First Day Digests

CHINA BANKING CORP V CA
Facts:
Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US
dollar deposits with Citibank N.A. Mary Margaret Dee received these amounts from Citibank through
checks which she allegedly deposited at petitioner China Bank. Jose Gotianuy, died during the pendency
of the case and was substituted by his daughter, Elizabeth Gotianuy Lo. The latter presented the US
Dollar checks withdrawn by Mary Margaret Dee from his US dollar placement with Citibank. Upon
motion of Elizabeth Gotianuy Lo, the trial court issued a subpoena to employees of China Bank to testify
on the case. China Bank moved for reconsideration. The trial court resolved by directing the employees
to appear at the trial of the case only for the purpose of disclosing in whose name/s is the foreign
currency fund deposited with. CA affirmed the order of the trial court.
Issue:
Whether or not a co-depositor may inquire into the deposit without a written consent of the other co-
depositor?
Ruling: YES. [Pro Hac Vice Ruling]
The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor of Mary
Margaret Dee. It reasoned that since Jose Gotianuy is the named co-payee of the latter in the subject
checks, which checks were deposited in China Bank, then, Jose Gotianuy is likewise a depositor thereof.
On that basis, no written consent from Mary Margaret Dee is necessitated.
We agree in the conclusion arrived at by the Court of Appeals.
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.
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 readily demonstrate that the late Jose Gotianuy
is one of the payees of said checks. Being a co-payee thereof, then he or his estate can be considered as
a co-depositor of said checks. Ergo, since the late Jose Gotianuy is a co-depositor of the CBC account,
then his request for the assailed subpoena is tantamount to an express permission of a depositor for the
disclosure of the name of the account holder.
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. 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, the upholding
of fairness in our judicial system and would be an avoidance of delay and time-wasteful and circuitous
way of administering justice.
CHICO-NAZARIO, J.:
A Complaint for recovery of sums of money and annulment of sales of real

properties and shares of stock docketed as CEB-21445 was filed by Jose Joseph
Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret
Dee, before the Regional Trial Court (RTC) of Cebu City, Branch 58.
Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his
other properties, US dollar deposits with Citibank N.A. amounting to not less
than P35,000,000.00and US$864,000.00. Mary Margaret Dee received these
amounts from Citibank N.A. through checks which she allegedly deposited at
China Banking Corporation (China Bank).He likewise accused his son-in-law,
George Dee, husband of his daughter, Mary Margaret, of transferring his real
properties and shares of stock in George Dees name without any
consideration. Jose Gotianuy, died during the pendency of the case before the trial
court.[1] He was substituted by his daughter, Elizabeth Gotianuy Lo. The latter
presented the US Dollar checks withdrawn by Mary Margaret Dee from his US
dollar placement with Citibank. The details of the said checks are:
1) CITIBANK CHECK NO. 69003194405412 dated September 29

1997 in the amount of US$5,937.52 payable to
GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;



1997 in the amount of US$989.04 payable to GOTIANUY: JOSE
AND/OR DEE: MARY MARGARET;
5) CITIBANK CHECK NO. 69003194405297 dated October 01 1997 in

the amount of US$766,011.97 payable to GOTIANUY: JOSE
AND/OR DEE: MARY MARGARET; and
6) CITIBANK CHECK NO. 69003194405339 dated October 09 1997 in

the amount of US$83,053.10 payable to GOTIANUY: JOSE
AND/OR DEE: MARY MARGARET.[2]
Upon motion of Elizabeth Gotianuy Lo, the trial court[3] issued a subpoena to
Cristota Labios and Isabel Yap, employees of China Bank, to testify on the
case. The Order of the trial court dated 23 February 1999, states:
Issue a subpoena ad testificandum requiring MS. ISABEL YAP and

CRISTOTA LABIOS of China Banking Corporation, Cebu Main
Branch, corner Magallanes and D. Jakosalem Sts., CebuCity, to appear
in person and to testify in the hearing of the above entitled case
on March 1, 1999 at 8:30 in the morning, with regards to Citibank
Checks (Exhs. AAA to AAA-5) and other matters material and relevant
to the issues of this case.[4]
China Bank moved for a reconsideration. Resolving the motion, the trial court
issued an Order dated 16 April 1999 and held:
The Court is of the view that as the foreign currency fund (Exhs. AAA to
AAA-5) is deposited with the movant China Banking Corporation, Cebu
Main Branch, Cebu City, the disclosure only as to the name or in whose
name the said fund is deposited is not violative of the law. Justice will be
better served if the name or names of the depositor of said fund shall be
disclosed because such a disclosure is material and important to the
issues between the parties in the case at bar.
Premises considered, the motion for reconsideration is denied partly and

granted partly, in the sense that Isabel Yap and/or Cristuta Labios are
directed to appear before this Court and to testify at the trial of this case
on April 20, 1999, May 6 & 7, 1999 at 10:00 oclock in the morning and
only for the purpose of disclosing in whose name or names is the foreign
currency fund (Exhs. AAA to AAA-5) deposited with the movant Bank
and not to other matters material and relevant to the issues in the case at
bar.[5]
From this Order, China Bank filed a Petition for Certiorari[6] with the Court of
Appeals. In a Decision[7] dated 29 October 1999, the Court of Appeals denied the
petition of China Bank and affirmed the Order of the RTC.
In justifying its conclusion, the Court of Appeals ratiocinated:
From the foregoing, it is pristinely clear the law specifically

encompasses only the money or funds in foreign currency deposited in a
bank. Thus, the coverage of the law extends only to the foreign currency
deposit in the CBC account where Mary Margaret Dee deposited the
Citibank checks in question and nothing more.
It has to be pointed out that the April 16, 1999 Order of the court of
origin modified its previous February 23, 1999 Order such that the CBC
representatives are directed solely to divulge in whose name or names is
the foreign currency fund (Exhs. AAA to AAA-5) deposited with the
movant bank. It precluded inquiry on other materials and relevant to the
issues in the case at bar.We find that the directive of the court below
does not contravene the plain language of RA 6426 as amended by P.D.
No. 1246.
The contention of petitioner that the [prescription] on absolute

confidentiality under the law in question covers even the name of the
depositor and is beyond the compulsive process of the courts is palpably
untenable as the law protects only the deposits itself but not the name of
the depositor. To uphold the theory of petitioner CBC is reading into the
statute something that is not within the manifest intention of the
legislature as gathered from the statute itself, for to depart from the
meaning expressed by the words, is to alter the statute, to legislate and
not to interpret, and judicial legislation should be avoided. Maledicta
expositio quae corrumpit textum It is a dangerous construction which is
against the words. Expressing the same principle is the maxim: Ubi lex
non distinguit nec nos distinguere debemos, which simply means that
where the law does not distinguish, we should not make any
distinction. (Gonzaga, Statutes and their Construction, p. 75.)[8]
From the Decision of the Court of Appeals, China Bank elevated the case to this
Court based on the following issues:
THE HONORABLE COURT OF APPEALS HAS INTERPRETED

THE PROVISION OF SECTION 8 OF R.A. 6426, AS AMENDED,
OTHERWISE KNOWN AS THE FOREIGN CURRENCY DEPOSIT
ACT, IN A MANNER CONTRARY TO THE LEGISLATIVE
PURPOSE, THAT IS, TO PROVIDE ABSOLUTE
CONFIDENTIALITY OF WHATEVER INFORMATION RELATIVE
TO THE FOREIGN CURRENCY DEPOSIT.
II
PRIVATE RESPONDENT IS NOT THE OWNER OF THE

QUESTIONED FOREIGN CURRENCY DEPOSIT. THUS, HE
CANNOT INVOKE THE AID OF THE COURT IN COMPELLING
THE DISCLOSURE OF SOMEONE ELSES FOREIGN
CURRENCY DEPOSIT ON THE FLIMSY PRETEXT THAT THE
CHECKS (IN FOREIGN CURRENCY) HE HAD ISSUED MAY
HAVE ENDED UP THEREIN.
III
PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF SEC.

8, R.A. 6426, IN BEHALF OF THE FOREIGN CURRENCY
DEPOSITOR, OWING TO ITS SOLEMN OBLIGATION TO ITS
CLIENT TO EXERCISE EXTRAORDINARY DILIGENCE IN THE
HANDLING OF THE ACCOUNT.[9]
As amended by Presidential Decree No. 1246, the law reads:
SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency

deposits authorized under this Act, as amended by Presidential Decree
No. 1035, as well as foreign currency deposits authorized under
Presidential Decree No. 1034, are hereby declared as and considered of
an absolutely confidential nature and, except upon the written
permission of the depositor, in no instance shall such foreign currency
deposits be examined, inquired or looked into by any person,
government official, bureau or office whether judicial or administrative
or legislative or any other entity whether public or
private: Provided, however, that said foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative
body whatsoever. (As amended by PD No. 1035, and further amended by
PD No. 1246, prom. Nov. 21, 1977) (Emphasis supplied.)
Under the above provision, the law provides that all foreign currency deposits
authorized under Republic Act No. 6426, as amended by Sec. 8, Presidential
Decree No. 1246, Presidential Decree No. 1035, as well as foreign currency
deposits authorized under Presidential Decree No. 1034 are considered absolutely
confidential in nature and may not be inquired into. There is only one exception to
the secrecy of foreign currency deposits, that is, disclosure is allowed upon the
written permission of the depositor.
This much was pronounced in the case of Intengan v. Court of Appeals,[10] where it
was held that the only exception to the secrecy of foreign currency deposits is in
the case of a written permission of the depositor.
It must be remembered that under the whereas clause of Presidential Decree No.
1246 which amended Sec. 8 of Republic Act No. 6426, the Foreign Currency
Deposit System including the Offshore Banking System under Presidential Decree
1034 were intended to draw deposits from foreign lenders and investors, and we
quote:
Whereas, in order to assure the development and speedy growth of the

