Considering that Bartelli is just a tourist or a transient, he is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes. Further, the SC said: In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.
10. UNION BANK V. COURT OF APPEALS FACTS: An amount amounting 1M was drawn against an account with Allied Banking payable to the order of Alvarez. Mr. Alvarez deposited the check with Union Bank who credited 1M to the account of Mr. Alvarez. Unionbank sent the check for clearing. When the check was presented for payment, a clearing discrepancy was committed by Union Banks clearing staff when the amount of One Million Pesos (P1,000,000.00) was erroneously under-encoded to One Thousand Pesos (P1,000.00) only. Unionbank only discovered the under- encoding almost a year later. Thus, Union Bank Notified Allied Bank of the discrepancy by way of a charge slip for Nine Hundred Ninety-Nine Thousand Pesos (P999,000.00) for automatic debiting against the account of Allied Bank. Allied Banking, however, refused to accept the charge slip since [the] transaction was completed per your [Union Banks] original instruction and clients account is now insufficiently funded. Subsequently, Union Bank filed a complaint against Allied Bank before the PCHC Arbitration Committee (Arbicom). Unionbank filed in RCT a petition for the examination of the said account. The RTC held SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 11 that the case involve does not fall under any of the foregoing exceptions to warrant a disclosure of or inquiry into the ledgers/books of account of Allied Checking Account No. 111-01854-8. UNionbanks complaint primarily hing[e]s on the alleged deliberate violation by Allied Bank Corporation of the provisions of the Clearing House Rules and as principal reliefs, it seeks for the recovery of amounts of money as a consequence of an alleged under-coding. On appeal to CA, the same affirmed RTCs decision, ruling that the case was not one where the money deposited is the subject matter of the litigation. We see no cogent reason to depart from the time-honored general banking rule that all deposits of whatever nature with banks are considered of absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office and corollarily, that it is unlawful for any official or employee of a bank to disclose to any person any information concerning deposits. Nowhere in petitioner collecting banks complaint filed before the PCHC does it mention of the amount it seeks to recover from Account No. 0111- 018548 itself, but speaks of P999,000.00 only as an incident of its alleged opportunity losses and interest as a result of its own employees admitted error in encoding the check.
ISSUE: W/N The subject matter involves money deposited.
HELD: Failing in that duty, petitioner holds private respondent directly liable for the P999,000.00 and other damages. It does not appear that petitioner is seeking reimbursement from the account of the drawer. This much is evident in petitioners complaint before the Arbicom. xxx plaintiffs cause of action against defendant arose from defendants deliberate violation of the provisions of the PCHC Rule Book, Sec. 25.3, specifically on Under-Encoding of check amounting to P1,000,000.00 drawn upon defendants Tondo Branch which was deposited with plaintiff herein sometime on May 20, 1990. From the check amount of P1,000,000.00, it was instead erroneously encoded at P1,000.00 which defendant as the receiving bank thereof, never called nor notified the plaintiff of the error committed thus causing actual losses to plaintiff in the principal amount of P999,000.00 exclusive of opportunity losses and interest thereon whatsoever. xxx[8] Petitioner even requested private respondents Branch Manager for reimbursement from private respondents account through the automatic debiting system. Hence, the amount actually debited from the subject account becomes very material and germane to petitioners claim for reimbursement as it is only upon examination of subject account can it be proved that indeed a discrepancy in the amount credited to petitioner was committed, thereby, rendering respondent Allied Bank liable to petitioner for the deficiency. The money deposited in aforesaid account is undeniably the subject matter of the litigation since the issue in the Arbicom case is whether respondent Bank should be held liable to petitioner for reimbursement of the amount of money constituting the difference between the amount of the check and the amount credited to petitioner, that is, P999,000.00, which has remained deposited in aforesaid account. On top of the allegations in the complaint, which can be verified only by examining the subject bank account, the defense of respondent Allied Bank that the reimbursement cannot be made since clients account is not sufficiently funded at the time petitioner sent its Charge Slip, bolsters petitioners contention that the money in subject account is the very subject matter of the pending Arbicom case. Indeed, to prove the allegations in its Complaint before the PCHC Arbitration Committee, and to rebut private respondents defense on the matter, petitioner needs to determine: 1. how long respondent Allied Bank had willfully or negligently allowed the difference of P999,000.00 to be maintained in the subject account without remitting the same to petitioner; 2. whether indeed the subject account was no longer sufficiently funded when petitioner sent its charge slip for reimbursement to respondent bank on May 7, 1991; and 3. whether or not respondent Allied Banks actuations in refusing to immediately reimburse the discrepancy was attended by good or bad faith. In other words, only a disclosure of the pertinent details and information relating to the transactions involving subject account will enable petitioner to prove its allegations in the pending Arbicom case. xxx[14] SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 12 In short, petitioner is fishing for information so it can determine the culpability of private respondent and the amount of damages it can recover from the latter. It does not seek recovery of the very money contained in the deposit. The subject matter of the dispute may be the amount of P999,000.00 that petitioner seeks from private respondent as a result of the latters alleged failure to inform the former of the discrepancy; but it is not the P999,000.00 deposited in the drawers account. By the terms of R.A. No. 1405, the money deposited itself should be the subject matter of the litigation. That petitioner feels a need for such information in order to establish its case against private respondent does not, by itself, warrant the examination of the bank deposits. The necessity of the inquiry, or the lack thereof, is immaterial since the case does not come under any of the exceptions allowed by the Bank Deposits Secrecy Act.