Foreign Currency Deposit System and the Offshore Banking System in
the Philippines, certain incentives were provided for under the two
Systems such as confidentiality of deposits subject to certain exceptions
and tax exemptions on the interest income of depositors who are
nonresidents and are not engaged in trade or business in the Philippines;
Whereas, making absolute the protective cloak of confidentiality over

such foreign currency deposits, exempting such deposits from tax, and
guaranteeing the vested rights of depositors would better encourage the
inflow of foreign currency deposits into the banking institutions
authorized to accept such deposits in the Philippines thereby placing
such institutions more in a position to properly channel the same to loans
and investments in the Philippines, thus directly contributing to the
economic development of the country.
As to the deposit in foreign currencies entitled to be protected under the

confidentiality rule, Presidential Decree No. 1034,[11] defines deposits to mean
funds in foreign currencies which are accepted and held by an offshore banking
unit in the regular course of business, with the obligation to return an equivalent
amount to the owner thereof, with or without interest.[12]
It is in this light that the court in the case of Salvacion v. Central Bank of the
Philippines,[13] allowed the inquiry of the foreign currency deposit in question
mainly due to the peculiar circumstances of the case such that a strict interpretation
of the letter of the law would result to rank injustice. Therein,
Greg Bartelli y Northcott, an American tourist, was charged with criminal cases for
serious illegal detention and rape committed against then 12 year-old
Karen Salvacion. A separate civil case for damages with preliminary attachment
was filed against Greg Bartelli. The trial court issued an Order granting
the Salvacions application for the issuance of a writ of preliminary attachment. A
notice of garnishment was then served on China Bank where Bartelli held a dollar
account. China Bank refused, invoking the secrecy of bank deposits. The Supreme
Court ruled: In fine, the application of the law depends on the extent of its justice
x x x It would be unthinkable, that the questioned law exempting foreign currency
deposits from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever would
be used as a device by an accused x xx for wrongdoing, and in so doing, acquitting
the guilty at the expense of the innocent.[14]
With the foregoing, we are now tasked to determine the single material issue of
whether or not petitioner China Bank is correct in its submission that the Citibank
dollar checks with both Jose Gotianuy and/or Mary Margaret Dee as payees,
deposited with China Bank, may not be looked into under the law on secrecy of
foreign currency deposits. As a corollary issue, sought to be resolved is whether
Jose Gotianuy may be considered a depositor who is entitled to seek an inquiry
over the said deposits.
The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a

co-depositor of Mary Margaret Dee. It reasoned that since Jose Gotianuy is the
named co-payee of the latter in the subject checks, which checks were deposited in
China Bank, then, Jose Gotianuy is likewise a depositor thereof. On that basis, no
written consent from Mary Margaret Dee is necessitated.
We agree in the conclusion arrived at by the Court of Appeals.
The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are
co-payees of various Citibank checks;[15] (2) Mary Margaret Dee withdrew these
checks from Citibank;[16] (3) Mary Margaret Dee admitted in her Answer 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 Jose Gotianuy is one of the payees of said checks. Being a
co-payee thereof, then he or his estate can be considered as a co-
depositor of said checks. Ergo, since the late Jose Gotianuy is a co-
depositor of the CBC account, then his request for the assailed subpoena
is tantamount to an express permission of a depositor for the disclosure
of the name of the account holder. 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]
WHEREFORE, premises considered, the Petition is DENIED. The Decision of

the Court of Appeals dated 29 October 1999 affirming the Order of the RTC,
Branch 58, CebuCity dated 16 April 1999 is AFFIRMED and this case is
ordered REMANDED to the trial court for continuation of hearing with utmost
dispatch consistent with the above disquisition. No costs.
SO ORDERED.
ANA RIVERA V PEOPLES BANK AND TRUST COMPANY
OZAETA, J.:
The question raised in this appeal is the validity of the survivorship agreement made by and between
Edgar Stephenson, now deceased, and Ana Rivera, appellant herein which reads as follows:
"SURVIVORSHIP AGREEMENT
"Know All Men by These Presents:
"That we hereby agree with each other and with the PEOPLES BANK AND TBUST COMPANY, Manila,
Philippine Islands (hereinafter called the Bank), that all moneys now or hereafter deposited by us or
either of us with the Bank in our savings account shall be deposited in and received by the Bank with the
understanding and upon the conditions that said money be deposited without consideration of its
previous ownership, and that said money and all interest thereon, if any there be, shall be the property
of both of us as joint tenants, and shall be payable to and collectible by either of us during our joint lives,
and after the death of one of us shall belong to and be the sole property of the survivor, and shall be
payable to and collectible by such survivor.
"And we further covenant and agree with each other and the Bank, its successors or assigns, that the
receipt or check of either of us during our joint lives, or the receipt or check of the survivor, for any
payment made from this account, shall be valid and sufficient release and discharge to the Bank for such
payment.
"The Bank is hereby authorized to accept and deposit to this account all checks made payable to either
or both of us, when endorsed by either or both of us or one for the other.
"This is a joint and several agreement and is binding upon each of us, our heirs, executors,
administrators, and assigns.
"In witness whereof we have signed our names hereto this 17th day of October, 1931.
"Witnesses:
"(Sgd.) EDGAR STEPHENSON
"(Sgd.) ANA RIVERA
"Address: 799 Sta. Mesa, Manila
"Witnesses:
"(Sgd.) FRED W. BOHLER
"(Sgd.) Y. E. Cox
"S. A. #4l46"
Ana Rivera was employed by Edgar Stephenson as housekeeper from the year 1920 until his death on
June 8, 1939. On December 24, 1929, Stephenson opened an account in his name with the defendant
Peoples Bank by depositing therein the sum of P1,000. On October 17, 1931, when there was a balance
of P2,072 in said account, the survivorship agreement in question was executed and the said account
was transferred to the name of "Edgar Stephenson and/or Ana Rivera." At the time of Stephenson's
death Ana Rivera held the deposit book, and there was a balance in said account of P701.43, which Ana
Rivera claimed but which the bank refused to pay to her upon advice of its attorneys, who gave the
opinion that the survivorship agreement was of doubtful validity. Thereupon Ana Rivera instituted the
present action against the bank, and Minnie Stephenson, administratrix of the estate of the deceased,
intervened and claimed the amount for the estate, alleging that the money deposited in said account
was and is the exclusive property of the deceased.
The trial court held that the agreement in question, viewed from its effect during the lives of the parties,
was a mere power of attorney authorizing Ana Rivera to withdraw the deposit, which power terminated
upon the death of the principal, Edgar Stephenson; but that, viewed from its effect after the death of
either of the parties, the agreement was a donation mortis causa with reference to the balance
remaining at the death of one of them, which, not having been executed with the formalities of a
testamentary disposition as required by article 620 of the Civil Code, was of no legal effect.
The defendant bank did not appear in this Court Counsel for the intervenor-appellee in his brief
contends that the survivorship agreement was a donation mortis causa from Stephenson to Ana Rivera
of the bank account in question and that, since it was not executed with the formalities of a will, it can
have no legal effect.
We find no basis for the conclusion that the survivorship agreement was a mere power of attorney from
Stephenson to Ana Rivera, or that it is a gift mortis causa of the bank account in question from him to
her. Such conclusion is evidently predicated exclusive owner of the funds deposited in the bank, which
assumption was in turn based on the facts (1) that the account was originally opened in the name of
Stephenson alone and (2) that Ana Rivera "served only as housemaid of the deceased." But it not
infrequently happens that a person deposits money in the bank in the name of another; and in the
instant case it also appears that Ana Rivera served her master for about nineteen years without actually
receiving her salary from him. The fact that subsequently Stephenson transferred the account to the
name of himself and/or Ana Rivera and executed with the latter the survivorship agreement in
question although there was no relation Of kinship between them but only that of master and servant,
nullifies the assumption that Stephenson was the exclusive owner of the bank account. In the absence,
then, of clear proof to the contrary, we must give full faith and credit to the certificate of deposit,
which recites in effect that the funds in question belonged to Edgar Stephenson and Ana Rivera; that
they were joint owners thereof; and that either of them could withdraw any part or the whole of said
account during the lifetime of both, and the balance, if any, upon the death of either, belonged to the
survivor.
Is the survivorship agreement valid? Prima facie, we think it is valid. It is an aleatory contract supported
by a lawful consideration the mutual agreement of the joint depositors permitting either of them to
withdraw the whole deposit during their lifetime, and transferring the balance to the survivor upon the
death of one of them. The trial court said that the Civil Code "contains no provisions sanctioning such
an agreement." We think it is covered by article 1790 of the Civil Code, which provides as follows:
"ART. 1790. By an aleatory contract one of the parties binds himself, or both reciprocally bind
themselves, to give or to do something as an equivalent for that which the other party is to give or do in
case of the occurrence of an event which is uncertain or will happen at an indeterminate time."
(See also article 1255)
The case of Macam vs. Gatmaitan (decided March 11, 1937), 36 Off. Gaz., 2175, is in point. Two friends,
Juana Gatmaitan and Leonarda Macam, who had lived together for some time, agreed in writing that
the house of strong materials which they bought with the money belonging to Leonarda Macam and the
Buick automobile and certain furniture which belonged to Juana Gatmaitan shall belong to the survivor
upon the death of one of them and that "this agreement shall be equivalent to a transfer of the rights of
the one who dies first and shall be kept by the survivor." After the death of Leonarda Macam, her
executrix assailed that document on the ground that with respect to the house the same constituted a
donation mostis causa by Leonarda Macam in favor of Juana Gatmaitan. In affirming the judgment of
the trial court absolving the defendants from the complaint this Court speaking through Chief Justice
Avanceña, said:
"This court is of the opinion that Exhibit C is an aleatory contract whereby, according to article 1790 of
the Civil Code, one of the parties or both reciprocally bind themselves to give or do something as an
equivalent for that which the other party is to give or do in case of the occurrence of an event which is
uncertain or will happen at an indeterminate time. As already stated, Leonarda was the owner of the
house and Juana of the Buick automobile and most of the furniture. By virtue of Exhibit C, Juana would
become the owner of the house in case Leonarda died first, and Leonarda would become the owner of
the automobile and the furniture if Juana were to die first. In this manner Leonarda and Juana
reciprocally assigned their respective property to one another conditioned upon who might die first, the
time of death determining the event upon which the acquisition of such right by the one or the other
depended. This contract, as any other contract, is binding upon the parties thereto. Inasmuch as
Leonarda had died before Juana, the latter thereupon acquired the ownership of the house, in the same
manner as Leonarda would have acquired the ownership of the automobile and of the furniture if
Juana had died first." (36 Off. Gat, 2176.)
Furthermore "it is well established that a bank account may be so created that two persons shall be joint
owners thereof during their mutual lives, and the survivor take the whole on the death of the other.
The right to make such joint deposits has generally been held not to be done away with by statutes
abolishing joint tenancy and survivorship generally as they existed at common law." (7 Am. Jur., 299.)
But although the survivorship agreement is per se not contrary to law, its operation or effect may be
violative of the law. For instance, if it be shown in a given case that such agreement is a mere cloak to
hide an inofficious donation, to transfer property in fraud of creditors, or to defeat the legitime of a
forced heir, it may be assailed and annulled upon such grounds. No such vice has been imputed and
established against the agreement involved in this case.
The judgment appealed from is reversed and another judgment will be entered in favor of the plaintiff
ordering the defendant bank to pay to her the sum of P701.43, with legal interest thereon from the date
of the complainti and the costs in both instances.
So ordered
Yulo, C.J., Moran, Paras, and Bocobo, JJ., concur.