11. MARQUEZ V. DESIERTO FACTS: Marquez received an order from Ombudsman Desierto, ordering Marquez to produce several bank documents for purposed of inspection in CAMERA relative to various accounts maintained at Union Bank of the Philippines (UBP). The accounts to be inspected were involved in a case pending with the Ombudsman which involves violation of RA 3019 Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates Authority and AMARI. The Order was grounded onOmbudsman Act of 1989) which provides that OMBs power includes the power to examine and have access to bank accounts and records; and to punish contempt who will not obey the orders. Petitioner agreed to an in camera inspection set on June 3, 1998. However, on June 4, 1998, Marquez wrote the Ombudsman that the accounts in question could not readily be identified since the checks were issued in cash or bearer, and asked for time to respond to the order. Marquez surmised that these accounts had long been dormant, hence were not covered by the new account number generated by the UB system, thus sought to verify from the Interbank records archives for the whereabouts of these accounts. Marquez together with UBP filed a petition for declaratory relief, prohibition and injunction with the Makati RTC against the Ombudsman allegedly because the Ombudsman and other persons acting under his authority were continuously harassing her to produce the bank documents relative to the accounts in question and threatening her to cite in contempt. But it was denied by RTC. An order of contempt was issued. Marquez reiterated that she had no intention to disobey the orders of the Ombudsman. However, she wanted to be clarified as to how she would comply with the orders without her breaking any law, particularly RA 1405. ISSUE: Whether or not the order of the Ombudsman to have an in camera inspection of the questioned account is allowed as an exception to the law on secrecy of bank deposits (RA 1405). HELD: An examination of the secrecy of bank deposits law (RA 1405) would reveal the following exceptions: 1. Where the depositor consents in writing; 2. Impeachment case; 3. By court order in bribery or dereliction of duty cases against public officials; 4. Deposit is subject of litigation; 5. Sec. 8, R. A. No. 3019, in cases of unexplained wealth as held in the case of PNB vs. Gancayco We rule that before an in camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case. In Union Bank of the Philippines v. Court of Appeals, we held that Section 2 of the Law on Secrecy of Bank Deposits, as amended, declares bank deposits to be absolutely confidential except: (1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by the Monetary Board after SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 13 being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity, (2) In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank, (3) Upon written permission of the depositor, (4) In cases of impeachment, (5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or (6) In cases where the money deposited or invested is the subject matter of the litigation In the case at bar, there is yet no pending litigation before any court of competent authority. What is existing is an investigation by the office of the Ombudsman. In short, what the Office of the Ombudsman would wish to do is to fish for additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in court which would warrant the opening of the bank account for inspection. Zones of privacy are recognized and protected in our laws. The Civil Code provides that every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons and punishes as actionable torts several acts for meddling and prying into the privacy of another. It also holds a public officer or employee or any private individual liable for damages for any violation of the rights and liberties of another person, and recognizes the privacy of letters and other private communications. The Revised Penal Code makes a crime of the violation of secrets by an officer, the revelation of trade and industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual Property Code. Ombudsman is ordered to cease and desist from requiring Union Bank Manager Lourdes T. Marquez, or anyone in her place to comply with the order dated October 14, 1998, and similar orders.