Vitug v. CA
183 SCRA 755
FACTS:
Romarico Vitug and Nenita Alonte were co-administrators of Dolores Vitug’s (deceased) estate. Rowena
Corona was the executrix. Romarico, the deceased’s husband, filed a motion with the probate court
asking for authority to sell certain shares of stock and real properties belonging to the estate to cover
alleged advances to the estate, which he claimed as personal funds. The advances were used to pay
estate taxes.
Corona opposed the motion on ground that the advances came from a savings account which formed
part of the conjugal partnership properties and is part of the estate. Thus, there was no ground for
reimbursement. Romarico claims that the funds are his exclusive property, having been acquired
through a survivorship agreement executed with his late wife and the bank.
The agreement stated that after the death of either one of the spouses, the savings account shall belong
to and be the sole property of the survivor, and shall be payable to and collectible or withdrawable by
such survivor.
The lower court upheld the validity of the agreement and granted the motion to sell. CA reversed stating
that the survivorship agreement constitutes a conveyance mortis causa which did not comply with the
formalities of a valid will. Assuming that it was a donation inter vivos, it is a prohibited donation
(donation between spouses).
ISSUE:
W/N the survivorship agreement was valid.

HELD:
YES. The conveyance is not mortis causa, which should be embodied in a will. A will is a personal,
solemn, revocable and free act by which a capacitated person disposes of his property and rights and
declares or complies with duties to take effect after his death. The bequest or devise must pertain to the
testator.
In this case, the savings account involved was in the nature of conjugal funds. Since it was not shown
that the funds belonged exclusively to one party, it is presumed to be conjugal.
It is also not a donation inter vivos because it was to take effect after the death of one party. It is also
not a donation between spouses because it involved no conveyance of a spouse’s own properties to the
other.
It was an error to include the savings account in the inventory of the deceased’s assets because it is the
separate property of Romarico.
Thus, Romarico had the right to claim reimbursement.
A will is a personal, solemn, revocable and free act by which a capacitated person disposes of his his
property and rights and declares or complies with duties to take effect after his death.
Survivorship agreements are permitted by the NCC. However, its operation or effect must not be
violative of the law (i.e. used as a cloak to hide an inofficious donation or to transfer property in fraud of
creditors or to defeat the legitime of a forced heir).
VITUG V CA
SARMIENTO, J.:
This case is a chapter in an earlier suit decided by this Court 1 involving the probate of the two wills of
the late Dolores Luchangco Vitug, who died in New York, U. S.A., on November 10, 1980, naming private
respondent Rowena Faustino-Corona executrix. In our said decision, we upheld the appointment of
Nenita Alonte as co-special administrator of Mrs. Vitug's estate with her (Mrs. Vitug's) widower,
petitioner Romarico G. Vitug, pending probate.
On January 13, 1985, Romarico G. Vitug filed a motion asking for authority from the probate court to sell
certain shares of stock and real properties belonging to the estate to cover allegedly his advances to the
estate in the sum of P667,731.66, plus interests, which he claimed were personal funds. As found by the
Court of Appeals, 2 the alleged advances consisted of P58,147.40 spent for the payment of estate tax,
P518,834.27 as deficiency estate tax, and P90,749.99 as "increment thereto." 3 According to Mr. Vitug,
he withdrew the sums of P518,834.27 and P90,749.99 from savings account No. 35342-038 of the Bank
of America, Makati, Metro Manila.
On April 12, 1985, Rowena Corona opposed the motion to sell on the ground that the same funds
withdrawn from savings account No. 35342-038 were conjugal partnership properties and part of the
estate, and hence, there was allegedly no ground for reimbursement. She also sought his ouster for
failure to include the sums in question for inventory and for "concealment of funds belonging to the
estate." 4
Vitug insists that the said funds are his exclusive property having acquired the same through a
survivorship agreement executed with his late wife and the bank on June 19, 1970. The agreement
provides:
We hereby agree with each other and with the BANK OF AMERICAN NATIONAL TRUST AND SAVINGS
ASSOCIATION (hereinafter referred to as the BANK), that all money now or hereafter deposited by us or
any or either of us with the BANK in our joint savings current account shall be the property of all or both
of us and shall be payable to and collectible or withdrawable by either or any of us during our lifetime,
and after the death of either or any of us shall belong to and be the sole property of the survivor or
survivors, and shall be payable to and collectible or withdrawable by such survivor or survivors.
We further agree with each other and the BANK that the receipt or check of either, any or all of us
during our lifetime, or the receipt or check of the survivor or survivors, for any payment or withdrawal
made for our above-mentioned account shall be valid and sufficient release and discharge of the BANK
for such payment or withdrawal. 5
The trial courts 6 upheld the validity of this agreement and granted "the motion to sell some of the
estate of Dolores L. Vitug, the proceeds of which shall be used to pay the personal funds of Romarico
Vitug in the total sum of P667,731.66 ... ." 7
On the other hand, the Court of Appeals, in the petition for certiorari filed by the herein private
respondent, held that the above-quoted survivorship agreement constitutes a conveyance mortis causa
which "did not comply with the formalities of a valid will as prescribed by Article 805 of the Civil Code,"
8 and secondly, assuming that it is a mere donation inter vivos, it is a prohibited donation under the
provisions of Article 133 of the Civil Code. 9
The dispositive portion of the decision of the Court of Appeals states:
WHEREFORE, the order of respondent Judge dated November 26, 1985 (Annex II, petition) is hereby set
aside insofar as it granted private respondent's motion to sell certain properties of the estate of Dolores
L. Vitug for reimbursement of his alleged advances to the estate, but the same order is sustained in all
other respects. In addition, respondent Judge is directed to include provisionally the deposits in Savings
Account No. 35342-038 with the Bank of America, Makati, in the inventory of actual properties
possessed by the spouses at the time of the decedent's death. With costs against private respondent. 10
In his petition, Vitug, the surviving spouse, assails the appellate court's ruling on the strength of our
decisions in Rivera v. People's Bank and Trust Co. 11 and Macam v. Gatmaitan 12 in which we sustained
the validity of "survivorship agreements" and considering them as aleatory contracts. 13
The petition is meritorious.

The conveyance in question is not, first of all, one of mortis causa, which should be embodied in a will. A
will has been defined as "a personal, solemn, revocable and free act by which a capacitated person
disposes of his property and rights and declares or complies with duties to take effect after his death."
14 In other words, the bequest or device must pertain to the testator. 15 In this case, the monies subject
of savings account No. 35342-038 were in the nature of conjugal funds In the case relied on, Rivera v.
People's Bank and Trust Co., 16 we rejected claims that a survivorship agreement purports to deliver
one party's separate properties in favor of the other, but simply, their joint holdings:
xxx xxx xxx
... Such conclusion is evidently predicated on the assumption that Stephenson was the exclusive owner
of the funds-deposited in the bank, which assumption was in turn based on the facts (1) that the
account was originally opened in the name of Stephenson alone and (2) that Ana Rivera "served only as
housemaid of the deceased." But it not infrequently happens that a person deposits money in the bank
in the name of another; and in the instant case it also appears that Ana Rivera served her master for
about nineteen years without actually receiving her salary from him. The fact that subsequently
Stephenson transferred the account to the name of himself and/or Ana Rivera and executed with the
latter the survivorship agreement in question although there was no relation of kinship between them
but only that of master and servant, nullifies the assumption that Stephenson was the exclusive owner
of the bank account. In the absence, then, of clear proof to the contrary, we must give full faith and
credit to the certificate of deposit which recites in effect that the funds in question belonged to Edgar
Stephenson and Ana Rivera; that they were joint (and several) owners thereof; and that either of them
could withdraw any part or the whole of said account during the lifetime of both, and the balance, if
any, upon the death of either, belonged to the survivor. 17
xxx xxx xxx
In Macam v. Gatmaitan, 18 it was held:
xxx xxx xxx
This Court is of the opinion that Exhibit C is an aleatory contract whereby, according to article 1790 of
the Civil Code, one of the parties or both reciprocally bind themselves to give or do something as an
equivalent for that which the other party is to give or do in case of the occurrence of an event which is
uncertain or will happen at an indeterminate time. As already stated, Leonarda was the owner of the
house and Juana of the Buick automobile and most of the furniture. By virtue of Exhibit C, Juana would
become the owner of the house in case Leonarda died first, and Leonarda would become the owner of
the automobile and the furniture if Juana were to die first. In this manner Leonarda and Juana
reciprocally assigned their respective property to one another conditioned upon who might die first, the
time of death determining the event upon which the acquisition of such right by the one or the other
depended. This contract, as any other contract, is binding upon the parties thereto. Inasmuch as
Leonarda had died before Juana, the latter thereupon acquired the ownership of the house, in the same
manner as Leonarda would have acquired the ownership of the automobile and of the furniture if Juana
had died first. 19
xxx xxx xxx
There is no showing that the funds exclusively belonged to one party, and hence it must be presumed to
be conjugal, having been acquired during the existence of the marita. relations. 20
Neither is the survivorship agreement a donation inter vivos, for obvious reasons, because it was to take
effect after the death of one party. Secondly, it is not a donation between the spouses because it
involved no conveyance of a spouse's own properties to the other.
It is also our opinion that the agreement involves no modification petition of the conjugal partnership,
as held by the Court of Appeals, 21 by "mere stipulation" 22 and that it is no "cloak" 23 to circumvent
the law on conjugal property relations. Certainly, the spouses are not prohibited by law to invest
conjugal property, say, by way of a joint and several bank account, more commonly denominated in
banking parlance as an "and/or" account. In the case at bar, when the spouses Vitug opened savings
account No. 35342-038, they merely put what rightfully belonged to them in a money-making venture.
They did not dispose of it in favor of the other, which would have arguably been sanctionable as a
prohibited donation. And since the funds were conjugal, it can not be said that one spouse could have
pressured the other in placing his or her deposits in the money pool.
The validity of the contract seems debatable by reason of its "survivor-take-all" feature, but in reality,
that contract imposed a mere obligation with a term, the term being death. Such agreements are
permitted by the Civil Code. 24
Under Article 2010 of the Code:
ART. 2010. By an aleatory contract, one of the parties or both reciprocally bind themselves to give or to
do something in consideration of what the other shall give or do upon the happening of an event which
is uncertain, or which is to occur at an indeterminate time.
Under the aforequoted provision, the fulfillment of an aleatory contract depends on either the
happening of an event which is (1) "uncertain," (2) "which is to occur at an indeterminate time." A
survivorship agreement, the sale of a sweepstake ticket, a transaction stipulating on the value of
currency, and insurance have been held to fall under the first category, while a contract for life annuity
or pension under Article 2021, et sequentia, has been categorized under the second. 25 In either case,
the element of risk is present. In the case at bar, the risk was the death of one party and survivorship of
the other.
However, as we have warned:
xxx xxx xxx
But although the survivorship agreement is per se not contrary to law its operation or effect may be
violative of the law. For instance, if it be shown in a given case that such agreement is a mere cloak to
hide an inofficious donation, to transfer property in fraud of creditors, or to defeat the legitime of a
forced heir, it may be assailed and annulled upon such grounds. No such vice has been imputed and
established against the agreement involved in this case. 26
xxx xxx xxx
There is no demonstration here that the survivorship agreement had been executed for such unlawful
purposes, or, as held by the respondent court, in order to frustrate our laws on wills, donations, and
conjugal partnership.
The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her husband, the latter
has acquired upon her death a vested right over the amounts under savings account No. 35342-038 of
the Bank of America. Insofar as the respondent court ordered their inclusion in the inventory of assets
left by Mrs. Vitug, we hold that the court was in error. Being the separate property of petitioner, it
forms no more part of the estate of the deceased.
WHEREFORE, the decision of the respondent appellate court, dated June 29, 1987, and its resolution,
dated February 9, 1988, are SET ASIDE.
No costs.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Padilla and Regalado JJ., concur.
Footnotes
FIDELITY SAVINGS AND MORTGAGE BANK V CENZON
Facts:
Respondent spouses Santiago maintained a savings and time deposit with petitioner bank. The
Monetary Board found petitioner bank to be insolvent and ordered for its assets to be taken charged of
by the Acting Superintendent. The PDIC paid spouses for their deposits with petitioner bank but there
was still a remaining balance. The Monetary Board then directed the liquidation of the affairs of
petitioner bank and a subsequent petition for assistance and supervision in liquidation was filed in the
court. The liquidation proceedings still pending, respondent spouses sent demand letters to petitioner
bank for the payment of their deposits. The court found in favor of respondent spouses.
Issue:
Whether or not petitioner bank may be adjudged to pay interest on unpaid deposits even after its
closure by the Central Bank by reason of insolvency.
Ruling: NO.
It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently
ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank
deposits which accrued during the period when the bank is actually closed and non-operational. In The
Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, we held that:
It is a matter of common knowledge, which We take judicial notice of, that what enables a bank to pay
stipulated interest on money deposited with it is that thru the other aspects of its operation it is able to
generate funds to cover the payment of such interest. Unless a bank can lend money, engage in
international transactions, acquire foreclosed mortgaged properties or their proceeds and generally
engage in other banking and financing activities from which it can derive income, it is inconceivable how
it can carry on as a depository obligated to pay stipulated interest. Conventional wisdom dictates this
inexorable fair and just conclusion. And it can be said that all who deposit money in banks are aware of
such a simple economic proposition. Consequently, it should be deemed read into every contract of
deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation
of the bank is completely suspended by the duly constituted authority, the Central Bank.
From the aforecited authorities, it is manifest that petitioner cannot be held liable for interest on bank
deposits which accrued from the time it was prohibited by the Central Bank to continue with its banking
operations. The order, therefore, of the Central Bank as receiver/liquidator of petitioner bank allowing
the claims of depositors and creditors to earn interest up to the date of its closure is in line with the
doctrine laid down in the jurisprudence above cited.
FIDELITY SAVINGS
REGALADO, J.:
The instant petition seeks the review, on pure questions of law, of the decision rendered by the Court of
First Instance of Manila (now Regional Trial Court), Branch XL, on December 3, 1976 in Civil Case No.
84800,1 ordering herein petitioner to pay private respondents the following amounts:
(a) P90,000.00 with accrued interest in accordance with Exhibits A and B until fully paid;
(b) P30,000,00 as exemplary damages; and
(c) P10,000.00 as and for attorney's fees.
The payment by the defendant Fidelity Savings and Mortgage Bank of the aforementioned sums of
money shall be subject to the Bank Liquidation Rules and Regulations embodied in the Order of the
Court of First Instance of Manila, Branch XIII, dated October 3, 1972, Civil Case No. 86005, entitled, "IN
RE: Liquidation of the Fidelity Savings Bank versus Central Bank of the Philippines, Liquidator."
With costs against the defendant Fidelity Savings and Mortgage Bank.
SO ORDERED.
Private respondents instituted this present action for a sum of money with damages against Fidelity
Savings and Mortgage Bank, Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio M. Lopez, Sr.,
Arsenio S. Lopez, Jr., Bibiana E. Lacuna, Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A.
Pacana. On motion of herein private respondents, as plaintiffs, the amended complaint was dismissed
without prejudice against defendants Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A.
Pacana. 2 In its aforesaid decision of December 3, 1976, the court a quo dismissed the complaint as
against defendants Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio S. Lopez, Jr., Arsenio M.
Lopez, Sr. and Bibiana S. Lacuna.
Back on August 10, 1973, the plaintiffs (herein private respondents) and the defendants Fidelity Savings
and Mortgage Bank (petitioner herein), Central Bank of the Philippines and Bibiana E. Lacuna had filed in
said case in the lower court a partial stipulation of facts, as follows:
COME NOW herein plaintiffs, SPOUSES TIMOTEO M. SANTIAGO and OLIMPIA R. SANTIAGO, herein
defendants FIDELITY SAVINGS AND MORTGAGE BANK and the CENTRAL BANK OF THE PHILIPPINES, and
herein defendant BIBIANA E. LACUNA, through their respective undersigned counsel, and before this
Honorable Court most respectfully submit the following Partial Stipulation of Facts:
1. That herein plaintiffs are husband and wife, both of legal age, and presently residing at No. 480
C. de la Paz Street, Sta. Elena, Marikina, Rizal;
2. That herein defendant Fidelity Savings and Mortgage Bank is a corporation duly organized and
existing under and by virtue of the laws of the Philippines; that defendant Central Bank of the
Philippines is a corporation duly organized and existing under and by virtue of the laws of the
Philippines;
3. That herein defendant Bibiana E. Lacuna is of legal age and a resident of No. 42 East Lawin
Street, Philamlife Homes, Quezon City, said defendant was an assistant Vice-President of the defendant
fidelity Savings and Mortgage Bank,
4. That sometime on May 16, 1968, here in plaintiffs deposited with the defendant Fidelity Savings
Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under Savings Account No. 16-0536; that
likewise, sometime on July 6, 1968, herein plaintiff,- deposited with the defendant Fidelity Savings and
Mortgage Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under Certificate of Time Deposit
No. 0210; that the aggregate amount of deposits of the plaintiffs with the defendant Fidelity Savings and
Mortgage Bank is ONE HUNDRED THOUSAND PESOS (P100,000.00);
5. That on February 18, 1969, the Monetary Board, after finding the report of the Superintendent
of Banks, that the condition of the defendant Fidelity Savings and Mortgage Bank is one of insolvency, to
be true, issued Resolution No. 350 deciding, among others, as follows:
1) To forbid the Fidelity Savings Bank to do business in the Philippines;
2) To instruct the Acting Superintendent of Banks to take charge, in the name of the Monetary
Board, of the Bank's assets
6. That pursuant to the above-cited instructions of the Monetary Board, the Superintendent of
Banks took charge in the name of the Monetary Board, of the assets of defendant Fidelity Savings Bank
on February 19, 1969; and that since that date up to this date, the Superintendent of Banks (now
designated as Director, Department of Commercial and Savings Banks) has been taking charge of the
assets of defendant Fidelity Savings and Mortgage Bank;
7. That sometime on October 10, 1969 the Philippine Deposit Insurance Corporation paid the
plaintiffs the amount of TEN THOUSAND PESOS (P10,000.00) on the aggregate deposits of P100,000.00
pursuant to Republic Act No. 5517, thereby leaving a deposit balance of P90,000.00;
8. That on December 9, 1969, the Monetary Board issued its Resolution No. 2124 directing the
liquidation of the affairs of defendant Fidelity Savings Bank;
9. That on January 25, 1972, the Solicitor General of the Philippines filed a "Petition for Assistance
and Supervision in Liquidation" of the affairs of the defendant Fidelity Savings and Mortgage Bank with
the Court of First Instance of Manila, assigned to Branch XIII and docketed as Civil Case No. 86005;
10. That on October 3, 1972, the Liquidation Court promulgated the Bank Rules and Regulations to
govern the liquidation of the affairs of defendant Fidelity Savings and Mortgage Bank, prescribing the
rules on the conversion of the Bank's assets into money, processing of claims against it and the manner
and time of distributing the proceeds from the assets of the Bank;
11. That the liquidation proceedings has not been terminated and is still pending up to the present;
12. That herein plaintiffs, through their counsel, sent demand letters to herein defendants,
demanding the immediate payment of the aforementioned savings and time deposits.
WHEREFORE, it is respectfully prayed that the foregoing Partial Stipulation of Facts be approved by this
Honorable Court, without prejudice to the presentation of additional documentary or testimonial
evidence by herein parties.
Manila, Philippines, August 10, 1973. 3
Assigning error in the judgment of the lower court quoted ab antecedents, petitioner raises two
questions of law, to wit:
1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged
to pay interest on unpaid deposits even after its closure by the Central Bank by reason of insolvency
without violating the provisions of the Civil Code on preference of credits; and
2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged
to pay moral and exemplary damages, attorney's fees and costs when the insolvency is caused b the
anomalous real estate transactions without violating the provisions of the Civil Code on preference of
credits.
There is merit in the petition.