12. OFFICE OF THEOMBUDSMAN V. IBAY FACTS: OMB conducted an investigation on the alleged "scam" on the Public Estates Authority-Amari Coastal Bay Development Corporation. Initial result of the investigation revealed that the alleged anomaly was committed through the issuance of checks which were subsequently deposited in several financial institutions. OMB issued an Order directing Lourdes Marquez, branch manager of Union Bank of the Philippines to produce several bank documents for inspection relative to certain Account maintained in the said branch. The documents referred to include bank account application forms, signature cards, transactions history, bank statements, bank ledgers, debit and credit memos, deposit and withdrawal slips, application for purchase of manager's checks, used manager's checks and check microfilms. The inspection would be done "in camera" wherein the bank records would be examined without bringing the documents outside the bank premises. Its purpose was to identify the specific bank records prior to the issuance of the required information not in any manner needed in or relevant to the investigation. Marquez failed to comply with OMB's order. She explained that the subject accounts pertain to International Corporate Bank (Interbank) which merged with Union Bank in 1994.
Marquez then filed a petition for declaratory relief with an application for temporary restraining order and/or preliminary injunction before the Regional Trial Court . In her petition, private respondent averred that under Sections 2 and 3 of R.A. 1405 (Law on Secrecy of Bank Deposits), she had the legal obligation not to divulge any information relative to all deposits of whatever nature with banks in the Philippines. ISSUE: W/N OMB can inquire into the questioned accounts
HELD: In any event, the relief being sought by private respondent in her action for declaratory SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 14 relief before the RTC of Makati City has been squarely addressed by our decision in Marquez vs. Desierto. 8 In that case, we ruled that before an in camera inspection of bank accounts may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, and the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case. In the present case, since there is no pending litigation yet before a court of competent authority, but only an investigation by the Ombudsman on the so- called "scam", any order for the opening of the bank account for inspection is clearly premature and legally unjustified. 13. INTENGAN V. COURT OF APPEALS FACTS: Citibank filed a complaint for violation of corporation code against its 2 officers namely Santos and Genuino.
Citibank Vice-president Lim, he alleges that he was assigned by the management of the Citibank to investigate certain anomalous and highly irregular activities of Treasurer of the Global Consumer Group of the bank, wherein Santos was the VP and Genuino was the Asst. VP and also performs the function of Account Officer.
It appeared that Santos and Genuino have been actively engaged in business endeavors that were in conflict with the business of the bank.
It was found that with the use of two (2) companies in which they have personal financial interest, namely Torrance Development Corporation and Global Pacific Corporation, they managed or caused existing bank clients/depositors to divert their money from Citibank, N.A., such as those placed in peso and dollar deposits and money placements, to products offered by other companies that were commanding higher rate of yields.
This was done by first transferring bank clients monies to Torrance and Global which in turn placed the monies of the bank clients in securities, shares of stock and other certificates of third parties.
It also appeared that out of these transactions, Mr. Dante L. Santos and Ms. Marilou Genuino derived substantial financial gains.
In the course of the investigation, it was found that the bank clients among of them is Intengan, which Mr. Santos and Ms. Genuino helped/caused to divert their Dollar deposits/money placements with Citibank, NA. to Torrance and Global (their family corporations) for subsequent investment in securities, shares of stocks and debt papers. It appears that Intengan have long standing accounts with Citibank, N.A. in savings/dollar deposits and/or in trust accounts and/or money placements. Hence, a complaint was filed against Santos and Genuino for violation of Section 31 of the Corporation Code in acquiring any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence. The complaint was supported by bank records presented by Lim, which revealed the deposits of herein petitioner. As an incident to the foregoing, Intengan and other depositors filed their respective motions for the exclusions and physical withdrawal of their bank records that were attached in the complaint. Thereafter, the provincial Prosecutor directed the filing of information against Lim et. Al, for the alleged violation of Bank Secrecy Law. ISSUE: Whether or not Lim et. Al. are liable for violation of Secrecy of Bank Deposits Act, RA 1405. HELD: The finest legal minds in the country - from the parties respective counsel, the Provincial Prosecutor, the Department of Justice, the Solicitor General, and the Court of Appeals - all appear to have overlooked a single fact which dictates the outcome of the entire controversy. A circumspect review of the record shows us the reason. The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No. 1405 but Republic Act (RA) No. 6426, known as the Foreign Currency Deposit Act of the Philippines, section 8 of which provides: Sec. 8. Secrecy of Foreign Currency Deposits.- All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 15 declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever.[21 (italics supplied) Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is allowed only upon the written permission of the depositor. Incidentally, the acts of private respondents complained of happened before the enactment on September 29, 2001 of R.A. No. 9160 otherwise known as the Anti-Money Laundering Act of 2001. A case for violation of Republic Act No. 6426 should have been the proper case brought against private respondents. Private respondents Lim and Reyes admitted that they had disclosed details of petitioners dollar deposits without the latters written permission. It does not matter if that such disclosure was necessary to establish Citibanks case against Dante L. Santos and Marilou Genuino. Lims act of disclosing details of petitioners bank records regarding their foreign currency deposits, with the authority of Reyes, would appear to belong to that species of criminal acts punishable by special laws, called malum prohibitum.
A violation of Republic Act No. 6426 shall subject the offender to imprisonment of not less than one year nor more than five years, or by a fine of not less than five thousand pesos nor more than twenty-five thousand pesos, or both.[24 Applying Act No. 3326, the offense prescribes in eight years.[25 Per available records, private respondents may no longer be haled before the courts for violation of Republic Act No. 6426. Private respondent Vic Lim made the disclosure in September of 1993 in his affidavit submitted before the Provincial Fiscal.[26 In her complaint- affidavit,[27 Intengan stated that she learned of the revelation of the details of her foreign currency bank account on October 14, 1993. On the other hand, Neri asserts that she discovered the disclosure on October 24, 1993.[28 As to Brawner, the material date is January 5, 1994.[29 Based on any of these dates, prescription has set in.[30 The filing of the complaint or information in the case at bar for alleged violation of Republic Act No. 1405 did not have the effect of tolling the prescriptive period. For it is the filing of the complaint or information corresponding to the correct offense which produces that effect.[31 It may well be argued that the foregoing disquisition would leave petitioners with no remedy in law. We point out, however, that the confidentiality of foreign currency deposits mandated by Republic Act No. 6426, as amended by Presidential Decree No. 1246, came into effect as far back as 1977. Hence, ignorance thereof cannot be pretended. On one hand, the existence of laws is a matter of mandatory judicial notice;[32 on the other, ignorantia legis non excusat.[33 Even during the pendency of this appeal, nothing prevented the petitioners from filing a complaint charging the correct offense against private respondents. This was not done, as everyone involved was content to submit the case on the basis of an alleged violation of Republic Act No. 1405 (Bank Secrecy Law), however, incorrectly invoked.
14. REPUBLIC OF THE PHILS V. CABRINI GREEN and ROSS
In the exercise of its power under Section 10 of RA 9160, the Anti-Money Laundering Council (AMLC) issued freeze orders against various bank accounts of respondents. The frozen bank accounts were previously found prima facie to be related to the unlawful activities of respondents.
Under RA 9160, a freeze order issued by the AMLC is effective for a period not exceeding 15 days unless extended upon order of the court. Accordingly, before the lapse of the period of effectivity of its freeze orders, the AMLC[filed with the Court of Appeals (CA) various petitions for extension of effectivity of its freeze orders.
The AMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to issue a temporary restraining order (TRO) or writ of injunction against any freeze order issued by the AMLC carried with it the power to extend the effectivity of a freeze order. In other words, the AMLC interpreted the phrase upon order of the court to refer to the CA.
However, the CA disagreed with the AMLC and dismissed the petitions. It uniformly ruled that it was not vested by RA 9160 with the power to extend a freeze order issued by the AMLC. SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 16
Hence, these consolidated petitions which present a common issue: which court has jurisdiction to extend the effectivity of a freeze order?
ISSUE: Who has jurisdiction over the case?
HELD: During the pendency of these petitions, or on March 3, 2003, Congress enacted RA 9194 (An Act Amending Republic Act No. 9160, Otherwise Known as the Anti-Money Laundering Act of 2001).[6] It amended Section 10 of RA 9160 as follows:
SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows:
SEC. 10. Freezing of Monetary Instrument or Property. The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Sec. 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.[7] (emphasis supplied)
Section 12 of RA 9194 further provides:
SEC 12. Transitory Provision. Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after the effectivity of this Act, unless extended by the Court of Appeals. (emphasis supplied)
On April 3, 2003, the Office of the Solicitor General (OSG) filed a Very Urgent Motion to Remand Cases to the Honorable Court of Appeals (with Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction).[8] The OSG prayed for the remand of these cases to the CA pursuant to RA 9194. It also asked for the issuance of a TRO on the ground that the freeze orders would be automatically lifted on April 22, 2003 by operation of law and the money or deposits in the concerned bank accounts may be taken out of the reach of law enforcement authorities. The OSG further manifested that pending in the CA were 29 other cases involving the same issue. It requested that these cases be included in the coverage of the TRO prayed for.
On April 21, 2003, the Court issued a TRO in these cases and in all other similar cases pending before all courts in the Philippines. Respondents, the concerned banks, and all persons acting in their behalf were directed to give full force and effect to existing freeze orders until further orders from this Court.