It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently
ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank
deposits which accrued during the period when the bank is actually closed and non-operational.
In The Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, 4 we held that:
It is a matter of common knowledge, which We take judicial notice of, that what enables a bank to pay
stipulated interest on money deposited with it is that thru the other aspects of its operation it is able to
generate funds to cover the payment of such interest. Unless a bank can lend money, engage in
international transactions, acquire foreclosed mortgaged properties or their proceeds and generally
engage in other banking and financing activities from which it can derive income, it is inconceivable how
it can carry on as a depository obligated to pay stipulated interest. Conventional wisdom dictates this
inexorable fair and just conclusion. And it can be said that all who deposit money in banks are aware of
such a simple economic proposition. Consequently, it should be deemed read into every contract of
deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation
of the bank is completely suspended by the duly constituted authority, the Central Bank.
This was reiterated in the subsequent case of The Overseas Bank of Manila vs. The Hon. Court of
Appeals and Julian R. Cordero. 5 and in the recent cases of Integrated Realty Corporation, et al. vs.
Philippine National Bank, et al. and the Overseas Bank of Manila vs. Court of appeals, et al. 6
From the aforecited authorities, it is manifest that petitioner cannot be held liable for interest on bank
deposits which accrued from the time it was prohibited by the Central Bank to continue with its banking
operations, that is, when Resolution No. 350 to that effect was issued on February 18, 1969.
The order, therefore, of the Central Bank as receiver/liquidator of petitioner bank allowing the claims of
depositors and creditors to earn interest up to the date of its closure on February 18, 1969, 7 in line with
the doctrine laid down in the jurisprudence above cited.
Although petitioner's formulation of the second issue that it poses is slightly inaccurate and defective,
we likewise find the awards of moral and exemplary damages and attorney's fees to be erroneous.
The trial court found, and it is not disputed, that there was no fraud or bad faith on the part of
petitioner bank and the other defendants in accepting the deposits of private respondents. Petitioner
bank could not even be faulted in not immediately returning the amount claimed by private
respondents considering that the demand to pay was made and Civil Case No. 84800 was filed in the
trial court several months after the Central Bank had ordered petitioner's closure. By that time,
petitioner bank was no longer in a position to comply with its obligations to its creditors, including
herein private respondents. Even the trial court had to admit that petitioner bank failed to pay private
respondents because it was already insolvent. 8 Further, this case is not one of the specified or
analogous cases wherein moral damages may be recovered. 9
There is no valid basis for the award of exemplary damages which is supposed to serve as a warning to
other banks from dissipating their assets in anomalous transactions. It was not proven by private
respondents, and neither was there a categorical finding made by the trial court, that petitioner bank
actually engaged in anomalous real estate transactions. The same were raised only during the testimony
of the bank examiner of the Central Bank, 10 but no documentary evidence was ever presented in
support thereof. Hence, it was error for the lower court to impose exemplary damages upon petitioner
bank since, in contracts, such sanction requires that the offending party acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. 11 Neither does this case present the situation where
attorney's fees may be awarded. 12
In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may, therefore, not be
held responsible for damages which may be reasonably attributed to the non-performance of the
obligation. 13 Consequently, we reiterate that under the premises and pursuant to the aforementioned
provisions of law, it is apparent that private respondents are not justifiably entitled to the payment of
moral and exemplary damages and attorney's fees.
While we tend to agree with petitioner bank that private respondents' claims should he been filed in the
liquidation proceedings in Civil Case No. 86005, entitled "In Re: Liquidation of the Fidelity Savings and
Mortgage Bank," pending before Branch XIII of the then Court of First Instance of Manila, we do not
believe that the decision rendered in the instant case would be violative of the legal provisions on
preference and concurrence of credits. As the trial court puts it:
. . . But this order of payment should not be understood as raising these deposits to the category of
preferred credits of the defendant Fidelity Savings and Mortgage Bank but shall be paid in accordance
with the Bank Liquidation Rules and Regulations embodied in the Order of the. Court of First Instance of
Manila, Branch XIII dated October 3, 1972 (Exh. 3). . . . 14
WHEREFORE, the judgment appealed from is hereby MODIFIED. Petitioner Fidelity Savings and
Mortgage Bank is hereby declared liable to pay private respondents Timoteo and Olimpia Santiago the
sum of P90,000.00, with accrued interest in accordance with the terms of Savings Account Deposit No.
16-0536 (Exhibit A) and Certificate of Time Deposit No. 0210 (Exhibit B) until February 18, 1969. The
awards for moral and exemplary damages, and attorney's fees are hereby DELETED. No costs.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.
CANCIO V CA
MELENCIO-HERRERA, J.:
Before us is petitioner's Motion for Reconsideration of this Court's Resolution of August 11, 1986,
which denied for lack of merit her Petition for Review on certiorari of respondent Court of Tax
Appeals' (CTA) Decision in C.T.A. Case No. 3398.
During the pendency of this case, or on April 23, 1986, petitioner had passed away and her legal heirs
were ordered substituted in her stead and Jose Cancio, Jr., was appointed guardian ad-litem for the
minors Ma. Irene and Roberto, both surnamed Cancio, in this Court's Resolution of August 11, 1986.
There is no substantial dispute on the background facts and the evidentiary aspects Vol the
controversy, summarized in said
Decision as follows:
The records show that claimant Mrs. Rosa Cancio bearing Philippine Passport No. 11797799 while
clearing through the Pre-Boarding (AVSECOM) Area of MIA with her husband and three (3) children to
board PR 306 for Hongkong in the morning of June 12, 1981, was apprehended with One Hundred Two
Thousand Nine Hundred Dollars (US$102,900.00) in cash, six hundred dollars (US$600.00) in two
travelers checks, and one thousand five hundred (Pl,500.00) Pesos; that such apprehension was
effected only thru an alarm sounded by the scanner (metal detecting device) of the AVSECOM men,
when Mrs. Cancio who did not declare her currency had already passed the Customs inspection area;
that subject currencies were placed and concealed inside the two fairly-sized carton boxes for local
chocolates, securely wrapped and taped with tin foil-back paper; and, that in view of claimant's
failure, upon being required, to present the Central Bank Authority, the said currencies were
accordingly confiscated and a seizure Receipt No. 013 was issued to her; hence, this seizure
proceedings.
At the hearing of this case, claimant, thru counsel, presented certified xerox copy of her Bank Book
(Exhibit "I") for foreign currency deposit with the Philippine Commercial and Industrial Bank under
Account FCDU No. 0265, dollar remittances in telegraphic transfers from abroad for deposits in her
account from May 13, 1981 to May 21, 1981, and withdrawal cards (Exhibit "l-A" to "1-E", inclusive),
attesting to the fact that claimant Rosa Cancio had withdrawn from her FCDU Account a certain
amount of United States currency which tended to show that claimant herein was a foreign currency
depositor pursuant to the provisions of Republic Act No. 6426, as implemented by Central Bank
Circular No. 343. And herein claimant testified that because her foreign currency deposit could not be
withdrawn at one time, she made her withdrawal on several occasions starting from May 14, 1981 up
to May 27, 1981 when she closed her account preparatory to her departure which was scheduled in
the morning of June 12, 1981 for Hongkong; that from Hongkong, she and her family intended to
proceed to the United States for medical treatment of her heart ailment as advised by her two
attending physicians from the UST Hospital; that the US currency that they were carrying and
confiscated from them on June 12, 1981 was intended principally for such medical purpose and for
other miscellaneous and necessary expenses, and, that the subject currencies were concealed and
hidden by them inside the two chocolate boxes solely for security reasons. 1
By reason of the forfeiture decreed by respondent Commissioner of Customs of both the foreign and
local currencies due to petitioner's failure to present a Central Bank (CB) authority to bring said
currencies out of the country, petitioner appealed to respondent Court of Tax Appeals. The latter
Court affirmed the forfeiture of the US$102,900.00 in cash, and US$600.00 in travellers' checks for
having been in violation of Central Bank Circulars Nos. 265 and 534, in relation to Section 2530(f) of
the Tariff and Customs Code, as amended. It reversed, however, the forfeiture of P1,500.00 on the
ground that since petitioner was travelling with her husband and three (3) children, the said amount
did not exceed the P500.00 at that each traveller is allowed to bring out of the country without a CB
permit pursuant to paragraph 4 of CB Circular No. 383.
Petitioner's unimpugned evidence shows that she was a foreign currency depositor at the Philippine
Commercial and Industrial Bank at Makati, Metro Manila, and that the subject foreign currency was
part of the total amount of US$116,000.00 she had withdrawn from said bank from May 14 to 27,
1981 for her travel and medical expenses in the United States via Hongkong. 2 Admitted, too, is the
fact that petitioner failed to present to the apprehending customs authorities a Central Bank authority
to bring out of the country the said currencies while at the pre-boarding area of the Manila
International Airport on June 12, 1981 on her scheduled flight to Hongkong together with her husband
and three children.
The primordial issue for resolution is whether or not respondent Court had committed reversible error
in upholding the forfeiture of the foreign currencies in question.
A second look at the facts and the equity of the case, the pertinent laws, and the CB Circulars involved
constrains us to rule in the affirmative and, accordingly, to grant reconsideration of our Resolution of
August 11, 1986 denying review.
It is true that in so far as the exportation or taking out of foreign currency from the country is
concerned, Central Bank Circular No. 265, issued on November 20, 1968, particularly paragraph 3
thereof, mandates:
3. No person shall take out or export from the Philippines foreign currency or any other foreign
exchange except as otherwise authorized by the Central Bank.
Similarly, Central bank Circular No. 534, issued on July 19, 1976, reiterates and provides in Sec. 3
thereof as follows:
Sec. 3. Unless specifically authorized by the Central Bank or allowed under existing international
agreements or Central Bank regulations, no person shall take or transmit or attempt to take or
transmit foreign exchange, in any form out of the Philippines only, through other persons, through the
mails, or through international carriers.
The provisions of this Section shall not apply to tourists and non-resident temporary visitors who are
taking or sending out of the Philippines their own foreign exchange brought in by them.
However, peculiar to the present controversy is the fact that, as stated previously, petitioner is a
foreign currency depositor. Relevant and applicable to her is the following provision of the "Foreign
Currency Deposit Act of the Philip pines" (Republic Act No. 6426, as amended), which took effect upon
its approval on April 4,1972:
SEC. 5. Withdrawability and transferability of deposits. — There shall be no restriction on the