On May 5, 2003, the OSG informed the Court that on April 22, 2003 the CA issued a resolution in CA-G.R. SP No. 69371 (the subject of G.R. No. 154694) granting the petition for extension of freeze orders.[9] Hence, the OSG prayed for the dismissal of G.R. No. 154694 for being moot. It also reiterated its earlier prayer for the remand of G.R. Nos. 154522, 155554 and 155711 to the CA.
The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over the extension of freeze orders. As the law now stands, it is solely the CA which has the authority to issue a freeze order as well as to extend its effectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued by the AMLC vis--vis accounts and deposits related to money-laundering activities.
16. EJERCITO V. SANDIGANBAYAN
FACTS: In connection with the plunder case filed against Estrada, Special Prosecutor filed before the Sandiganbayan a Request for Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing the President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her authorized representative to produce the following documents during the hearings:
I. For Trust Account No. 858; 1. Account Opening Documents; 2. Trading Order No. 020385 dated January 29, 1999; 3. Confirmation Advice TA 858; 4. Original/Microfilm copies, including the dorsal side, of the following: a. Bank of Commerce MC # 0256254 in the amount of P2,000,000.00; SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 17 b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the amount of P10,875,749.43; c. Urban Bank MC # 34182 dated November 8, 1999 in the amount of P42,716,554.22; d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in the amount of P54,161,496.52; 5. Trust Agreement dated January 1999: Trustee: Joseph Victor C. Ejercito Nominee: URBAN BANK-TRUST DEPARTMENT Special Private Account No. (SPAN) 858; and 6. Ledger of the SPAN # 858. II. For Savings Account No. 0116-17345-9 1. Signature Cards; and 2. Statement of Account/Ledger
The special prosecution panel also filed a request for the issuance of Subpoena Duces Tecum/Ad tesificandum directed to the authorized representatives of Equitable PCI to produce statements of account pertaining to certain accounts in the name of JOSE VELARDE and to testify. All requests were granted accordingly.
Upon learning of the said requests, Estrada wrote a letter to Sandiganbayn asking that the issuance of the subpoena be held in abeyance for at least ten (10) days to enable him to take appropriate legal steps in connection with the prosecutions request for the issuance of subpoena concerning his (my) accounts.
Then, Estrada filed a Motion to Quash Subpoena Duces Tecum/Ad Testificandum praying that the subpoenas previously issued to the President of the EIB be quashed. In his Motion to Quash, petitioner claimed that his bank accounts are covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under any of the exceptions stated therein. He further claimed that the specific identification of documents in the questioned subpoenas, including details on dates and amounts, could only have been made possible by an earlier illegal disclosure thereof by the EIB and the Philippine Deposit Insurance Corporation (PDIC) in its capacity as receiver of the then Urban Bank.
Before the motion was resolved by the Sandiganbayan, the prosecution filed another Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum, again to direct the President of the EIB to produce, on the hearings scheduled, additional documents for Savings Account No. 1701-00646-1. The prosecution also filed a Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to produce certain The subpoena prayed for in both requests were issued by the Sandiganbayan. Consequently, Ejercito filed an Urgent Motion to Quash Subpoenae Duces Tecum/Ad Testificandum praying that the subpoena directed to the bank be quashed for the same reasons which he cited in the motion to quash he had earlier filed, which the Sandiganbayan, in a Resolution, denied. Ejercito filed the present petition for certiorari under Rule 65 assailing the Sandiganbayan Resolutions denying his Motions to Quash Subpoenas Duces Tecum/Ad Testificandum, and Resolution denying his Motion for Reconsideration of the first two resolutions. People posits that Trust Account No. 858 may be inquired into, not merely because it falls under the exceptions to the coverage of R.A. 1405, but because it is not even contemplated therein. To 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. ISSUE: Whether petitioners Trust Account No. 858 is covered by the term deposit as used in R.A. 1405;
Whether petitioners Trust Account No. 858 and Savings Account No. 0116-17345-9 are excepted from the protection of R.A. 1405; and
Whether the extremely-detailed information contained in the Special Prosecution Panels requests for subpoena was obtained through a prior illegal disclosure of petitioners bank accounts, in violation of the fruit of the poisonous tree doctrine. HELD: The Sandiganbayan did not commit grave abuse of discretion in issuing the challenged subpoena for documents pertaining to Ejercitos Trust Account No. 858 and Savings Account No. 0116-17345-9 for the following reasons: 1. Plunder is excepted from the protection of RA 1405 otherwise known as The Secrecy of Bank Deposits Law. SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 18 R.A. 1405 is broad enough to cover Trust Account No. 858. However, the protection afforded by the law is not absolute. There being recognized exceptions thereto, as above-quoted Section 2 provides. In the present case, two exceptions apply, to wit: (1) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2) the money deposited or invested is the subject matter of the litigation. Ejercito contends that since plunder is neither bribery nor dereliction of duty, his accounts are not excepted from the protection of R.A. 1405. Philippine National Bank v. Gancayco holds otherwise: Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy expresses the notion that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny. Undoubtedly, cases for plunder involve unexplained wealth. The crime of bribery and the overt acts constitutive of plunder are crimes committed by public officers, and in either case the The petition is DISMISSED. Noble idea that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny applies with equal force. Also, the plunder case now pending with the Sandiganbayan necessarily involves an inquiry into the whereabouts of the amount purportedly acquired illegally by former President Joseph Estrada. The meaning of the phrase subject matter of the litigation as used in R.A. 1405 is explained in Union Bank of the Philippines v. Court of Appeals, thus: In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently caused the transfer of the amount 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: x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition. 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 In light then of the Courts pronouncement in Union Bank, the subject matter of the litigation cannot be limited to bank accounts under the name of President Estrada alone, but must include those accounts to which the money purportedly acquired illegally or a portion thereof was alleged to have been transferred. Trust Account No. 858 and Savings Account No. 0116-17345-9 in the name of Ejercito fall under this description and must thus be part of the subject matter of the litigation. Hence, these accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two exceptions to the said law applicable in this case, namely: (1)the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2)the money deposited or invested is the subject matter of the litigation. Exception (1) applies since the plunder case pending against former President Estrada is analogous to bribery or dereliction of duty, while exception (2) applies because the money deposited in Ejercitos bank accounts is said to form part of the subject matter of the same plunder case. 2. The fruit of the poisonous tree doctrine or the exclusionary rule is inapplicable in cases of unlawful examination of bank accounts. Ejercitos attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it bears noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence obtained therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that [a]ny violation of this law will subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court. SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 19 Even assuming arguendo, however, that the exclusionary rule applies in principle to cases involving R.A. 1405, the Court finds no reason to apply the same in this particular case. The fruit of the poisonous tree doctrine presupposes a violation of law. If there was no violation of R.A. 1405 in the instant case, then there would be no poisonous tree to begin with, and, thus, no reason to apply the doctrine. Hence, the fruit of the poisonous tree principle, which states that once the primary source (the tree) is shown to have been unlawfully obtained, any secondary or derivative evidence (the fruit) derived from it is also inadmissible, does not apply in this case. In the first place, R.A. 1405 does not provide for the application of this rule. Moreover, there is no basis for applying the same in this case since the primary source for the detailed information regarding Joseph Victor G. Ejercitos bank accounts the investigation previously conducted by the Ombudsman was lawful. 3. The extremely-detailed information was obtained by the Ombudsman from sources independent of its previous inquiry. In a further attempt to show that the subpoenas issued by the Sandiganbayan are invalid and may not be enforced, Ejercito contends that the information found therein, given their extremely detailed character, could only have been obtained by the Special Prosecution Panel through an illegal disclosure by the bank officials concerned. He thus claims that, following the fruit of the poisonous tree doctrine, the subpoenas must be quashed. He further contends that even if, as claimed by People, the extremely-detailed information was obtained by the Ombudsman from the bank officials concerned during a previous investigation of the charges against President Estrada, such inquiry into his bank accounts would itself be illegal. How the Ombudsman conducted his inquiry into the bank accounts of Ejercito is recounted by the People of the Philippines. At all events, even if the challenged subpoenas are quashed, the Ombudsman is not barred from requiring the production of the same documents based solely on information obtained by it from sources independent of its previous inquiry. The Ombudsman may conduct on its own the same inquiry into the subject bank accounts that it earlier conducted last February-March 2001, there being a plunder case already pending against former President Estrada. To quash the challenged subpoenas would, therefore, be pointless since the Ombudsman may obtain the same documents by another route. Upholding the subpoenas avoids an unnecessary delay in the administration of justice.
17. CHINA BANK CORPORATION V. COURT OF APPEALS
FACTS: A Complaint for recovery of sums of money and annulment of sales of real properties and shares of stock was filed by Jose Joseph Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee, before the Regional Trial Court. Jose Gotianuy accused his daughter Mary Margaret Dee of stealing his US dollar deposits with Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received these amounts from Citibank N.A. through checks which she allegedly deposited at China Bank. He likewise accused his son-in-law, George Dee, husband Mary Margaret, of transferring his real properties and shares of stock in George Dees name without any consideration. Jose Gotianuy, died during the pendency of the case before the trial court. He was substituted by his daughter, Elizabeth Gotianuy Lo. Elizabeth presented the US Dollar checks withdrawn by Mary Margaret Dee from his US dollar placement with Citibank. Elizabeth filed a motion with trial court for the issuance of subpoena to employees of China Bank to testify on the case. The court granted this. China Bank moved for a reconsideration. The court partially granted the motion however allowed the employees to testify. Hence, China Bank filed a certiorari before the CA. But CA affirmed RTCs decision. ISSUE: W/N a foreign Currency Deposit may be look into?
HELD: With the foregoing, we are now tasked to determine the single material issue of whether or not petitioner China Bank is correct in its submission that the Citibank dollar checks with both Jose Gotianuy and/or Mary Margaret Dee as payees, deposited with China Bank, may not be looked into under the law on secrecy of foreign currency deposits. As a corollary issue, sought to be resolved is whether Jose Gotianuy may be considered a depositor who is entitled to seek an inquiry over the said deposits.
The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 20 of Mary Margaret Dee. It reasoned that since Jose Gotianuy is the named co-payee of the latter in the subject checks, which checks were deposited in China Bank, then, Jose Gotianuy is likewise a depositor thereof. On that basis, no written consent from Mary Margaret Dee is necessitated.
We agree in the conclusion arrived at by the Court of Appeals.
The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are co-payees of various Citibank checks;[15] (2) Mary Margaret Dee withdrew these checks from Citibank;[16] (3) Mary Margaret Dee admitted in her Answer to the Request for Admissions by the Adverse Party sent to her by Jose Gotianuy[17] that she withdrew the funds from Citibank upon the instruction of her father Jose Gotianuy and that the funds belonged exclusively to the latter; (4) these checks were endorsed by Mary Margaret Dee at the dorsal portion; and (5) Jose Gotianuy discovered that these checks were deposited with China Bank as shown by the stamp of China Bank at the dorsal side of the checks.
Thus, with this, there is no issue as to the source of the funds. Mary Margaret Dee declared the source to be Jose Gotianuy. There is likewise no dispute that these funds in the form of Citibank US dollar Checks are now deposited with China Bank.
As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose Gotianuy has the right to inquire into the said deposits.
A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of business, to be placed to his credit and subject to his check or the beneficiary of the funds held by the bank as trustee.[18]
On this score, the observations of the Court of Appeals are worth reiterating:
Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency account with Citibank, NA. The monies subject of said checks originally came from the late Jose Gotianuy, the owner of the account. Thus, he also has legal rights and interests in the CBC account where said monies were deposited. More importantly, the Citibank checks (Exhibits AAA to AAA-5) readily demonstrate (sic) that the late J ose Gotianuy is one of the payees of said checks. Being a co-payee thereof, then he or his estate can be considered as a co-depositor of said checks. Ergo, since the late Jose Gotianuy is a co- depositor of the CBC account, then his request for the assailed subpoena is tantamount to an express permission of a depositor for the disclosure of the name of the account holder. The April 16, 1999 Order perforce must be sustained.[19] (Emphasis supplied.)
One more point. It must be remembered that in the complaint of Jose Gotianuy, he alleged that his US dollar deposits with Citibank were illegally taken from him. On the other hand, China Bank employee Cristuta Labios testified that Mary Margaret Dee came to China Bank and deposited the money of Jose Gotianuy in Citibank US dollar checks to the dollar account of her sister Adrienne Chu.[20] This fortifies our conclusion that an inquiry into the said deposit at China Bank is justified. At the very least, Jose Gotianuy as the owner of these funds is entitled to a hearing on the whereabouts of these funds.
All things considered and in view of the distinctive circumstances attendant to the present case, we are constrained to render a limited pro hac vice ruling.[21] Clearly it was not the intent of the legislature when it enacted the law on secrecy on foreign currency deposits to perpetuate injustice. This Court is of the view that the allowance of the inquiry would be in accord with the rudiments of fair play,[22] the upholding of fairness in our judicial system and would be an avoidance of delay and time-wasteful and circuitous way of administering justice.[23]
SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 21
18. REPUBLIC V. EUGENIO
FACTS: After the Agan v. PIATCO ruling, a series of investigations concerning the award of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman and the Compliance and Investigation Staff (CIS) of the Anti-Money Laundering Council (AMLC). The OSG wrote AMLC requesting AMLCs assistance in obtaining more evidence to completely reveal the financial trail of corruption surrounding the NAIA 3 Project, and also noting that the Republic was presently defending itself in two international arbitration cases. The CIS conducted an intelligence database search on the financial transactions of certain individuals involved in the award, including Alvarez (Chairman of the Pre-Qualification Bids and Awards Technical Committee). By this time, Alvarez had already been charged by the Ombudsman with violation of Section 3(J) of the Anti Graft and Corrupt Practices Act.1 The search revealed that Alvarez maintained 8 bank accounts with 6 different banks The AMLC issued a resolution authorizing its Executive Director to sign and verify an application to inquire into the deposits or investments of Alvarez et al. and to authorize the AMLC Secretariat to conduct an inquiry once the RTC grants the application. The rationale for the resolution was founded on the findings of the CIS that amounts were transferred from a Hong Kong bank account to bank accounts in the Philippines maintained by respondents. The Resolution also noted that by awarding the contract to PIATCO (despite its lack of financial capacity) Alvarez violated Section 3(E) of the Anti Graft and Corrupt Practices Act.2 The MAKATI RTC rendered an Order granting the AMLC the authority to inquire and examine the subject bank accounts of Alvarez et al. In response to a letter of Special Prosecutor Villa- Ignacio, AMLC issued a Resolution authorizing its Executive Director to inquire into and examine the accounts of Alvarez, PIATCO, and several other entities involved in the nullified contract. AMLC filed an application before the MANILA RTC to inquire into the accounts alleged as having been used to facilitate corruption in the NAIA 3 Project. The ex parte application was granted and the MANILA RTC issued a bank inquiry order. Alvarez alleged that he fortuitously learned of the bank inquiry order, which was issued following an ex parte application, and he argued that nothing in the Anti- Money Laundering Act (AMLA) authorized the AMLC to seek the authority to inquire into bank accounts ex parte. After several motions, manifestations, orders and resolutions the case went up to the SC. Alvarez et al.s position: The AMLA, being a substantive penal statute, has no retroactive effect and the bank inquiry order could not apply to deposits or investments opened prior to the effectivity of the AMLA (17 October 2001). The subject bank accounts, opened in 1989 to 1990, could not be the subject of the bank inquiry order without violating the constitutional prohibition against ex post facto laws.
ISSUE: Whether or not the proscription against ex post facto laws applies to Section 11 of the AMLA (a provision which does not provide a penal sanction BUT which merely authorizes the inspection of suspect accounts and deposits).
HELD: YES. It is clear that no person may be prosecuted under the PENAL provisions of the AMLA for acts committed prior to the enactment of the law (17 October 2001). With respect to the AUTHORITY TO INSPECT, it should be noted that an ex post facto law is one that (among others) deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection of a former conviction or acquittal, or a proclamation of amnesty. PRIOR to the AMLA: (1) The fact that bank accounts were involved in activities later on enumerated in the law did not, by itself, remove such accounts from the shelter of absolute confidentiality. (2) In order that bank accounts could be examined, there was need to secure either the written permission of the depositor OR a court order authorizing such examination, assuming that they were involved in cases of bribery or dereliction of duty of public officials, or in a case where the money deposited or invested was itself the subject matter of the litigation. In addition to providing for the definition and penalties for the crime of money laundering, the AMLA also authorizes certain provisional remedies that would aid the AMLC in the enforcement of the AMLA. These are the freeze order authorized under Section 10, and the bank inquiry order authorized under Section 11.
cralawRespondents posit that a bank inquiry order under Section 11 may be obtained only upon the pre-existence of a money laundering offense case already filed before the courts. [68] The conclusion is based on the phrase upon order of any competent court in cases of violation of this Act, the word cases generally understood as referring to actual cases pending with the courts.
We are unconvinced by this proposition, and agree instead with the then Solicitor General who SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)
TERESE RAY-ANNE O. AQUINO | 3A 22 conceded that the use of the phrase in cases of was unfortunate, yet submitted that it should be interpreted to mean in the event there are violations of the AMLA, and not that there are already cases pending in court concerning such violations. [69] If the contrary position is adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the government to ascertain whether there is sufficient evidence to sustain an intended prosecution of the account holder for violation of the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders. After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing of complaints under the AMLA with the hope or expectation that the evidence of money laundering would somehow surface during the trial. Since the AMLC could not make use of the bank inquiry order to determine whether there is evidentiary basis to prosecute the suspected malefactors, not filing any case at all would not be an alternative. Such unwholesome set-up should not come to pass. Thus Section 11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the unfounded initiation of complaints for money laundering.
Still, even if the bank inquiry order may be availed of without need of a pre-existing case under the AMLA, it does not follow that such order may be availed of ex parte. There are several reasons why the AMLA does not generally sanction ex parte applications and issuances of the bank inquiry order.