withdrawal by the depositor of his deposit or on the transferability of the same abroad except those
arising from the contract between the depositor and the bank.11 (Emphasis Ours).
Under the foregoing provision, the transferability abroad of foreign currency deposits is unrestricted.
Only one exception is provided for therein, which is, any restriction " from the contract between the
depositor and the bank." Neither is a Central Bank authority required for the transferability abroad of
foreign currency deposits.
Attention is called, however, to the implementing rules and regulations to said Republic Act 6426, as
embodied in CB Circular No. 343 issued on April 24, 1972, which provides:
SEC. 11.Withdrawability and Liquidity of Deposits.
a. xxxxxx xxx
b. Subject only to the terms of the contract between the bank and the depositor, the latter shall
have a general license to withdraw his deposit, notwithstanding any change in policy or regulations.
xxx xxx xxx
(Emphaisis supplied)
Respondent Court has taken the position that the foregoing provision its the right of the depositor to
that of withdrawal and withholds from him the right of transferability abroad. That is not so. Circular-
Letter, dated August 3, 1978, issued by the Central Bank reads in explicit terms:
TO: ALL BANKS AUTHORIZED TO ACCEPT FOREIGN CURRENCY DEPOSITS UNDER THE PROVISIONS OF
RA 6426, AS AMENDED AND PRESIDENTIAL DECREE NO. 1035.
Effective immediately, the banks authorized to accept foreign currency deposits under the provisions
of RA 6426, as amended, and PD 1035 and as implemented by Central Bank Circular 343 and 547, are
hereby instructed to advise their foreign currency depositors who are withdrawing funds for travel
purposes to carry with them the certificate of withdrawal that the banks shall issue. The travellers
shall present the certifications to the Customs and Central Bank personnel at the MIA, if requested.
The banks shall issue a uniform certification, as follows:
___________________
Date
TO WHOM IT MAY CONCERN:
This certifies that ________________________whose signature appears below has withdrawn today,
the amount of ____________in cash (US$ _______________) and Travellers Check
(US$___________________________) against his/her foreign currency account maintained with us.
The funds herein withdrawn are represented to be used in connection with the depositor's foreign
travel scheduled on or about ____________________197_________.
___________________________
(Signature of Authorized
Official OverPrinted Name)
_______________________
(Signature of Depositor)
Please be guided accordingly.
(SGD.) R.D.RUIZ
Director
It is a fact that petitioner could not present a certificate of withdrawal at the Manila International
Airport when she was about to depart. As she had explained, however, she was unaware of this
requirement. And if she had wrapped her dollar currency inside a chocolate box it was for "security
reasons." Besides, as instructed in the Circular-Letter abovequoted, it is the authorized depository
bank which should advise its depositors to carry with them the certificate of withdrawal. At any rate,
respondent Court has found that petitioner has presented in evidence her foreign currency bank
book3 and her withdrawal cards.4 These may be considered as substantial compliance for purposes of
this case.
Indeed, given the underlying objective of the Foreign Currency Deposit Act, as amended, which is to
attract and invite the deposit of foreign currencies which are acceptable as part of the international
reserve in duly authorized banks in order that they may be put into the stream of the banking system,
it would be to defeat the very purpose of the law to place undue restrictions on the transferability of
such funds. The countervailing effect would be to discourage prospective foreign currency depositors
to the detriment of the banking system.
In fine, Central Bank Circulars Nos. 265 and 534 requiring prior Central Bank authority for the taking
out of the country of foreign currency should not be made to encompass foreign currency depositors
whose rights are expressly defined and guaranteed in a special law, the Foreign Currency Deposit Act
(RA 6426, as amended). As a foreign currency depositor, therefore, petitioner cannot be adjudged to
have violated the aforestated Central Bank Circulars. It follows that neither is there room for the
application of Section 2530(f) of the Tariff and Customs Code, as amended, which provides for the
forfeiture of any article and other objects, the exportation of which is effected or attempted contrary
to law.
This is not to condone petitioner's failure to declare the foreign currency she was carrying out of the
country but just to stress that the Foreign Currency Deposit Act grants petitioner the right of
transferability of her funds abroad except that she was not advised by her bank to secure, and
consequently was unable to present, the necessary certificate of withdrawal from said bank.
ACCORDINGLY, the Decision of respondent Court of Tax Appeals is hereby SET ASIDE in so far as it
upheld the forfeiture by respondent Commissioner of Customs of the sums of US$102,900.00 in cash,
and US$600.00 in traveller's checks, which amounts should now be returned to petitioner's heirs, but
AFFIRMED in so far as it reversed the forfeiture by the same official of the sum of P1,500.00. No costs.
SO ORDERED.
SALVACION V CENTRAL BANK
Facts:
Greg Bartelli y Northcott, an American tourist, was charged with serious Illegal detention and Rape of
herein petitioner Karen Salvacion. Upon his arrest, it was recovered from him among others, bank
books and a dollar account with China Bank Corp. On the day of the hearing of his petition for bail, he
was able to escape from jail. Pending his arrest the criminal cases were archived. Meanwhile, in the
Civil Case against Bartelli, the Judge granted the prayer of attachment and a notice of garnishment
was served on China Bank. China Bank invoked R.A. No. 1405 and later on, Section 113 Central Bank
Circular No. 960 to the effect that the dollar deposits of Bartelli are exempt from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever. This prompted petitioner’s counsel to inquire herein respondent
whether the said circular has any exception or has been repealed/amended. Respondent cited that
the provision is absolute in application. Meanwhile, the court has rendered judgment in favor of
petitioners. Petitioners tried to execute on Bartelli’s dollar deposit with China Bank but the bank
invoked the CB Circular. Thus, petitioners decided to seek relief from this Court.
Issue:
Whether or not the secrecy of foreign currency deposits should be made applicable to a foreign
transient?
Ruling: NO.
This Court finds the petition to be partly meritorious.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country’s
economy was in a shambles; when foreign investments were minimal and presumably, this was the
reason why said statute was enacted. But the realities of the present times show that the country has
recovered economically; and even if not, the questioned law still denies those entitled to due process
of law for being unreasonable and oppressive. The intention of the questioned law may be good when
enacted. The law failed to anticipate the iniquitous effects producing outright injustice and inequality
such as the case before us.
In his Comment, the Solicitor General correctly opined, thus:
It is evident from the above [Whereas clauses] that the Offshore Banking System and the Foreign
Currency Deposit System were designed to draw deposits from foreign lenders and investors (Vide
second Whereas of PD No. 1034; third Whereas of PD No. 1035). It is these deposits that are induced
by the two laws and given protection and incentives by them. Obviously, the foreign currency deposit
made by a transient or a tourist is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and
given incentives and protection by said laws because such depositor stays only for a few days in the
country and, therefore, will maintain his deposit in the bank only for a short time.
Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with
respondent China Banking Corporation only for safekeeping during his temporary stay in the
Philippines.
For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent
Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD
No. 1246 against attachment, garnishment or other court processes.
In 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,
administrative body whatsoever, is applicable to a foreign transient, injustice would result especially
to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the
New Civil Code which provides that “in case of doubt in the interpretation or application of laws, it is
presumed that the lawmaking body intended right and justice to prevail. “Ninguno non deue
enriquecerse tortizeramente con dano de otro.” Simply stated, when the statute is silent or
ambiguous, this is one of those fundamental solutions that would respond to the vehement urge of
conscience.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it
amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its
peculiar circumstances.
Respondent Greg Bartelli y Northcott, an American tourist, coaxed and lured the 12-year old
petitioner Karen Salvacion to go with him in his apartment where the former repeatedly raped latter.
After the rescue, policemen recovered dollar and peso checks including a foreign currency deposit
from China Banking Corporation (CBC). Writ of preliminary attachment and hold departure order were
issued. Notice of Garnishment was served by the Deputy Sheriff to CBC which later invoked R.A. No.
1405 as its answer to it. Deputy Sheriff sent his reply to CBC saying that the garnishment did not
violate the secrecy of bank deposits since the disclosure is merely incidental to a garnishment
properly and legally made by virtue of a court order which has placed the subject deposits in custodia
legis. CBC replied and invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar
deposits of Greg Bartelli are exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body, whatsoever. Central Bank
of the Philippines affirmed the defense of CBC.
ISSUE:
Whether or not Sec. 113 of Central Bank Circular 960 and Sec. 8 of RA 6426 amended by PD 1246
otherwise known as the “Foreign Currency Deposit Act” be made applicable to a foreign transient.
HELD:
NO. The provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends Section
8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar
circumstances.
RATIO:
[T]he 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,
administrative body whatsoever, is applicable to a foreign transient, injustice would result especially
to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the
New Civil Code which provides that “in case of doubt in the interpretation or application of laws, it is
presumed that the lawmaking body intended right and justice to prevail.
“Ninguno non deue enriquecerse tortizeramente con dano de otro.” Simply stated, when the statute
is silent or ambiguous, this is one of those fundamental solutions that would respond to the
vehement urge of conscience. It would be unthinkable, that the questioned Section 113 of Central
Bank No. 960 would be used as a device by accused Greg Bartelli for wrongdoing, and in so doing,
acquitting the guilty at the expense of the innocent.
Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding the
final and executory judgment of the lower court against the Central Bank Circular protecting the
foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor against
injustice to a national and victim of a crime? This situation calls for fairness against legal tyranny.
PEREZ, J.:
The subject of this petition for certiorari is the Decision[1] of the Court of Appeals in CA-G.R. SP No.
82647 allowing the quashal by the Regional Trial Court (RTC) of Makati of a subpoena for the
production of bank ledger. This case is incident to Civil Case No. 99-1853, which is the main case for
collection of sum of money with damages filed by Industrial Bank of Korea, Tong Yang Merchant Bank,
First Merchant Banking Corporation, Land Bank of the Philippines, and Westmont Bank (now United
Overseas Bank), collectively known as the Banks against Domsat Holdings, Inc. (Domsat) and the
Government Service Insurance System (GSIS). Said case stemmed from a Loan Agreement,[2] whereby
the Banks agreed to lend United States (U.S.) $11 Million to Domsat for the purpose of financing the
lease and/or purchase of a Gorizon Satellite from the International Organization of Space
Communications (Intersputnik).[3]
The controversy originated from a surety agreement by which Domsat obtained a surety bond from
GSIS to secure the payment of the loan from the Banks. We quote the terms of the Surety Bond in its
entirety.[4]
Republic of the Philippines
GOVERNMENT SERVICE INSURANCE SYSTEM
GENERAL INSURANCE FUND
GSIS Headquarters, Financial Center

Roxas Boulevard, Pasay City
G(16) GIF Bond 027461
SURETYBOND
KNOW ALL MEN BY THESE PRESENTS:
That we, DOMSAT HOLDINGS, INC., represented by its President as PRINCIPAL, and the GOVERNMENT
SERVICE INSURANCE SYSTEM, as Administrator of the GENERAL INSURANCE FUND, a corporation duly
organized and existing under and by virtue of the laws of the Philippines, with principal office in the
City of Pasay, Metro Manila, Philippines as SURETY, are held and firmly bound unto the OBLIGEES:
LAND BANK OF THE PHILIPPINES, 7th Floor, Land Bank Bldg. IV. 313 Sen. Gil J. Puyat Avenue, Makati
City; WESTMONT BANK, 411 Quintin Paredes St., Binondo, Manila: TONG YANG MERCHANT BANK,
185, 2-Ka, Ulchi-ro, Chungk-ku, Seoul, Korea; INDUSTRIAL BANK OF KOREA, 50, 2-Ga, Ulchi-ro, Chung-
gu, Seoul, Korea; and FIRST MERCHANT BANKING CORPORATION, 199-40, 2-Ga, Euliji-ro, Jung-gu,
Seoul, Korea, in the sum, of US $ ELEVEN MILLION DOLLARS ($11,000,000.00) for the payment of
which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators,
successors and assigns, jointly and severally, firmly by these presents.
THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS:
WHEREAS, the above bounden PRINCIPAL, on the 12th day of December, 1996 entered into a contract
agreement with the aforementioned OBLIGEES to fully and faithfully
Guarantee the repayment of the principal and interest on the loan granted the PRINCIPAL to be used
for the financing of the two (2) year lease of a Russian Satellite from INTERSPUTNIK, in accordance
with the terms and conditions of the credit package entered into by the parties.
This bond shall remain valid and effective until the loan including interest has been fully paid and
liquidated,
a copy of which contract/agreement is hereto attached and made part hereof;

WHEREAS, the aforementioned OBLIGEES require said PRINCIPAL to give a good and sufficient bond in
the above stated sum to secure the full and faithful performance on his part of said
contract/agreement.
NOW, THEREFORE, if the PRINCIPAL shall well and truly perform and fulfill all the undertakings,
covenants, terms, conditions, and agreements stipulated in said contract/agreements, then this
obligation shall be null and void; otherwise, it shall remain in full force and effect.
WITNESS OUR HANDS AND SEALS this 13th day of December 1996 at Pasay City, Philippines.
DOMSAT HOLDINGS, INC GOVERNMENT SERVICE INSURANCE
Principal SYSTEM
General Insurance Fund
By: By:
CAPT. RODRIGO A. SILVERIO AMALIO A. MALLARI

President Senior Vice-President
General Insurance Group
When Domsat failed to pay the loan, GSIS refused to comply with its obligation reasoning that Domsat
did not use the loan proceeds for the payment of rental for the satellite. GSIS alleged that Domsat,
with Westmont Bank as the conduit, transferred the U.S. $11 Million loan proceeds from the
Industrial Bank of Korea to Citibank New York account of Westmont Bank and from there to the
Binondo Branch of Westmont Bank.[5] The Banks filed a complaint before the RTC of Makati against
Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of a subpoena duces tecum to the
custodian of records of Westmont Bank to produce the following documents:
1. Ledger covering the account of DOMSAT Holdings, Inc. with Westmont Bank (now United
Overseas Bank), any and all documents, records, files, books, deeds, papers, notes and other data and
materials relating to the account or transactions of DOMSAT Holdings, Inc. with or through the
Westmont Bank (now United Overseas Bank) for the period January 1997 to December 2002, in
his/her direct or indirect possession, custody or control (whether actual or constructive), whether in
his/her capacity as Custodian of Records or otherwise;
2. All applications for cashiers/ managers checks and bank transfers funded by the account
of DOMSAT Holdings, Inc. with or through the Westmont Bank (now United Overseas Bank) for the
period January 1997 to December 2002, and all other data and materials covering said applications, in
his/her direct or indirect possession, custody or control (whether actual or constructive), whether in
his/her capacity as Custodian of Records or otherwise;
3. Ledger covering the account of Philippine Agila Satellite, Inc. with Westmont Bank (now
United Overseas Bank), any and all documents, records, files, books, deeds, papers, notes and other
data and materials relating to the account or transactions of Philippine Agila Satellite, Inc. with or
through the Westmont bank (now United Overseas Bank) for the period January 1997 to December
2002, in his/her direct or indirect possession, custody or control (whether actual or constructive),
whether in his/her capacity as Custodian of Records or otherwise;
4. All applications for cashiers/managers checks funded by the account of Philippine Agila
Satellite, Inc. with or through the Westmont Bank (now United Overseas Bank) for the period January
1997 to December 2002, and all other data and materials covering said applications, in his/her direct
or indirect possession, custody or control (whether actual or constructive), whether in his/her
capacity as Custodian of Records or otherwise.[6]
The RTC issued a subpoena decus tecum on 21 November 2002.[7] A motion to quash was filed by the
banks on three grounds: 1) the subpoena is unreasonable, oppressive and does not establish the
relevance of the documents sought; 2) request for the documents will violate the Law on Secrecy of
Bank Deposits; and 3) GSIS failed to advance the reasonable cost of production of the documents.[8]
Domsat also joined the banks motion to quash through its Manifestation/Comment.[9] On 9 April
2003, the RTC issued an Order denying the motion to quash for lack of merit. We quote the pertinent
portion of the Order, thus:
After a careful consideration of the arguments of the parties, the Court did not find merit in the
motion.
The serious objection appears to be that the subpoena is violative of the Law on Secrecy of Bank
Deposit, as amended. The law declares bank deposits to be absolutely confidential except: x x x (6) In
cases where the money deposited or invested is the subject matter of the litigation.
The case at bench is for the collection of a sum of money from defendants that obtained a loan from
the plaintiff. The loan was secured by defendant GSIS which was the surety. It is the contention of
defendant GSIS that the proceeds of the loan was deviated to purposes other than to what the loan
was extended. The quashal of the subpoena would deny defendant GSIS its right to prove its
defenses.
WHEREFORE, for lack of merit the motion is DENIED.[10]

On 26 June 2003, another Order was issued by the RTC denying the motion for reconsideration filed
by the banks.[11] On 1 September 2003 however, the trial court granted the second motion for
reconsideration filed by the banks. The previous subpoenas issued were consequently quashed.[12]
The trial court invoked the ruling in Intengan v. Court of Appeals,[13] where it was ruled that foreign
currency deposits are absolutely confidential and may be examined only when there is a written
permission from the depositor. The motion for reconsideration filed by GSIS was denied on 30
December 2003.
Hence, these assailed orders are the subject of the petition for certiorari before the Court of Appeals.
GSIS raised the following arguments in support of its petition:
I.
Respondent Judge acted with grave abuse of discretion when it favorably considered respondent
banks (second) Motion for Reconsideration dated July 9, 2003 despite the fact that it did not contain a
notice of hearing and was therefore a mere scrap of paper.
II.
Respondent judge capriciously and arbitrarily ignored Section 2 of the Foreign Currency Deposit Act
(RA 6426) in ruling in his Orders dated September 1 and December 30, 2003 that the
US$11,000,000.00 deposit in the account of respondent Domsat in Westmont Bank is covered by the
secrecy of bank deposit.
III.
Since both respondent banks and respondent Domsat have disclosed during the trial the
US$11,000,000.00 deposit, it is no longer secret and confidential, and petitioner GSIS right to inquire
into what happened to such deposit can not be suppressed.[14]
The Court of Appeals addressed these issues in seriatim.
The Court of Appeals resorted to a liberal interpretation of the rules to avoid miscarriage of justice
when it allowed the filing and acceptance of the second motion for reconsideration. The appellate
court also underscored the fact that GSIS did not raise the defect of lack of notice in its opposition to
the second motion for reconsideration. The appellate court held that failure to timely object to the
admission of a defective motion is considered a waiver of its right to do so.
The Court of Appeals declared that Domsats deposit in Westmont Bank is covered by Republic Act No.
6426 or the Bank Secrecy Law. We quote the pertinent portion of the Decision:
It is our considered opinion that Domsats deposit of $11,000,000.00 in Westmont Bank is covered by
the Bank Secrecy Law, as such it cannot be examined, inquired or looked into without the written
consent of its owner. The ruling in Van Twest vs. Court of Appeals was rendered during the effectivity
of CB Circular No. 960, Series of 1983, under Sec. 102 thereof, transfer 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.
CB Circular No. 960 has since been superseded by CB Circular 1318 and later by CB Circular 1389.
Section 102 of Circular 960 has not been re-enacted in the later Circulars. What is applicable now is
the decision in Intengan vs. Court of Appeals where the Supreme Court has ruled that the under R.A.
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. Petitioner, therefore, had inappropriately
invoked the provisions of Central Bank (CB) Circular Nos. 343 which has already been superseded by
more recently issued CB Circulars. CB Circular 343 requires the surrender to the banking system of
foreign exchange, including proceeds of foreign borrowings. This requirement, however, can no longer
be found in later circulars.
In its Reply to respondent banks comment, petitioner appears to have conceded that what is
applicable in this case is CB Circular 1389. Obviously, under CB 1389, proceeds of foreign borrowings
are no longer required to be surrendered to the banking system.
Undaunted, petitioner now argues that paragraph 2, Section 27 of CB Circular 1389 is applicable
because Domsats $11,000,000.00 loan from respondent banks was intended to be paid to a foreign
supplier Intersputnik and, therefore, should have been paid directly to Intersputnik and not deposited
into Westmont Bank. The fact that it was deposited to the local bank Westmont Bank, petitioner
claims violates the circular and makes the deposit lose its confidentiality status under R.A. 6426.
However, a reading of the entire Section 27 of CB Circular 1389 reveals that the portion quoted by the
petitioner refers only to the procedure/conditions of drawdown for service of debts using foreign
exchange. The above-said provision relied upon by the petitioner does not in any manner prescribe
the conditions before any foreign currency deposit can be entitled to the confidentiality provisions of
R.A. 6426.[15]
Anent the third issue, the Court of Appeals ruled that the testimony of the incumbent president of
Westmont Bank is not the written consent contemplated by Republic Act No. 6426.
The Court of Appeals however upheld the issuance of subpoena praying for the production of
applications for cashiers or managers checks by Domsat through Westmont Bank, as well as a copy of
an Agreement and/or Contract and/or Memorandum between Domsat and/or Philippine Agila
Satellite and Intersputnik for the acquisition and/or lease of a Gorizon Satellite. The appellate court
believed that the production of these documents does not involve the examination of Domsats
account since it will never be known how much money was deposited into it or withdrawn therefrom
and how much remains therein.
On 29 February 2008, the Court of Appeals rendered the assailed Decision, the decretal portion of
which reads:
WHEREFORE, the petition is partially GRANTED. Accordingly, the assailed Order dated December 30,
2003 is hereby modified in that the quashal of the subpoena for the production of Domsats bank
ledger in Westmont Bank is upheld while respondent court is hereby ordered to issue subpoena duces
tecum ad testificandum directing the records custodian of Westmont Bank to bring to court the
following documents:
a) applications for cashiers or managers checks by respondent Domsat through Westmont Bank
from January 1997 to December 2002;
b) bank transfers by respondent Domsat through Westmont Bank from January 1997 to December
2002; and
c) copy of an agreement and/or contract and/or memorandum between respondent Domsat

and/or Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon
satellite.
No pronouncement as to costs.[16]
GSIS filed a motion for reconsideration which the Court of Appeals denied on 19 June 2009. Thus, the
instant petition ascribing grave abuse of discretion on the part of the Court of Appeals in ruling that
Domsats deposit with Westmont Bank cannot be examined and in finding that the banks second
motion for reconsideration in Civil Case No. 99-1853 is procedurally acceptable.[17]
This Court notes that GSIS filed a petition for certiorari under Rule 65 of the Rules of Court to assail
the Decision and Resolution of the Court of Appeals. Petitioner availed of the improper remedy as the
appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a
special civil action under Rule 65.[18] Certiorari under Rule 65 lies only when there is no appeal, nor
plain, speedy and adequate remedy in the ordinary course of law. That action is not a substitute for a
lost appeal in general; it is not allowed when a party to a case fails to appeal a judgment to the proper
forum.[19] Where an appeal is available, certiorari will not prosper even if the ground therefor is
grave abuse of discretion. Accordingly, when a party adopts an improper remedy, his petition may be
dismissed outright.[20]
Yet, even if this procedural infirmity is discarded for the broader interest of justice, the petition sorely
lacks merit.
GSIS insists that Domsats deposit with Westmont Bank can be examined and inquired into. It
anchored its argument on Republic Act No. 1405 or the Law on Secrecy of Bank Deposits, which allows
the disclosure of bank deposits in cases where the money deposited is the subject matter of the
litigation. GSIS asserts that the subject matter of the litigation is the U.S. $11 Million obtained by
Domsat from the Banks to supposedly finance the lease of a Russian satellite from Intersputnik.
Whether or not it should be held liable as a surety for the principal amount of U.S. $11 Million, GSIS
contends, is contingent upon whether Domsat indeed utilized the amount to lease a Russian satellite
as agreed in the Surety Bond Agreement. Hence, GSIS argues that the whereabouts of the U.S. $11
Million is the subject matter of the case and the disclosure of bank deposits relating to the U.S. $11
Million should be allowed.
GSIS also contends that the concerted refusal of Domsat and the banks to divulge the whereabouts of
the U.S. $11 Million will greatly prejudice and burden the GSIS pension fund considering that a
substantial portion of this fund is earmarked every year to cover the surety bond issued.
Lastly, GSIS defends the acceptance by the trial court of the second motion for reconsideration filed
by the banks on the grounds that it is pro forma and did not conform to the notice requirements of
Section 4, Rule 15 of the Rules of Civil Procedure.[21]
Domsat denies the allegations of GSIS and reiterates that it did not give a categorical or affirmative
written consent or permission to GSIS to examine its bank statements with Westmont Bank.
The Banks maintain that Republic Act No. 1405 is not the applicable law in the instant case because
the Domsat deposit is a foreign currency deposit, thus covered by Republic Act No. 6426. Under said
law, only the consent of the depositor shall serve as the exception for the disclosure of his/her
deposit.
The Banks counter the arguments of GSIS as a mere rehash of its previous arguments before the Court
of Appeals. They justify the issuance of the subpoena as an interlocutory matter which may be
reconsidered anytime and that the pro forma rule has no application to interlocutory orders.
It appears that only GSIS appealed the ruling of the Court of Appeals pertaining to the quashal of the
subpoena for the production of Domsats bank ledger with Westmont Bank. Since neither Domsat nor
the Banks interposed an appeal from the other portions of the decision, particularly for the
production of applications for cashiers or managers checks by Domsat through Westmont Bank, as
well as a copy of an agreement and/or contract and/or memorandum between Domsat and/or
Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon satellite, the
latter became final and executory.
GSIS invokes Republic Act No. 1405 to justify the issuance of the subpoena while the banks cite
Republic Act No. 6426 to oppose it. The core issue is which of the two laws should apply in the instant
case.
Republic Act No. 1405 was enacted in 1955. Section 2 thereof was first amended by Presidential
Decree No. 1792 in 1981 and further amended by Republic Act No. 7653 in 1993. It now reads:
Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political subdivisions
and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not
be examined, inquired or looked into by any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
Section 8 of Republic Act No. 6426, which was enacted in 1974, and amended by Presidential Decree
No. 1035 and later by Presidential Decree No. 1246, provides:
Section 8. Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this
Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized
under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely
confidential nature and, except upon the written permission of the depositor, in no instance shall
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,
administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246,
prom. Nov. 21, 1977.)
On the one hand, Republic Act No. 1405 provides for four (4) exceptions when records of deposits
may be disclosed. These are under any of the following instances: a) upon written permission of the
depositor, (b) in cases of impeachment, (c) upon order of a competent court in the case of bribery or
dereliction of duty of public officials or, (d) when the money deposited or invested is the subject
matter of the litigation, and e) in cases of violation of the Anti-Money Laundering Act (AMLA), the
Anti-Money Laundering Council (AMLC) may inquire into a bank account upon order of any competent
court.[22] On the other hand, the lone exception to the non-disclosure of foreign currency deposits,
under Republic Act No. 6426, is disclosure upon the written permission of the depositor.
These two laws both support the confidentiality of bank deposits. There is no conflict between them.
Republic Act No. 1405 was enacted for the purpose of giving encouragement to the people to deposit
their money in banking institutions and to discourage private hoarding so that the same may be
properly utilized by banks in authorized loans to assist in the economic development of the
country.[23] It covers all bank deposits in the Philippines and no distinction was made between
domestic and foreign deposits. Thus, Republic Act No. 1405 is considered a law of general application.
On the other hand, Republic Act No. 6426 was intended to encourage deposits from foreign lenders
and investors.[24] It is a special law designed especially for foreign currency deposits in the
Philippines. A general law does not nullify a specific or special law. Generalia specialibus non
derogant.[25] Therefore, it is beyond cavil that Republic Act No. 6426 applies in this case.
Intengan v. Court of Appeals affirmed the above-cited principle and categorically declared that for
foreign currency deposits, such as U.S. dollar deposits, the applicable law is Republic Act No. 6426.
In said case, Citibank filed an action against its officers for persuading their clients to transfer their
dollar deposits to competitor banks. Bank records, including dollar deposits of petitioners, purporting
to establish the deception practiced by the officers, were annexed to the complaint. Petitioners now
complained that Citibank violated Republic Act No. 1405. This Court ruled that since the accounts in
question are U.S. dollar deposits, the applicable law therefore is not Republic Act No. 1405 but
Republic Act No. 6426.
The above pronouncement was reiterated in China Banking Corporation v. Court of Appeals,[26]
where respondent accused his daughter of stealing his dollar deposits with Citibank. The latter
allegedly received the checks from Citibank and deposited them to her account in China Bank. The
subject checks were presented in evidence. A subpoena was issued to employees of China Bank to
testify on these checks. China Bank argued that the Citibank dollar checks with both respondent
and/or her daughter as payees, deposited with China Bank, may not be looked into under the law on
secrecy of foreign currency deposits. This Court highlighted the exception to the non-disclosure of
foreign currency deposits, i.e., in the case of a written permission of the depositor, and ruled that
respondent, as owner of the funds unlawfully taken and which are undisputably now deposited with
China Bank, he has the right to inquire into the said deposits.
Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont
Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might expose
itself to criminal liability under the same act.[27]
The basis for the application of subpoena is to prove that the loan intended for Domsat by the Banks
and guaranteed by GSIS, was diverted to a purpose other than that stated in the surety bond. The
Banks, however, argue that GSIS is in fact liable to them for the proper applications of the loan
proceeds and not vice-versa. We are however not prepared to rule on the merits of this case lest we
pre-empt the findings of the lower courts on the matter.
The third issue raised by GSIS was properly addressed by the appellate court. The appellate court
maintained that the judge may, in the exercise of his sound discretion, grant the second motion for
reconsideration despite its being pro forma. The appellate court correctly relied on precedents where
this Court set aside technicality in favor of substantive justice. Furthermore, the appellate court
accurately pointed out that petitioner did not assail the defect of lack of notice in its opposition to the
second motion of reconsideration, thus it can be considered a waiver of the defect.
WHEREFORE, the petition for certiorari is DISMISSED. The Decision dated 29 February 2008 and 19
June 2009 Resolution of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.

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CHINA BANKING CORP V CA

Ruling: YES. [Pro Hac Vice Ruling]

We agree in the conclusion arrived at by the Court of Appeals.

A Complaint for recovery of sums of money and annulment of sales of real

1) CITIBANK CHECK NO. 69003194405412 dated September 29

2) CITIBANK CHECK NO. 69003194405296 dated September 29

3) CITIBANK CHECK NO. 69003194405414 dated September 29

4) CITIBANK CHECK NO. 69003194405413 dated September 29

5) CITIBANK CHECK NO. 69003194405297 dated October 01 1997 in

6) CITIBANK CHECK NO. 69003194405339 dated October 09 1997 in

Issue a subpoena ad testificandum requiring MS. ISABEL YAP and

Premises considered, the motion for reconsideration is denied partly and

In justifying its conclusion, the Court of Appeals ratiocinated:

From the foregoing, it is pristinely clear the law specifically

The contention of petitioner that the [prescription] on absolute

THE HONORABLE COURT OF APPEALS HAS INTERPRETED

PRIVATE RESPONDENT IS NOT THE OWNER OF THE

PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF SEC.

As amended by Presidential Decree No. 1246, the law reads:

SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency

Whereas, in order to assure the development and speedy growth of the

Whereas, making absolute the protective cloak of confidentiality over

As to the deposit in foreign currencies entitled to be protected under the

The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a

We agree in the conclusion arrived at by the Court of Appeals.

Furthermore, it is indubitable that the Citibank checks were drawn

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

"Know All Men by These Presents:

"(Sgd.) EDGAR STEPHENSON

"(Sgd.) ANA RIVERA

"Address: 799 Sta. Mesa, Manila

"(Sgd.) FRED W. BOHLER

(See also article 1255)

Yulo, C.J., Moran, Paras, and Bocobo, JJ., concur.

183 SCRA 755

W/N the survivorship agreement was valid.

Thus, Romarico had the right to claim reimbursement.

The dispositive portion of the decision of the Court of Appeals states:

The petition is meritorious.

xxx xxx xxx

xxx xxx xxx

In Macam v. Gatmaitan, 18 it was held:

xxx xxx xxx

xxx xxx xxx

However, as we have warned:

xxx xxx xxx

xxx xxx xxx

Melencio-Herrera (Chairperson), Paras, Padilla and Regalado JJ., concur.

(b) P30,000,00 as exemplary damages; and

(c) P10,000.00 as and for attorney's fees.

1) To forbid the Fidelity Savings Bank to do business in the Philippines;

Manila, Philippines, August 10, 1973. 3

There is merit in the petition.

Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

SEC. 5. Withdrawability and transferability of deposits. — There shall be no restriction on the

SEC. 11.Withdrawability and Liquidity of Deposits.

xxx xxx xxx

The banks shall issue a uniform certification, as follows:

TO WHOM IT MAY CONCERN:

Official OverPrinted Name)

Please be guided accordingly.

SALVACION V CENTRAL BANK

This Court finds the petition to be partly meritorious.

In his Comment, the Solicitor General correctly opined, thus: