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G.R. No. 71479 October 18, 1990 million dollars less bank charges of $6.

million dollars less bank charges of $6.30 to the Prudential Bank for
MELLON BANK, N.A., petitioner, the account of Victoria Javier.
vs. On June 3, 1977, Javier opened a new dollar account (No. 343) in
HON. CELSO L. MAGSINO, in his capacity as Presiding Judge of the Prudential Bank and deposited $999,943.70. Immediately their,
Branch CLIX of the Regional Trial Court at Pasig; MELCHOR Victoria Javier and her husband, Melchor Javier, Jr., made
JAVIER, JR., VICTORIA JAVIER; HEIRS OF HONORIO withdrawals from the account, deposited them in several banks only
POBLADOR, JR., namely: Elsa Alunan Poblador, Honorio to withdraw them later in an apparent plan to conceal, "launder" and
Poblador III, Rafael Poblador, Manuel Poblador, Ma. Regina dissipate the erroneously sent amount.
Poblador, Ma. Concepcion Poblador & Ma. Dolores Poblador; On June 14, 1977, Javier withdrew $475,000 from account No. 343
F.C. HAGEDORN & CO., INC.; DOMINGO JHOCSON, JR.; JOSE and converted it into eight cashier's checks made out to the
MARQUEZ; ROBERTO GARINO; ELNOR INVESTMENT CO., following: (a) F.C. Hagedorn & Co., Inc., two cheeks for the total
INC.; PARAMOUNT FINANCE CORPORATION; RAFAEL amount of P1,000,000; (b) Elnor Investment Co., Inc., two checks for
CABALLERO; and TRI-ARC INVESTMENT and MANAGEMENT P1,000,000; (c) Paramount Finance Corporation, two checks for
CO., INC. respondents. P1,000,000; and (d) M. Javier, Jr., two checks for P496,000. The first
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for six checks were delivered to Jose Marquez and Honorio Poblador,
petitioner. Jr.
Jose Buendia for respondent Jose Marquez. It appears that Melchor Javier, Jr. had requested Jose Marquez, a
Raul L. Cornea & Associates for Jhocson and Garino. realtor, to look for properties for sale in the United States. Marquez
Jesus L. Santos and Conrado Valera for Tri-Arc Investment, etc. offered a 160-acre lot in the Mojave desert in California City which
Bernardo D. Calderon for respondent ELNOR and Rafael Caballero. was owned by Honorio Poblador, Jr. Javier, without having seen the
Nazareno, Azada, Sabado & Dizon for Movants. property, agreed to buy it for P3,236,800 (US$437,405) although it
Balgos & Perez for Paramount Finance Corporation. was actually appraised at around $38,500. Consequently, as
Meer, Meer & Meer for Hagedorn. Poblador's agent, Marquez executed in Makati a deed of absolute
Alberto Villareza for F.C. Hagedorn & Co. sale in favor of the Javiers and had the document notarized in Manila
before an associate of Poblador. Marquez executed another deed of
FERNAN, C.J.: sale indicating receipt of the purchase price and sent the deed to the
The issue in the instant special civil action of certiorari is whether or Kern County Registrar in California for registration.
not, by virtue of the principle of election of remedies, an action filed Inasmuch as Poblador had requested that the purchase price should
in California, U.S.A., to recover real property located therein and to not be paid directly to him, the payment of P3,000,000 was coursed
constitute a constructive trust on said property precludes the filing in through Elnor Investment Co., Inc., allegedly Poblador's personal
our jurisdiction of an action to recover the purchase price of said real holding company; Paramount Finance, allegedly headed by
property. Poblador's brother, and F.C. Hagedorn, allegedly a stock brokerage
On May 27, 1977, Dolores Ventosa requested the transfer of $1,000 with extensive dealings with Poblador. The payment was made
from the First National Bank of Moundsville, West Virginia, U.S.A. to through the aforementioned six cashier's checks while the balance of
Victoria Javier in Manila through the Prudential Bank. Accordingly, P236,000 was paid in cash by Javier who did not even ask for a
the First National Bank requested the petitioner, Mellon Bank, to receipt.
effect the transfer. Unfortunately the wire sent by Mellon Bank to The two checks totalling P1,000,000 was delivered by Poblador to
Manufacturers Hanover Bank, a correspondent of Prudential Bank, F.C. Hagedorn with specific instructions to purchase Atlas, SMC and
indicated the amount transferred as "US$1,000,000.00" instead of Philex shares. The four checks for P2,000,000 with Elnor Investment
US$1,000.00. Hence Manufacturers Hanover Bank transferred one
and Paramount Finance as payees were delivered to the latter to had been constituted trustees of an implied trust for the benefit of
purchase "bearer" notes. Mellon Bank with a clear duty to return to said bank the moneys
Meanwhile, in July, 1977, Mellon Bank filed a complaint docketed as mistakenly paid to them; that, upon request of Mellon Bank and
No. 148056 in the Superior Court of California, County of Kern, Manufacturers Hanover Bank, Prudential Bank informed the Javiers
against Melchor Javier, Jane Doe Javier, Honorio Poblador, Jrn, and of the erroneous transmittal of one million dollars first orally and later
Does I through V. In its first amended complaint to impose by letter-demand; that conferences between the representatives of
constructive trust dated July 14, 1977, 1 Mellon Bank alleged that it the Javiers, led by Jhocson and Poblador, in the latter's capacity as
had mistakenly and inadvertently cause the transfer of the sum of legal and financial counsel, and representatives of Mellon Bank,
$999,000.00 to Jane Doe Javier; that it believes that the defendants proved futile as the Javiers claimed that most of the moneys had
had withdrawn said funds; that "the defendants and each of them been irretrievably spent; that the Javiers could only return the
have used a portion of said funds to purchase real property located amount if the Mellon Bank should agree to make an absolute
in Kern County, California"; and that because of defendants' quitclaim and waiver of future rights against them, and that in a
knowledge of Mellon Bank's mistake and inadvertence and their use scheme to conceal and dissipate the funds, through the active
of the funds to purchase the property, they and "each of them are participation of Jose Marquez, the Javiers bought the California
involuntary or constructive trustees of the real property and of any property of Poblador.
profits therefrom, with a duty to convey the same to plaintiff It further alleged that trust fund moneys totalling P3,000,000.00 were
forthwith." It prayed that the defendants and each of them be made payable to Hagedorn Paramount and Elnor; that Hagedorn on
declared as holders of the property in trust for the plaintiff; that instructions of Poblador, purchased shares of stock at a stock
defendants be compelled to transfer legal title and possession of the exchange for P1,000,000.00 but later, it hastily sold said shares at a
property to the plaintiff; that defendants be made to pay the costs of loss of approximately P150,000.00 to the prejudice of the plaintiff;
the suit, and that other reliefs be granted them. that proceeds of the sale were deposited by Hagedorn in the name
On July 29, 1977, Mellon Bank also filed in the Court of First of Poblador and/or the law office of Poblador, Nazareno, Azada,
Instance of Rizal, Branch X, a complaint against the Javier spouses, Tomacruz and Paredes; that dividends declared on the shares were
Honorio Poblador, Jr., Domingo L. Jhocson, Jr., Jose Marquez, delivered by Hagedorn to Caballero after the complaint had been
Roberto Gariño, Elnor Investment Co., Inc., F.C. Hagedorn & Co., filed and thereafter, Caballero deposited the dividends in his
Inc. and Paramount Finance Corporation. After its amendment, personal account; that after receiving the P1,000,000.00 trust
Rafael Caballero and Tri-Arc Investment & Management Company, money, Paramount issued promissory notes upon maturity of which
Inc. were also named defendants. 2 Paramount released the amount to unknown persons; that Elnor also
The amended and supplemental complaint alleged the facts set forth invested P1,000,000.00 in Paramount for which the latter also issued
above and added that Roberto Gariño, chief accountant of Prudential promissory notes; that after the filing of the complaint, counsel for
Bank, and who was the reference of Mrs. Ventosa's dollar plaintiff requested Paramount not to release the amount after
remittances to Victoria Javier, immediately informed the Javiers of maturity; that in evident bad faith, Elnor transferred the non-
the receipt of US$1,000,000.00; that knowing the financial negotiable Paramount promissory notes to Tri-Arc. that when the
circumstances of Mrs. Ventosa and the fact that a mistake had been notes matured, Paramount delivered the proceeds of P1,000,000.00
committed, the Javiers, with undue haste, took unlawful advantage of to Tri-Arc; that Poblador knew or should have known that the
the mistake, withdrew the whole amount and transferred the same to attorney's fees he received from the Javiers came from the trust
a "343 dollar account"; that, aided and abetted by Poblador and funds; and that despite formal demands even after the filing of the
Domingo L. Jhocson, the Javiers "compounded and completed the complaint, the defendants refused to return the trust funds which
conversion" of the funds by withdrawing from the account dollars or they continued concealing and dissipating.
pesos equivalent to US $975,000; that by force of law, the Javiers
It prayed that: (a) the Javiers, Poblador, Elnor, Jhocson and Gariño 339736 and 339737 amounting to P874,490.75 in his personal
be ordered to account for and pay jointly and severally unto the current account with said bank. It also subpoenaed Pilologo Red, Jr.
plaintiff US$999,000.00 plus increments, additions, fruits and of Hongkong & Shanghai Banking Corporation to prove that said
interests earned by the funds from receipt thereof until fully paid; (b) amount was returned by Azada to Hagedorn.
the other defendants be ordered to account for and pay unto the The testimonies of these witnesses were objected to by the defense
plaintiff jointly and severally with the Javiers to the extent of the on the grounds of res inter alios acta, immateriality, irrelevancy and
amounts which each of them may have received directly or indirectly confidentiality. To resolve the matter, the court ordered the parties to
from the US$999,000.00 plus increments, additions, fruits and submit memoranda. The defendants' objections were also discussed
interests; (c) Marquez be held jointly and severally liable with at the hearing on July 13, 1982. For the first time, Poblador's counsel
Poblador for the amount received by the latter for the sale of the 160- raised the matter of "election of remedies." 5
acre lot in California City; and (d) defendants be likewise held liable At the July 20, 1982 hearing, the lower court, then presided by Judge
jointly and severally for attomey's fees and litigation expenses plus Eficio Acosta, conditionally allowed the testimonies of Baylosis and
exemplary damages. Red. Baylosis afffirmed that Azada deposited checks Nos. 339736
In due course, the defendants filed their answers and hearing of the and 339737 in the total amount of P874,490.75 in his personal
case ensued. In his testimony, Jose Marquez stated that Prudential account with the Philippine Veterans Bank but almost
Bank and Trust Company checks Nos. 2530 and 2531 in the simultaneously, Azada issued his PVB check for the same amount in
respective amounts of P100,000 and P900,000 payable to F. C. favor of Hagedorn Consequently, Azada's check initially bounced.
Hagedorn were delivered to him by Melchor Javier, Jr. as partial For his part, Red testified that Azada's check for P874,490.75 was
consideration for the sale of Poblador's property in California. After received by the Hongkong & Shanghai Banking Corporation and
receiving the checks, Hagedorn purchased shares of Atlas Mining, credited to the account of Hagedorn .
Philex, Marcopper and San Miguel Corporation for Account No. The defendants then moved to strike off the testimonies of Baylosis
3000, which, according to Fred Hagedorn belonged to the law office and Red from the record. Defendant Paramount Finance
of Poblador. 3 Corporation, which is not a party to the California case, thereafter
F.C. Hagedorn & Co., Inc. then sold the shares for P874,490.75 as filed its memorandum raising the matter of "election of remedies". It
evidenced by HSBC check No. 339736 for P400,000 and HSBC averred that inasmuch as the Mellon Bank had filed in California an
check No. 339737 for P474,490.75 payable to "cash". Mellon Bank action to impose constructive trust on the California property and to
traced these checks to Account 2825-1 of the Philippine Veterans recover the same, Mellon Bank can no longer try to regain the
Bank in the name of Cipriano Azada, Poblador's law partner and purchase price of the same property through Civil Case No. 26899.
counsel to the Javiers. 4 The other defendants adopted Paramount's stand.
An employee of the Philippine Veterans Bank thereafter introduced After Mellon Bank filed its reply to the memorandum of Paramount,
the specimen signature cards for Account No. 2825-1 thereby on September 10, 1982, Judge Acosta issued a resolution ordering
confirming Azada's ownership of the account. Defendants objected that the testimonies of Baylosis and Red and the documents they
to this testimony on the grounds of Azada's absence, the testified on, which were conditionally allowed, be stricken from the
confidentiality of the bank account, and the best evidence rule. The records. 6 Judge Acosta explained:
court overruled the objection. Another employee of the Philippine After a judicious evaluation of the arguments of the parties the Court
Veterans Bank then presented the ledger card for Account No. 2825- is of the view that in cases where money held in trust was diverted
1, a check deposit slip and a daily report of returned items. The by the trustee, under the "rule of trust pursuit" the beneficiary "may
defendants objected but they were again overruled by the court. elect whether to accept the trust estate in its new form or hold the
Mellon Bank then subpoenaed Erlinda Baylosis of the Philippine trustee responsible for it in its original condition" (Lathrop vs.
Veterans Bank to show that Azada deposited HSBC checks No. Hampton, 31 Cal. 17; Zodos vs. Marefalos 48 Idaho 291; Bahle vs.
Hasselbrach 64 NW Eq. 334, 51 Sections 508-76 Am Jur. 2d p. 475), raised the matter of "election of remedies" in their answers; that
and that "an election to pursue one remedy waives and bars pursuit realizing this procedural error, Paramount sought the amendment of
of any inconsistent remedy"(76 Am Jur. 2d S253). The instant its answer to reflect the "defence" of "election of remedies"; that,
complaint among others is for the recovery of the purchase price of disregarding its previous orders allowing evidence and testimonies
the Kern property as held in trust for the plaintiff while in the on Account No. 2825-1, the court made a turnabout and ruled that
California case the plaintiff maintains that the Kern property is held in the testimonies on said account were irrelevant and confidential
trust for the plaintiff, which positions are inconsistent with each other. under Republic Act No. 1405; that Philippine law and jurisprudence
Neither can the plaintiff now abandon his complaint for the recovery does not require the election of remedies for they favor availment of
of the Kern property and pursue his complaint for the recovery of the all remedies; that even United States jurisprudence frowns upon
purchase price of said property for "if he has first sought to follow the election of remedies if it will lead to an inequitable result; that, as
res, the plaintiff cannot thereafter hold the trustee personally held by this Court in Radiowealth vs. Javier, 7 there can be no
responsible" and "when once there has been an election to do one of binding election of remedies before the decision on the merits is had;
two things, you cannot retract it and do the other thing. The election that until Mellon Bank gets full recovery of the trust moneys, any
once made is finally made." (Fowler vs. Bowvery Savings Bank 113 contention of election of remedy is premature, and that, the purchase
N.Y. 450, 21 N.E. 172, 4 LRA 145, 10 Am. S.R. 479. 2 Silv. 280, 23, price being the subject of litigation, inquiring into its movement,
Abb. N. Cos. 133065 C. J. p. 980 Note 32). including its deposit in banks, is allowed under Republic Act No.
The fact that the California case has been stayed pending 1405.
determination of the instant case only means that should this case Defendants filed their respective comments and oppositions to the
be dismissed, the California case can proceed to its final motion for reconsideration. In its reply, the Mellon Bank presented
determination. proof to the effect that in the California case, defendants filed
Furthermore, when the plaintiff filed the California case for the motions to stake out the cross-complaint of Mellon Bank, for
transfer of legal title and possession of the Kern property to the summary judgment and to stay or dismiss the action on the ground
plaintiff it in effect ratified the transaction for "by taking the proceeds of inconvenient forum but the first two motions and the motion to
or product of a wrongful transfer of trust property or funds, the dismiss were denied "without prejudice to renew upon determination
beneficiary ratifies the transaction" (Board of Commissioner vs. of the Philippine action." The motion to stay proceedings was
Strawn [CA6 Ohio] 157 F. 49, 76 Am Jur. 2d Section 253). "granted until determination of the Philippine action." 8
Consequently the purchase price of the California property received On October 28, 1983, the lower court, through Judge Acosta, denied
by defendant Poblador from Javier is no longer the proper subject the motion for reconsideration and ordered the continuation of the
matter of litigation and the movement and disposition of the purchase hearing (Rollo, p. 182). The plaintiff filed a motion for the
price is therefore within the scope of the absolutely confidential reconsideration of both the September 10, 1982 and October 28,
nature of bank deposits as provided by Sec. 2, R.A. 1405 as 1983 orders. After the parties had filed comments, opposition and
amended by PD No. 1792. reply, the court, through Judge Celso L. Magsino, denied Mellon
Mellon Bank moved for reconsideration, alleging that said order Bank's second motion for reconsideration on the ground that it was
prevented the presentation of evidence on the purchase price of the "prescribed by the 1983 Interim Rules of Court" in an order dated
California property; that the California case cannot be considered a July 9, 1985. 9
waiver of the pursuit of the purchase price as even if said case was The court ruled that the determination of the relevancy of the
filed fifteen days prior to the filing of the original complaint in this testimonies of Baylosis and Red was "premised directly and
case, except for the Javiers, no other defendants raised in their principally" on whether or not Mellon Bank could still recover the
answers the affirmative defense of the filing of the California case; purchase price of the California property notwithstanding the filing of
that after the amendment of the complaint, none of the defendants the case in California to recover title and possession of the said
property. After quoting the resolution of September 10, 1982, the long been declared obsolete in the United States, is not applicable in
Court ruled that it was a "final order or a definitive judgment with this case.
respect to the claim of plaintiff for the recovery" of the purchase price With the exception of the Javiers, all the respondents filed their
of the California property. It stated: respective comments on the petition. Having failed to file said
The adjudication in the Order of September 10, 1982 and the Order comment, the Javiers' counsel of record, Azada, Tomacruz &
of October 28, 1983, which has the effect of declaring that plaintiff Cacanindin, 11 was required to show cause why disciplinary action
has no cause of action against the defendants for the recovery of the should not be taken against it. And, having also failed to show cause,
proceeds of the sale of Kern property in the amount of Three Million it was fined P300.
Three Hundred Fifty Thousand Pesos (P3,500,000.00 [sic]) for In his motion for reconsideration of the resolution imposing said fine,
having filed a complaint for the recovery of the Kern property in the Cipriano Azada alleged that in Civil Case No. 26899, the Javiers
Superior Court of California, County of Kern is a final and definitive were indeed represented by the law firm of Poblador, Azada,
disposition of the claim of the plaintiff to recover in the instant action Tomacruz & Cacanindin but he was never the lawyer of the Javiers'
the proceeds of sale of said property against the defendants. The in his personal capacity; that after the death of Honorio Poblador, Jr.,
issue of "election of remedy" by the plaintiff was lengthily and he had withdrawn from the partnership; that he is the counsel of the
thoroughly discussed and argued by the parties before the rendition Administratrix of the Estate of Honorio Poblador, Jr. for which he had
of the resolution of September 10, 1982, and in the motion for filed a comment, and that should the Court still require him to file
reconsideration and oppositions thereto before its resolution in the comment for the Javiers despite the lack of client-lawyer relationship,
Order of October 28, 1983. Such issue is a substantive one as it he would adopt the comment he had filed for the said
refers to the existence of plaintiffs cause of action to recover the Administratrix. 12
proceeds of the sale of the Kern property in this action, and that In its effort to locate the Javiers so that their side could be heard, we
issue was presented to the Court as if a motion to dismiss or a required the petitioner to furnish us with the Javiers' address as well
preliminary hearing of an affirmative defense on the ground that as the name and address of their counsel. 13 In compliance
plaintiff has no cause of action, and was resolved against plaintiff in therewith, counsel for petitioner manifested that the Javiers had two
the Order of September 10, 1982, after a full hearing of all the known addresses in San Juan, Metro Manila and in Sampaloc,
parties. Said Order of September 10, 1982 has the effect of putting Manila; that since their conviction in Crim. Case No. CCC-VII 2369-
an end to the controversy between the parties as to the right of P.C. of the Pasig Regional Trial Court, the Javiers had gone into
plaintiff to claim or recover the proceeds of the sale of the Kern hiding and warrants for their arrest still remain unserved; 14 that the
property from the defendants. It is therefore an adjudication upon the Javiers' counsel of record in Civil Case No. 26899 is Atty. Cipriano
merits. 10 Azada; that the same counsel appeared for the Javiers in Criminal
Hence, Mellon Bank filed the instant petition for certiorari claiming Case No. 39851 of the Pasig Regional Trial Court which is a tax
that the resolution of September 10, 1982 and the orders of October evasion case filed by the Republic of the Philippines, and that during
28, 1983 and July 9, 1985 are void for being unlawful and oppressive the hearings of the civil and tax evasion cases against the Javiers,
exercises of legal authority, subversive of the fair administration of Atty. Cipriano Azada, Jr. represented them. 15
justice, and in excess of jurisdiction. The petition is founded on its Inasmuch as copies of the resolution requiring comment on the
allegations that: (a) the resolution of September 10, 1982 is petition and the petition itself addressed to Melchor Javier were
interlocutory as it does not dispose of Civil Case No. 26899 returned with the notations "moved" and "deceased", the Court
completely: (b) the evidence stricken from the records is relevant on required that said copies be sent to Mrs. Javier herself and that
the basis of the allegations of the amended and supplemental petitioner should inform the Court of the veracity of Javier's
complaint, and (c) the doctrine of election of remedies, which has death. 16 A copy of the resolution addressed to Mrs. Javier was
returned also with the notation "deceased." 17
Counsel for petitioner accordingly informed the Court that he learned discretion therefore forces us to exercise supervisory authority to
that the Javiers had fled the country and that he had no way of correct its errors notwithstanding the fact that ordinarily, this Court
verifying whether Melchor Javier had indeed died. 18 would not entertain a petition for certiorari questioning the legality
In view of these circumstances, the Javiers' comment on the petition and validity of an interlocutory order. 23
shall be dispensed with as the Court deems the pleadings filed by Respondents' principal objection to the testimonies of Baylosis and
the parties sufficient bases for resolving this case. The Javiers shall Red is their alleged irrelevance to the issues raised in Civil Case No.
be served copies of this decision in accordance with Section 6, Rule 26899. The fallacy of this objection comes to fore upon a scrutiny of
13 of the Rules of Court by delivering said copies to the clerk of court the complaint. Petitioner's theory therein is that after the Javiers had
of the lower court, with proof of failure of both personal service and maliciously appropriated unto themselves $999,000, the other private
service by mail. respondents conspired and participated in the concealment and
We hold that the lower court gravely abused its discretion in ruling dissipation of said amount. The testimonies of Baylosis and Red are
that the resolution of September 10, 1982 is a "final and definitive therefore needed to establish the scheme to hide the erroneously
disposition" of petitioner's claim for the purchase price of the Kern sent amount.
property. The resolution is interlocutory and means no more than Private respondents' protestations that to allow the questioned
what it states in its dispositive portion-the testimonies of Baylosis and testimonies to remain on record would be in violation of the
Red and the documents they testified on, should be stricken from the provisions of Republic Act No. 1405 on the secrecy of bank deposits,
record. is unfounded. Section 2 of said law allows the disclosure of bank
That the resolution discusses the common-law principle of election of deposits in cases where the money deposited is the subject matter of
remedies, a subject matter which shall be dealt with later, is beside the litigation. 24Inasmuch as Civil Case No. 26899 is aimed at
the point. It is interlocutory because the issue resolved therein is recovering the amount converted by the Javiers for their own benefit,
merely the admissibility of the plaintiff's evidence. 19 As such, it does necessarily, an inquiry into the whereabouts of the illegally acquired
not dispose of the case completely but leaves something more to be amount extends to whatever is concealed by being held or recorded
done upon its merits. 20 There are things left undone in Civil Case in the name of persons other than the one responsible for the illegal
No. 26899 after the issuance of the September 10, 1982 resolution acquisition. 25
not only because of its explicit dispositive portion but also due to the We view respondents' reliance on the procedural principle of election
fact that even until now, the case is still pending and being heard. 21 of remedies as part of their ploy to terminate Civil Case No. 26899
Furthermore, the lower court's holding in its July 9, 1985 order that prematurely. With the exception of the Javiers, respondents failed to
petitioner's second motion for reconsideration is proscribed by the raise it as a defense in their answers and therefore, by virtue of
1983 Interim Rules of Court which disallows such motion on Section 2, Rule 9 of the Rules of Court, such defense is deemed
a final order or judgment, should be rectified. As explained above, waived. 26Notwithstanding its lengthy and thorough discussion during
the resolution of September 10, 1982 is not a final one. It also the hearing and in pleadings subsequent to the answers, the issue of
contains conclusions on procedural matters which, if left unchecked, election of remedies has not, contrary to the lower court's assertion,
would prejudice petitioner's substantive rights. been elevated to a "substantive one." Having been waived as a
In effect, therefore, the July 9, 1985 order is a shortcut disposition of defense, it cannot be treated as if it has been raised in a motion to
Civil Case No. 26899 in total disregard of petitioner's right to a dismiss based on the nonexistence of a cause of action.
thorough ventilation of its claims. By putting a premium on Moreover, granting that the defense was properly raised, it is
procedural technicalities over the resolution of the merits of the case, inapplicable in this case. In its broad sense, election of remedies
the lower court rode roughshod over the basic judicial tenet that refers to the choice by a party to an action of one of two or more
litigations should, as much as possible, be decided on their merits coexisting remedial rights, where several such rights arise out of the
and not on technicalities. 22 The trial court's patent grave abuse of same facts, but the term has been generally limited to a choice by a
party between inconsistent remedial rights, the assertion of one remedies does not apply to the assertion of distinct causes of action
being necessarily repugnant to, or a repudiation of, the other. In its against different persons arising out of independent transactions. 33
technical and more restricted sense, election of remedies is the As correctly pointed out by the petitioner, the doctrine of election of
adoption of one of two or more coexisting remedies, with the effect of remedies is not favored in the United States for being harsh. 34 Its
precluding a resort to the others. 27 application with regard to two cases filed in two different jurisdictions
As a technical rule of procedure, the purpose of the doctrine of is also circumscribed by jurisprudence on abatement of suits. Thus,
election of remedies is not to prevent recourse to any remedy, but to in Brooks Erection Co. v. William R. Montgomery & Associates,
prevent double redress for a single wrong. 28 It is regarded as an Inc., 35 it is held:
application of the law of estoppel, upon the theory that a party The pendency of an action in the courts of one state or country is not
cannot, in the assertion of his right occupy inconsistent positions a bar to the institution of another action between the same parties
which form the basis of his respective remedies. However, when a and for the same cause of action in a court of another state or
certain state of facts under the law entitles a party to alternative country, nor is it the duty of the court in which the latter action is
remedies, both founded upon the Identical state of facts, these brought to stay the same pending a determination of the earlier
remedies are not considered inconsistent remedies. In such case, action, even though the court in which the earlier action is brought
the invocation of one remedy is not an election which will bar the has jurisdiction sufficient to dispose of the entire controversy.
other, unless the suit upon the remedy first invoked shall reach the Nevertheless, sometimes stated as a matter of comity not of right, it
stage of final adjudication or unless by the invocation of the remedy is usual for the court in which the later action is brought to stay
first sought to be enforced, the plaintiff shall have gained an proceedings under such circumstances until the earlier action is
advantage thereby or caused detriment or change of situation to the determined.
other. 29 It must be pointed out that ordinarily, election of remedies is However, in view of the fact that the California court wherein the
not made until the judicial proceedings has gone to judgment on the case for recovery of the Kern property was first filed against the
merits. 30 Javiers had stayed proceedings therein until after the termination of
Consonant with these rulings, this Court, through Justice J.B.L. Civil Case No. 26899, the court below can do no less than expedite
Reyes, opined that while some American authorities hold that the the disposition of said case.
mere initiation of proceedings constitutes a binding choice of We cannot dispose of this case without condemning in the strongest
remedies that precludes pursuit of alternative courses, the better rule terms possible the acts of chicanery so apparent from the records.
is that no binding election occurs before a decision on the merits is The respective liabilities of the respondents are still being
had or a detriment to the other party supervenes. 31 This is because determined by the court below. We must warn, however, against the
the principle of election of remedies is discordant with the modern use of technicalities and obstructive tactics to delay a just settlement
procedural concepts embodied in the Code of Civil Procedure which of this case. The taking advantage of the petitioner's mistake to gain
Permits a party to seek inconsistent remedies in his claim for relief sudden and undeserved wealth is marked by circumstances so
without being required to elect between them at the pleading stage of brazen and shocking that any further delay will reflect poorly on the
the litigation. 32 kind of justice our courts dispense. The possible involvement of
It should be noted that the remedies pursued in the California case lawyers in this sorry scheme stamps a black mark on the legal
and in Civil Case No. 26899 are not exactly repugnant or profession. The Integrated Bar of the Philippines (IBP) must be made
inconsistent with each other. If ever, they are merely alternative in aware of the ostensible participation, if not instigation, in the spiriting
view of the inclusion of parties in the latter case who are not named away of the missing funds. The IBP must take the proper action at
defendants in the former. The causes of action, although they all the appropriate time against all lawyers involved in any misdeeds
stem from the erroneous transmittal of dollars, are distinct as shown arising from this case.
by the complaints lengthily set out above. The bar of an election of
WHEREFORE, the resolution of September 10, 1982 and the orders against Account No. 0111-01854-8 with private respondent Allied
of October 28, 1982 and July 9, 1985 are hereby annulled. The lower Bank payable to the order of one Jose Ch. Alvarez. The payee
court is ordered to proceed with dispatch in the disposition of Civil deposited the check with petitioner Union Bank who credited the
case No. 26899, considering that thirteen (13) years have gone by P1,000,000.00 to the account of Mr. Alvarez.On May 21, 1990,
since the original erroneous remittance. petitioner sent the check for clearing through the Philippine Clearing
Service of this decision on the Javier spouses shall be in accordance House Corporation (PCHC). When the check was presented for
with Section 6, Rule 13 of the Rules of Court. A copy of this decision payment, a clearing discrepancy was committed by Union Banks
shall be served on the Integrated Bar of the Philippines. clearing staff when the amount of One Million Pesos (P1,000,000.00)
The decision is immediately executory. Costs against private was erroneously under-encoded to One Thousand Pesos
respondents. (P1,000.00) only.
SO ORDERED. Petitioner only discovered the under-encoding almost a year
later. Thus, on May 7, 1991, Union Bank Notified Allied Bank of the
discrepancy by way of a charge slip for Nine Hundred Ninety-Nine
UNION BANK OF THE PHILIPPINES, petitioner, vs. COURT OF Thousand Pesos (P999,000.00) for automatic debiting against the
APPEALS and ALLIED BANK CORPORATION, respondents. account of Allied Bank. The latter, however, refused to accept the
DECISION charge slip since [the] transaction was completed per your [Union
KAPUNAN, J.: Banks] original instruction and clients account is now insufficiently
Section 2 of the Law on Secrecy of Bank Deposits,[1] as amended, funded.
declares bank deposits to be absolutely confidential except: Subsequently, Union Bank filed a complaint against Allied Bank
(1) In an examination made in the course of a special or general before the PCHC Arbitration Committee (Arbicom), praying that:
examination of a bank that is specifically authorized by the Monetary judgment be rendered in favor of plaintiff against defendant
Board after being satisfied that there is reasonable ground to believe sentencing it to pay plaintiff:
that a bank fraud or serious irregularity has been or is being 1. The sum of NINE HUNDRED NINETY-NINE THOUSAND PESOS
committed and that it is necessary to look into the deposit to (P999,000.00);
establish such fraud or irregularity, 2. The sum of THREE HUNDRED SIXTY-ONE AND FOUR
(2) In an examination made by an independent auditor hired by the HUNDRED EIGHTY AND 20/XX P361,480.20 as of October 9, 1991
bank to conduct its regular audit provided that the examination is for representing reimbursements for opportunity losses and interest at
audit purposes only and the results thereof shall be for the exclusive the rate of 24% per annum arising from actual losses sustained by
use of the bank, plaintiff as of May 21, 1990;
(3) Upon written permission of the depositor, 3. The amount for attorneys fees at the rate of 25% of any and all
(4) In cases of impeachment, sums due;
(5) Upon order of a competent court in cases of bribery or dereliction 4. Penalty Charges at the rate of 1/8 of 1% of P999,000.00 from May
of duty of public officials, or 22, 1990 until payment thereof.
(6) In cases where the money deposited or invested in the subject 5. Exemplary and punitive damages against the defendant in such
matter of the litigation. amounts as may be awarded by this Tribunal in order to serve a
Whether or not the case at bar falls under the last exception is the lesson to all member-Banks under the PCHC umbrella to striclty
issue in the instant petition. comply with the provisions thereof;
The facts are not disputed. 6. The costs of suit which includes filing fee in addition to litigation
On March 21, 1990, a check (Check No. 11669677) dated March 31, expenses which shall be proven in the course of arbitration.
1990 in the amount of One Million Pesos (P1,000,000.00) was drawn 7. Such other damages thay may be awarded by this Tribunal.[2]
Thereafter, Union Bank filed in the Regional Trial court (RTC) of obligation to notify the erring bank (petitioner collecting bank herein)
Makati a petition for the examination of Account No. 111-01854- of any such under-encoding of any check amount submitted for
8. Judgment on the arbitration case was held in abeyance pending clearing within the member banks of the PCHC not later than 10:00
the resolution of said petition. a.m. of the following clearing day and prays that respondent drawee
Upon motion of private respondent, the RTC dismissed Union Banks bank be held liable to petitioner collecting bank for penalties in view
petition. The RTC held that: of the latters violation of the notification requirement.
The case of the herein petitioner does not fall under any of the Prescinding from the above, we see no cogent reason to depart from
foregoing exceptions to warrant a disclosure of or inquiry into the the time-honored general banking rule that all deposits of whatever
ledgers/books of account of Allied Checking Account No. 111-01854- nature with banks are considered of absolutely confidential nature
8. Needless to say, the complaint filed by herein petitioner against and may not be examined, inquired or looked into by any person,
Allied Banking Corporation before the Philippine Clearing House government official, bureau or office and corollarily, that it is unlawful
Corporation (PCHC) Arbitration Committee and docketed therein as for any official or employee of a bank to disclose to any person any
Arb[i]com Case No. 91-068 (Annex A, petition) is not one for bribery information concerning deposits.
or dereliction of duty of public officials much less is there any Nowhere in petitioner collecting banks complaint filed before the
showing that the subject matter thereof is the money deposited in the PCHC does it mention of the amount it seeks to recover from
account in question. Petitioners complaint primarily hing[e]s on the Account No. 0111-018548 itself, but speaks of P999,000.00 only as
alleged deliberate violation by Allied Bank Corporation of the an incident of its alleged opportunity losses and interest as a result of
provisions of the PCHC Rule Book, Sec. 25[.]3, and as principal its own employees admitted error in encoding the check.
reliefs, it seeks for [sic] the recovery of amounts of money as a The money depositied in Account No. 0111-018548 is not the subject
consequence of an alleged under-coding of check amount to matter of the litigation in the Arbicom case for as clearly stated by
P1,000,000.00 and damage[s] by way of loss of interest income.[3] petitioner itself, it is the alleged violation by respondent of the rules
The Court of Appeals affirmed the dismissal of the petition, ruling and regulations of the PCHC.[4]
that the case was not one where the money deposited is the subject Union Bank is now before this Court insisting that the money
matter of the litigation. deposited in Account No. 0111-01854-8 is the subject matter of the
Petitioner collecting bank itself in its complaint filed before the litigation Petitioner cites the case of Mathay vs. Consolidated Bank
PCHC, Arbicom Case No. 91-068, clearly stated that its cause of and Trust Company,[5] where we defined subject matter of the action,
action against defendant arose from defendants deliberate violation thus:
of the provisions of the PCHC Rule Book, Sec. 25.3, specifically on xxx By the phrase subject matter of the action is meant the physical
Under-Encoding of check amouting to P1,000,000.00 drawn upon facts, the things real or personal, the money, lands, chattels, and the
defendants Tondo Branch which was deposited with plaintiff herein like, in relation to which the suit is prosecuted, and not the delict or
on May 20, 1990, xxx which was erroneously encoded at P1,000.00 wrong committed by the defendant.
which defendant as the receiving bank thereof, never called nor Petitioner contends that the Court of Appeals confuses the cause of
notified the plaintiff of the error committed thus causing actual losses action with the subject of the action. In Yusingco vs. Ong Hing
to plaintiff in the principal amount of P999,000.00 exclusive of Lian,[6] petitioner points out, this Court distinguished the two
opportunity losses and interest. concepts.
Furthermore, a reading of petitioner collecting banks complaint in the xxx The cause of action is the legal wrong threatened or committed,
Arbicom case shows that its thrust is directed against respondent while the object of the action is to prevent or redress the wrong by
drawee banks alleged failure to inform the former of the under- obtaining some legal relief; but the subject of the action is neither of
encoding when Sec. 25.3 of the PCHC Rule Book is clear that it is these since it is not the wrong or the relief demanded, the subject of
receiving banks (respondent drawee bank herein) duty and the action is the matter or thing with respect to which the controversy
has arisen, concerning which the wrong has been done, and this check amount of P1,000,000.00, it was instead erroneously encoded
ordinarily is the property, or the contract and its subject matter, or the at P1,000.00 which defendant as the receiving bank thereof, never
thing in dispute. called nor notified the plaintiff of the error committed thus causing
The argument is well taken. We note with approval the difference actual losses to plaintiff in the principal amount of
between the subject of the action from the cause of action. We also P999,000.00 exclusive of opportunity losses and interest thereon
find petitioners definition of the phrase subject matter of the action is whatsoever. xxx[8]
consistent with the term subject matter of the litigation, as the latter is Petitioner even requested private respondents Branch Manager for
used in the Bank Deposits Secrecy Act. reimbursement from private respondents account through the
In Mellon Bank, N.A. vs. Magsino,[7] where the petitioner bank automatic debiting system.
inadvertently caused the transfer of the amount of US$1,000,000.00 2.7. On May 6, 1991, plaintiffs Senior Vice-President, Ms. ERLINDA
instead of only US$1,000.00, the Court sanctioned the examination V. VALENTON wrote defendants Tondo Branch Manager, Mr.
of the bank accounts where part of the money was subsequently RODOLFO JOSE on the incident and requested assistance in
caused to be deposited: facilitating correction of the erroneous coding with request for
Section 2 of [Republic Act No. 1405] allows the disclosure of bank reimbursement thru the industrys automatic debiting of defendants
deposits in cases where the money deposited is the subject matter of account.[9]
the litigation. Inasmuch as Civil Case No. 26899 is aimed at Further, petitioner rejected private respondents proposal that the
recovering the amount converted by the Javiers for their own benefit, drawer issue postdated checks in favor of petitioner since the identity
necessarily, an inquiry into the wherabouts of the illegally acquired and credit standing of the depositor were unknown to petitioner.
amount extends to whatever is concealed by being held or recorded 2.9. On May 23, 1991, defendants Branch Manager, the same Mr.
in the name of persons other than the one responsible for the illegal Rodolfo Jose wrote plaintiffs Ms. Erlinda Valenton again insisting on
acquisition. the execution of the Quitclaim and Release in favor of defendant as
Clearly, Mellon Bank involved a case where the money deposited the Branch has endeavored to negotiate with its client for the
was the subject matter of the litigation since the money so deposited collection of such amount. Upon a reading of the terms of the
was the very thing in dispute. This, however, is not the case here. Quitclaim and Release being proposed by defendant, the
Petitioners theory is that private respondent Allied Bank should have unmistakable fact lies that again defendant attempts for the second
informed petitioner of the under-encoding pursuant to the provisions time to take advantage of plaintiffs plight by indicating that the terms
of Section 25.3.1 of the PCHC Handbook, which states: of the payment of the principal amount of P999,000.00 is by way of
25.3.1. The Receiving Bank should inform the erring Bank about the several personal postdated checks up to March 21, 1992 from a
under-encoding of amount not later than 10:00 A.M. of the following person whose identity is not even disclosed to plaintiff.
clearing day. To an ordinary person aggrieved already by having been taken
Failing in that duty, petitioner holds private respondent directly liable advantage of for 620 days more or less, the proposal of defendant
for the P999,000.00 and other damages. It does not appear that could not be acceptable for the reason that aside from the interest
petitioner is seeking reimbursement from the account of the lost already for the use of its money by another party, no assurance
drawer. This much is evident in petitioners complaint before the is made as to the actual collection thereof from a party whose credit
Arbicom. standing, the recipient is not at all aware of.[10]
xxx plaintiffs cause of action against defendant arose from Petitioner also believed that it had no privity with the depositor:
defendants deliberate violation of the provisions of the PCHC Rule 2.12. Plaintiff then replied to defendants letter by requesting that in
Book, Sec. 25.3, specifically on Under-Encoding of check amounting lieu of the post-dated checks from defendants client with whom
to P1,000,000.00 drawn upon defendants Tondo Branch which was plaintiff has no privity whatsoever, if the defendant could tender the
deposited with plaintiff herein sometime on May 20, 1990. From the full payment of the amount of P999,000.00 in defendants own
Managers check and that plaintiff is willing to forego its further claims and the amount credited to petitioner, that is, P999,000.00, which
for interest and losses for a period of 620 days, more or less.[11] has remained deposited in aforesaid account.
The following argument adduced by petitioner in the Arbicom case On top of the allegations in the complaint, which can be verified only
leaves no doubt that petitioner is holding private respondent itself by examining the subject bank account, the defense of respondent
liable for the discrepancy: Allied Bank that the reimbursement cannot be made since clients
Defendant by its acceptance thru the clearing exchange of the check account is not sufficiently funded at the time petitioner sent its
deposit from its client cannot be said to be free from any liability for Charge Slip, bolsters petitioners contention that the money in subject
the unpaid portion of the check amount considering that defendant account is the very subject matter of the pending Arbicom case.
as the drawee bank, is remiss in its duty of verifying possible Indeed, to prove the allegations in its Complaint before the PCHC
technicalities on the face of the check. Arbitration Committee, and to rebut private respondents defense on
Since the provisions of the PCHC Rule Book has so imposed upon the matter, petitioner needs to determine:
the defendant being the Receiving Bank of a discrepant check item 1. how long respondent Allied Bank had willfully or negligently
to give that timely notification and defendant failing to comply with allowed the difference of P999,000.00 to be maintained in the
such requirement, then it can be said that defendant is guilty of subject account without remitting the same to petitioner;
negligence. He who is guilty of negligence in the performance of its 2. whether indeed the subject account was no longer sufficiently
[sic] duty is liable for damages. (Art. 1170, New Civil Code.) funded when petitioner sent its charge slip for reimbursement to
Art. 1172 of the Civil Code provides that: respondent bank on May 7, 1991; and
Responsibility arising from negligence in the performance of every 3. whether or not respondent Allied Banks actuations in refusing to
kind of obligation is also demandable, but such liability may be immediately reimburse the discrepancy was attended by good or bad
regulated by the courts, according to the circumstances.[][12] faith.
Petitioner points to its prayer in its complaint to show that it sought In other words, only a disclosure of the pertinent details and
reimbursement from the drawers account. The prayer, however, information relating to the transactions involving subject account will
does not specifically state that it was seeking recovery of the amount enable petitioner to prove its allegations in the pending Arbicom
from the depositors account. Petitioner merely asked that judgment case. xxx[14]
be rendered in favor of plaintiff against defendant sentencing it to In short, petitioner is fishing for information so it can determine the
pay plaintiff: 1. The sum of NINE HUNDRED NINETY-NINE culpability of private respondent and the amount of damages it can
THOUSAND PESOS (P999,000.00).[13] recover from the latter. It does not seek recovery of the very money
On the other hand, the petition before this court reveals that the true contained in the deposit. The subject matter of the dispute may be
purpose for the examination is to aid petitioner in proving the extent the amount of P999,000.00 that petitioner seeks from private
of Allied Banks liability: respondent as a result of the latters alleged failure to inform the
Hence, the amount actually debited from the subject account former of the discrepancy; but it is not the P999,000.00 deposited in
becomes very material and germane to petitioners claim for the drawers account. By the terms of R.A. No. 1405, the money
reimbursement as it is only upon examination of subject account can deposited itself should be the subject matter of the litigation.
it be proved that indeed a discrepancy in the amount credited to That petitioner feels a need for such information in order to establish
petitioner was committed, thereby, rendering respondent Allied Bank its case against private respondent does not, by itself, warrant the
liable to petitioner for the deficiency. The money deposited in examination of the bank deposits. The necessity of the inquiry, or the
aforesaid account is undeniably the subject matter of the litigation lack thereof, is immaterial since the case does not come under any
since the issue in the Arbicom case is whether respondent Bank of the exceptions allowed by the Bank Deposits Secrecy Act.
should be held liable to petitioner for reimbursement of the amount of WHEREFORE, the petition is DENIED.
money constituting the difference between the amount of the check SO ORDERED.
LOURDES T. MARQUEZ, in her capacity as Branch Manager, others, the following powers, functions and duties of the
Union Bank of the Philippines, petitioners, vs. HON. ANIANO A. Ombudsman, to wit:
DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and xxx
Preliminary Investigation Bureau, Office of the Ombudsman, (8) Administer oaths, issue subpoena and subpoena duces tecum
ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC and take testimony in any investigation or inquiry, including the
and JOSE T. DE JESUS, JR., in their capacities as Chairman and power to examine and have access to bank accounts and records;
Members of the Panel, respectively, respondents. (9) Punish for contempt in accordance with the Rules of Court and
DECISION under the same procedure and with the same penalties provided
PARDO, J.: therein.
In the petition at bar, petitioner seeks to-- Clearly, the specific provision of R.A. 6770, a later legislation,
a. Annul and set aside, for having been issued without or in excess modifies the law on the Secrecy of Bank Deposits (R.A. 1405) and
of jurisdiction or with grave abuse of discretion amounting to lack of places the office of the Ombudsman in the same footing as the
jurisdiction, respondents order dated September 7, 1998 in OMB-0- courts of law in this regard.[2]
97-0411, In Re: Motion to Cite Lourdes T. Marquez for indirect The basis of the Ombudsman in ordering an in camera inspection of
contempt, received by counsel of September 9, 1998, and their order the accounts is a trail of managers checks purchased by one George
dated October 14, 1998, denying Marquezs motion for Trivinio, a respondent in OMB-0-97-0411, pending with the office of
reconsideration dated September 10, 1998, received by counsel on the Ombudsman.
October 20, 1998. It would appear that Mr. George Trivinio, purchased fifty one (51)
b. Prohibit respondents from implementing their order dated October Managers Checks (MCs) for a total amount of P272.1 Million at
14, 1998, in proceeding with the hearing of the motion to cite Traders Royal Bank, United Nations Avenue branch, on May 2 and
Marquez for indirect contempt, through the issuance by this Court of 3, 1995. Out of the 51 MCs, eleven (11) MCs
a temporary restraining order and/or preliminary injunction.[1] in the amount of P70.6 million, were deposited and credited to an
The antecedent facts are as follows: account maintained at the Union Bank, Julia Vargas Branch.[3]
Sometime in May 1998, petitioner Marquez received an Order from On May 26, 1998, the FFIB panel met in conference with petitioner
the Ombudsman Aniano A. Desierto dated April 29, 1998, to produce Lourdes T. Marquez and Atty. Fe B. Macalino at the banks main
several bank documents for purposes of inspection in office, Ayala Avenue, Makati City. The meeting was for the purpose
camera relative to various accounts maintained at Union Bank of the of allowing petitioner and Atty. Macalino to view the checks furnished
Philippines, Julia Vargas Branch, where petitioner is the branch by Traders Royal Bank. After convincing themselves of the veracity
manager. The accounts to be inspected are Account Nos. 011- of the checks, Atty. Macalino advised Ms. Marquez to comply with
37270, 240-020718, 245-30317-3 and 245-30318-1, involved in a the order of the Ombudsman. Petitioner agreed to an in
case pending with the Ombudsman entitled, Fact-Finding and camerainspection set on June 3, 1998.[4]
Intelligence Bureau (FFIB) v. Amado Lagdameo, et. al.The order However, on June 4, 1998, petitioner wrote the Ombudsman
further states: explaining to him that the accounts in question cannot readily be
It is worth mentioning that the power of the Ombudsman to identified and asked for time to respond to the order. The reason
investigate and to require the production and inspection of records forwarded by petitioner was that despite diligent efforts and from the
and documents is sanctioned by the 1987 Philippine Constitution, account numbers presented, we can not identify these accounts
Republic Act No. 6770, otherwise known as the Ombudsman Act of since the checks are issued in cash or bearer. We surmised that
1989 and under existing jurisprudence on the matter. It must be these accounts have long been dormant, hence are not covered by
noted that R. A. 6770 especially Section 15 thereof provides, among the new account number generated by the Union Bank system. We
therefore have to verify from the Interbank records archives for the continuously harassing her to produce the bank documents relative
whereabouts of these accounts.[5] to the accounts in question. Moreover, on June 16, 1998, the
The Ombudsman, responding to the request of the petitioner for time Ombudsman issued another order stating that unless petitioner
to comply with the order, stated: firstly, it must be emphasized that appeared before the FFIB with the documents requested, petitioner
Union Bank, Julia Vargas Branch was the depositary bank of the manager would be charged with indirect contempt and obstruction of
subject Traders Royal Bank Managers Checks (MCs), as shown at justice.
its dorsal portion and as cleared by the Philippine Clearing House, In the meantime,[9] on July 14, 1998, the lower court denied
not the International Corporate Bank. petitioners prayer for a temporary restraining order and stated thus:
Notwithstanding the fact that the checks were payable to cash or After hearing the arguments of the parties, the court finds the
bearer, nonetheless, the name of the depositor(s) could easily be application for a Temporary Restraining Order to be without merit.
identified since the account numbers x x x where said checks were Since the application prays for the restraint of the respondent, in the
deposited are identified in the order. exercise of his contempt powers under Section 15 (9) in relation to
Even assuming that the accounts xxx were already classified as paragraph (8) of R.A. 6770, known as The Ombudsman Act of 1989,
dormant accounts, the bank is still required to preserve the records there is no great or irreparable injury from which petitioners may
pertaining to the accounts within a certain period of time as required suffer, if respondent is not so restrained. Respondent should he
by existing banking rules and regulations. decide to exercise his contempt powers would still have to apply with
And finally, the in camera inspection was already extended twice the court. x x x Anyone who, without lawful excuse x x x refuses to
from May 13, 1998 to June 3, 1998, thereby giving the bank enough produce documents for inspection, when thereunto lawfully required
time within which to sufficiently comply with the order.[6] shall be subject to discipline as in case of contempt of Court and
Thus, on June 16, 1998, the Ombudsman issued an order directing upon application of the individual or body exercising the power in
petitioner to produce the bank documents relative to the accounts in question shall be dealt with by the Judge of the First Instance (now
issue. The order states: RTC) having jurisdiction of the case in a manner provided by law
Viewed from the foregoing, your persistent refusal to comply with (section 580 of the Revised Administrative Code). Under the present
Ombudsmans order is unjustified, and is merely intended to delay Constitution only judges may issue warrants, hence, respondent
the investigation of the case. Your act constitutes disobedience of or should apply with the Court for the issuance of the warrant needed
resistance to a lawful order issued by this office and is punishable as for the enforcement of his contempt orders. It is in these proceedings
Indirect Contempt under Section 3(b) of R.A. 6770. The same may where petitioners may question the propriety of respondents exercise
also constitute obstruction in the lawful exercise of the functions of of his contempt powers. Petitioners are not therefore left without any
the Ombudsman which is punishable under Section 36 of R.A. adequate remedy.
6770.[7] The questioned orders were issued with the investigation of the case
On July 10, 1998, petitioner together with Union Bank of the of Fact-Finding and Intelligence Bureau vs. Amado Lagdameo, et.
Philippines, filed a petition for declaratory relief, prohibition and el., OMB-0-97-0411, for violation of R.A. 3019.Since petitioner failed
injunction[8] with the Regional Trial Court, Makati City, against the to show prima facie evidence that the subject matter of the
Ombudsman. investigation is outside the jurisdiction of the Office of the
The petition was intended to clear the rights and duties of petitioner. Ombudsman, no writ of injunction may be issued by this Court to
Thus, petitioner sought a declaration of her rights from the court due delay this investigation pursuant to Section 14 of the Ombudsman
to the clear conflict between R. A. No. 6770, Section 15 and R. A. Act of 1989.[10]
No. 1405, Sections 2 and 3. On July 20, 1998, petitioner filed a motion for reconsideration based
Petitioner prayed for a temporary restraining order (TRO) because on the following grounds:
the Ombudsman and other persons acting under his authority were
a. Petitioners application for Temporary Restraining Order is not only her for indirect contempt be intransferrably set to 29 October 1998 at
to restrain the Ombudsman from exercising his contempt powers, but 2:00 oclock p.m. at which date and time she should appear
to stop him from implementing his Orders dated April 29,1998 and personally to submit her additional evidence. Failure to do so shall
June 16,1998; and be deemed a waiver thereof.[24]
b. The subject matter of the investigation being conducted by the Hence, the present petition.[25]
Ombudsman at petitioners premises is outside his jurisdiction.[11] The issue is whether petitioner may be cited for indirect contempt for
On July 23, 1998, the Ombudsman filed a motion to dismiss the her failure to produce the documents requested by the Ombudsman.
petition for declaratory relief[12] on the ground that the Regional Trial And whether the order of the Ombudsman to have an in
Court has no jurisdiction to hear a petition for relief from the findings camera inspection of the questioned account is allowed as an
and orders of the Ombudsman, citing R. A. No. 6770, Sections 14 exception to the law on secrecy of bank deposits (R. A. No. 1405).
and 27. On August 7, 1998, the Ombudsman filed an opposition to An examination of the secrecy of bank deposits law (R. A. No. 1405)
petitioners motion for reconsideration dated July 20, 1998.[13] would reveal the following exceptions:
On August 19, 1998, the lower court denied petitioners motion for 1. Where the depositor consents in writing;
reconsideration,[14] and also the Ombudsmans motion to dismiss.[15] 2. Impeachment case;
On August 21, 1998, petitioner received a copy of the motion to cite 3. By court order in bribery or dereliction of duty cases against public
her for contempt, filed with the Office of the Ombudsman by Agapito officials;
B. Rosales, Director, Fact Finding and Intelligence Bureau (FFIB). [16] 4. Deposit is subject of litigation;
On August 31, 1998, petitioner filed with the Ombudsman an 5. Sec. 8, R. A. No. 3019, in cases of unexplained wealth as held in
opposition to the motion to cite her in contempt on the ground that the case of PNB vs. Gancayco[26]
the filing thereof was premature due to the petition pending in the The order of the Ombudsman to produce for in camera inspection
lower court.[17] Petitioner likewise reiterated that she had no intention the subject accounts with the Union Bank of the Philippines, Julia
to disobey the orders of the Ombudsman. However, she wanted to Vargas Branch, is based on a pending investigation at the Office of
be clarified as to how she would comply with the orders without her the Ombudsman against Amado Lagdameo, et. al. for violation of R.
breaking any law, particularly R. A. No. 1405.[18] A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture
Respondent Ombudsman panel set the incident for hearing on Agreement between the Public Estates Authority and AMARI.
September 7, 1998.[19] After hearing, the panel issued an order dated We rule that before an in camera inspection may be allowed, there
September 7, 1998, ordering petitioner and counsel to appear for a must be a pending case before a court of competent jurisdiction.
continuation of the hearing of the contempt charges against her.[20] Further, the account must be clearly identified, the inspection limited
On September 10, 1998, petitioner filed with the Ombudsman a to the subject matter of the pending case before the court of
motion for reconsideration of the above order.[21] Her motion was competent jurisdiction. The bank personnel and the account holder
premised on the fact that there was a pending case with the must be notified to be present during the inspection, and such
Regional Trial Court, Makati City,[22] which would determine whether inspection may cover only the account identified in the pending case.
obeying the orders of the Ombudsman to produce bank documents In Union Bank of the Philippines v. Court of Appeals, we held that
would not violate any law. Section 2 of the Law on Secrecy of Bank Deposits, as amended,
The FFIB opposed the motion,[23] and on October 14, 1998, the declares bank deposits to be absolutely confidential except:
Ombudsman denied the motion by order the dispositive portion of (1) In an examination made in the course of a special or general
which reads: examination of a bank that is specifically authorized by the Monetary
Wherefore, respondent Lourdes T. Marquezs motion for Board after being satisfied that there is reasonable ground to believe
reconsideration is hereby DENIED, for lack of merit. Let the hearing that a bank fraud or serious irregularity has been or is being
of the motion of the Fact Finding Intelligence Bureau (FFIB) to cite
committed and that it is necessary to look into the deposit to PHILIPPINE NATIONAL BANK and EDUARDO Z. ROMUALDEZ,
establish such fraud or irregularity, in his capacity as President of the Philippine National
(2) In an examination made by an independent auditor hired by the Bank, plaintiffs-appellants,
bank to conduct its regular audit provided that the examination is for vs.
audit purposes only and the results thereof shall be for the exclusive EMILIO A. GANCAYCO and FLORENTINO FLOR, Special
use of the bank, Prosecutors of the Dept. of Justice, defendants-appellees.
(3) Upon written permission of the depositor, Ramon B. de los Reyes and Zoilo P. Perlas for plaintiffs-appellants.
(4) In cases of impeachment, Villamor & Gancayco for defendants-appellees.
(5) Upon order of a competent court in cases of bribery or dereliction
of duty of public officials, or
(6) In cases where the money deposited or invested is the subject REGALA, J.:
matter of the litigation[27] The principal question presented in this case is whether a bank can
In the case at bar, there is yet no pending litigation before any court be compelled to disclose the records of accounts of a depositor who
of competent authority. What is existing is an investigation by the is under investigation for unexplained wealth.
office of the Ombudsman. In short, what the Office of the This question arose when defendants Emilio A. Gancayco and
Ombudsman would wish to do is to fish for additional evidence to Florentino Flor, as special prosecutors of the Department of Justice,
formally charge Amado Lagdameo, et. al., with the Sandiganbayan. required the plaintiff Philippine National Bank to produce at a hearing
Clearly, there was no pending case in court which would warrant the to be held at 10 a.m. on February 20, 1961 the records of the bank
opening of the bank account for inspection. deposits of Ernesto T. Jimenez, former administrator of the
Zones of privacy are recognized and protected in our laws. The Civil Agricultural Credit and Cooperative Administration, who was then
Code provides that "[e]very person shall respect the dignity, under investigation for unexplained wealth. In declining to reveal its
personality, privacy and peace of mind of his neighbors and other records, the plaintiff bank invoked Republic Act No. 1405 which
persons" and punishes as actionable torts several acts for meddling provides:
and prying into the privacy of another. It also holds a public officer or SEC. 2. All deposits of whatever nature with banks or banking
employee or any private individual liable for damages for any institutions in the Philippines including investments in bonds issued
violation of the rights and liberties of another person, and recognizes by the Government of the Philippines, its political subdivisions and its
the privacy of letters and other private communications. The Revised instrumentalities, are hereby considered as of an absolutely
Penal Code makes a crime of the violation of secrets by an officer, confidential nature and may not be examined, inquired or looked into
the revelation of trade and industrial secrets, and trespass to by any person, government official, bureau or office, except upon
dwelling. Invasion of privacy is an offense in special laws like the written permission of the depositor, or in cases of impeachment, or
Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the upon order of a competent court in cases of bribery or dereliction of
Intellectual Property Code.[28] duty of public officials, or in cases where the money deposited or
IN VIEW WHEREOF, we GRANT the petition. We order the invested is the subject matter of the litigation.
Ombudsman to cease and desist from requiring Union Bank The plaintiff bank also called attention to the penal provision of the
Manager Lourdes T. Marquez, or anyone in her place to comply with law which reads:
the order dated October 14, 1998, and similar orders. No costs. SEC. 5. Any violation of this law will subject the offender upon
SO ORDERED. conviction, to an imprisonment of not more than five years or a fine
of not more than twenty thousand pesos or both, in the discretion of
the court.
On the other hand, the defendants cited the Anti-Graft and Corrupt In support of their position, plaintiffs contend, first, that the Anti-Graft
Practices Act (Republic Act No. 3019) in support of their claim of Law (which took effect on August 17, 1960) is a general law which
authority and demanded anew that plaintiff Eduardo Z. Romualdez, cannot be deemed to have impliedly repealed section 2 of Republic
as bank president, produce the records or he would be prosecuted Act No. 1405 (which took effect on Sept. 9, 1955), because of the
for contempt. The law invoked by the defendant states: rule that repeals by implication are not favored. Second, they argue
SEC. 8. Dismissal due to unexplained wealth. — If in accordance that to construe section 8 of the Anti-Graft Law as allowing inquiry
with the provisions of Republic Act Numbered One thousand three into bank deposits would be to negate the policy expressed in
hundred seventy-nine, a public official has been found to have section 1 of Republic Act No. 1405 which is "to give encouragement
acquired during his incumbency, whether in his name or in the name to the people to deposit their money in banking institutions and to
of other persons, an amount of property and/or money manifestly out discourage private hoarding so that the same may be utilized by
of proportion to his salary and to his other lawful income, that fact banks in authorized loans to assist in the economic development of
shall be a ground for dismissal or removal. Properties in the name of the country."
the spouse and unmarried children of such public official may be Contrary to their claim that their position effects a reconciliation of
taken into consideration, when their acquisition through legitimate the provisions of the two laws, plaintiffs are actually making the
means cannot be satisfactorily shown. Bank deposits shall be taken provisions of Republic Act No. 1405 prevail over those of the Anti-
into consideration in the enforcement of this section, notwithstanding Graft Law, because even without the latter law the balance standing
any provision of law to the contrary. to the depositor's credit can be considered provided its disclosure is
Because of the threat of prosecution, plaintiffs filed an action for made in any of the cases provided in Republic Act No. 1405.
declaratory judgment in the Manila Court of First Instance. After trial, The truth is that these laws are so repugnant to each other than no
during which Senator Arturo M. Tolentino, author of the Anti-Graft reconciliation is possible. Thus, while Republic Act No. 1405
and Corrupt Practices Act testified, the court rendered judgment, provides that bank deposits are "absolutely confidential ... and
sustaining the power of the defendants to compel the disclosure of [therefore] may not be examined, inquired or looked into," except in
bank accounts of ACCFA Administrator Jimenez. The court said that, those cases enumerated therein, the Anti-Graft Law directs in
by enacting section 8 of, the Anti-Graft and Corrupt Practices Act, mandatory terms that bank deposits "shall be taken into
Congress clearly intended to provide an additional ground for the consideration in the enforcement of this section, notwithstanding any
examination of bank deposits. Without such provision, the court provision of law to the contrary." The only conclusion possible is that
added prosecutors would be hampered if not altogether frustrated in section 8 of the Anti-Graft Law is intended to amend section 2 of
the prosecution of those charged with having acquired unexplained Republic Act No. 1405 by providing additional exception to the rule
wealth while in public office.1awphîl.nèt against the disclosure of bank deposits.
From that judgment, plaintiffs appealed to this Court. In brief, Indeed, it is said that if the new law is inconsistent with or repugnant
plaintiffs' position is that section 8 of the Anti-Graft Law "simply to the old law, the presumption against the intent to repeal by
means that such bank deposits may be included or added to the implication is overthrown because the inconsistency or repugnancy
assets of the Government official or employee for the purpose of reveals an intent to repeal the existing law. And whether a statute,
computing his unexplained wealth if and when the same are either in its entirety or in part, has been repealed by implication is
discovered or revealed in the manner authorized by Section 2 of ultimately a matter of legislative intent. (Crawford, The Construction
Republic Act 1405, which are (1) Upon written permission of the of Statutes, Secs. 309-310. Cf. Iloilo Palay and Corn Planters Ass'n
depositor; (2) In cases of impeachment; (3) Upon order of a v. Feliciano, G.R. No. L-24022, March 3, 1965).
competent court in cases of bribery or dereliction of duty of public The recent case of People v. De Venecia, G.R. No. L-20808, July 31,
officials; and (4) In cases where the money deposited or invested is 1965 invites comparison with this case. There it was held:
the subject matter of the litigation."
The result is that although sec. 54 [Rev. Election Code] prohibits a
classified civil service employee from aiding any candidate, sec. 29 In above-stated case of People v. Estrada, et al., the Special
[Civil Service Act of 1959] allows such classified employee to Prosecution Panel[1] filed on January 20, 2003 before the
express his views on current political problems or issues, or to Sandiganbayan a Request for Issuance of Subpoena Duces Tecum
mention the name of his candidate for public office, even if such for the issuance of a subpoena directing the President of Export and
expression of views or mention of names may result in aiding one Industry Bank (EIB, formerly Urban Bank) or his/her authorized
particular candidate. In other words, the last paragraph of sec. 29 is representative to produce the following documents during the
an exception to sec. 54; at most, an amendment to sec. 54. hearings scheduled on January 22 and 27, 2003:
With regard to the claim that disclosure would be contrary to the
policy making bank deposits confidential, it is enough to point out I. For Trust Account No. 858;
that while section 2 of Republic Act 1405 declares bank deposits to 1. Account Opening Documents;
be "absolutely confidential," it nevertheless allows such disclosure in 2. Trading Order No. 020385 dated January 29, 1999;
the following instances: (1) Upon written permission of the depositor; 3. Confirmation Advice TA 858;
(2) In cases of impeachment; (3) Upon order of a competent court in 4. Original/Microfilm copies, including the dorsal side, of the
cases of bribery or dereliction of duty of public officials; (4) In cases following:
where the money deposited is the subject matter of the litigation.
Cases of unexplained wealth are similar to cases of bribery or a. Bank of Commerce MC # 0256254 in the amount
dereliction of duty and no reason is seen why these two classes of of P2,000,000.00;
cases cannot be excepted from the rule making bank deposits b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the
confidential. The policy as to one cannot be different from the policy amount of P10,875,749.43;
as to the other. This policy express the motion that a public office is a c. Urban Bank MC # 34182 dated November 8, 1999 in the
public trust and any person who enters upon its discharge does so amount of P42,716,554.22;
with the full knowledge that his life, so far as relevant to his duty, is d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in
open to public scrutiny. the amount of P54,161,496.52;
WHEREFORE, the decision appealed from is affirmed, without
pronouncement as to costs. 5. Trust Agreement dated January 1999:
Trustee: Joseph Victor C. Ejercito
Nominee: URBAN BANK-TRUST DEPARTMENT
EJERCITO VS SANDIGANBAYAN Special Private Account No. (SPAN) 858; and
The present petition for certiorari under Rule 65 assails the 6. Ledger of the SPAN # 858.
Sandiganbayan Resolutions dated February 7 and 12, 2003 denying
petitioner Joseph Victor G. Ejercitos Motions to Quash Subpoenas II. For Savings Account No. 0116-17345-9
Duces Tecum/Ad Testificandum, and Resolution dated March 11, SPAN No. 858
2003 denying his Motion for Reconsideration of the first two
resolutions. 1. Signature Cards; and
2. Statement of Account/Ledger
The three resolutions were issued in Criminal Case No.
26558, People of the Philippines v. Joseph Ejercito Estrada, et al., III. Urban Bank Managers Check and their corresponding Urban
for plunder, defined and penalized in R.A. 7080, AN ACT DEFINING Bank Managers Check Application Forms, as follows:
AND PENALIZING THE CRIME OF PLUNDER.
1. MC # 039975 dated January 18, 2000 in the amount It is with much respect that I write this court relative to the concern of
of P70,000,000.00; subpoenaing the undersigneds bank account which I have learned
2. MC # 039976 dated January 18, 2000 in the amount through the media.
of P2,000,000.00;
3. MC # 039977 dated January 18, 2000 in the amount I am sure the prosecution is aware of our banking secrecy laws
of P2,000,000.00; everyone supposed to observe. But, instead of prosecuting those
4. MC # 039978 dated January 18, 2000 in the amount who may have breached such laws, it seems it is even going to use
of P1,000,000.00; supposed evidence which I have reason to believe could only have
been illegally obtained.
The Special Prosecution Panel also filed on January 20, 2003, a
Request for Issuance of Subpoena Duces Tecum/Ad Testificandum The prosecution was not content with a general request. It even lists
directed to the authorized representative of Equitable-PCI Bank to and identifies specific documents meaning someone else in the bank
produce statements of account pertaining to certain accounts in the illegally released confidential information.
name of Jose Velarde and to testify thereon.
If this can be done to me, it can happen to anyone. Not that anything
The Sandiganbayan granted both requests by Resolution of January can still shock our family. Nor that I have anything to hide. Your
21, 2003and subpoenas were accordingly issued. Honors.

The Special Prosecution Panel filed still another Request for But, I am not a lawyer and need time to consult one on a situation
Issuance of Subpoena Duces Tecum/Ad Testificandum that affects every bank depositor in the country and should interest
dated January 23, 2003 for the President of EIB or his/her authorized the bank itself, the Bangko Sentral ng Pilipinas, and maybe the
representative to produce the same documents subject of the Ombudsman himself, who may want to investigate, not exploit, the
Subpoena Duces Tecum dated January 21, 2003 and to testify serious breach that can only harm the economy, a consequence that
thereon on the hearings scheduled on January 27 and 29, 2003 and may have been overlooked. There appears to have been deplorable
subsequent dates until completion of the testimony. The request was connivance.
likewise granted by the Sandiganbayan. A Subpoena Duces
Tecum/Ad Testificandum was accordingly issued on January 24, xxxx
2003.
I hope and pray, Your Honors, that I will be given time to retain the
Petitioner, claiming to have learned from the media that the Special services of a lawyer to help me protect my rights and those of every
Prosecution Panel had requested for the issuance of subpoenas for banking depositor. But the one I have in mind is out of the country
the examination of bank accounts belonging to him, attended the right now.
hearing of the case on January 27, 2003 and filed before the
Sandiganbayan a letter of even date expressing his concerns as May I, therefore, ask your Honors, that in the meantime, the
follows, quoted verbatim: issuance of the subpoena be held in abeyance for at least ten (10)
days to enable me to take appropriate legal steps in connection with
Your Honors: the prosecutions request for the issuance of subpoena
concerning my accounts. (Emphasis supplied)
From the present petition, it is gathered that the accounts referred to 3. Statements of Account.
by petitioner in his above-quoted letter are Trust Account No.
858 and Savings Account No. 0116-17345-9.[2]
The prosecution also filed a Request for the Issuance of Subpoena
In open court, the Special Division of the Sandiganbayan, through Duces Tecum/Ad Testificandum bearing the same date, January 31,
Associate Justice Edilberto Sandoval, advised petitioner that his 2003, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC
remedy was to file a motion to quash, for which he was given up to for her to produce the following documents on the scheduled
12:00 noon the following day, January 28, 2003. hearings on February 3 and 5, 2003:

Petitioner, unassisted by counsel, thus filed on January 28, 2003 a 1. Letter of authority dated November 23, 1999 re: SPAN [Special
Motion to Quash Subpoena Duces Tecum/Ad Testificandum praying Private Account Number] 858;
that the subpoenas previously issued to the President of the EIB
dated January 21 and January 24, 2003be quashed.[3] 2. Letter of authority dated January 29, 2000 re: SPAN 858;

In his Motion to Quash, petitioner claimed that his bank accounts are 3. Letter of authority dated April 24, 2000 re: SPAN 858;
covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and
do not fall under any of the exceptions stated therein. He further 4. Urban Bank check no. 052092 dated April 24, 2000 for the amount
claimed that the specific identification of documents in the of P36, 572, 315.43;
questioned subpoenas, including details on dates and amounts,
could only have been made possible by an earlier illegal disclosure 5. Urban Bank check no. 052093 dated April 24, 2000 for the amount
thereof by the EIB and the Philippine Deposit Insurance Corporation of P107,191,780.85; and
(PDIC) in its capacity as receiver of the then Urban Bank.
6. Signature Card Savings Account No. 0116-17345-
The disclosure being illegal, petitioner concluded, the prosecution in 9. (Underscoring supplied)
the case may not be allowed to make use of the information.

Before the Motion to Quash was resolved by the Sandiganbayan, the The subpoenas prayed for in both requests were issued by the
prosecution filed another Request for the Issuance of Subpoena Sandiganbayan on January 31, 2003.
Duces Tecum/Ad Testificandum dated January 31, 2003, again to
direct the President of the EIB to produce, on the hearings scheduled On February 7, 2003, petitioner, this time assisted by counsel, filed
on February 3 and 5, 2003, the same documents subject of the an Urgent Motion to Quash Subpoenae Duces Tecum/Ad
January 21 and 24, 2003 subpoenas with the exception of the Bank Testificandum praying that the subpoena dated January 31,
of Commerce MC #0256254 in the amount of P2,000,000 as Bank of 2003 directed to Aurora Baldoz be quashed for the same reasons
Commerce MC #0256256 in the amount of P200,000,000 was which he cited in the Motion to Quash[4] he had earlier filed.
instead requested. Moreover, the request covered the following
additional documents: On the same day, February 7, 2003, the Sandiganbayan issued a
Resolution denying petitioners Motion to Quash Subpoenae Duces
IV. For Savings Account No. 1701-00646-1: Tecum/Ad Testificandum dated January 28, 2003.
1. Account Opening Forms;
2. Specimen Signature Card/s; and
Subsequently or on February 12, 2003, the Sandiganbayan issued a The policy behind the law is laid down in Section 1:
Resolution denying petitioners Urgent Motion to Quash Subpoena
Duces Tecum/Ad Testificandum dated February 7, 2003. SECTION 1. It is hereby declared to be the policy of the Government
to give encouragement to the people to deposit their money in
Petitioners Motion for Reconsideration dated February 24, banking institutions and to discourage private hoarding so that the
2003 seeking a reconsideration of the Resolutions of February 7 and same may be properly utilized by banks in authorized loans to assist
12, 2003 having been denied by Resolution of March 11, 2003, in the economic development of the country.(Underscoring supplied)
petitioner filed the present petition.

Raised as issues are: If the money deposited under an account may be used by banks for
authorized loans to third persons, then such account, regardless of
1. Whether petitioners Trust Account No. 858 is covered by whether it creates a creditor-debtor relationship between the
the term deposit as used in R.A. 1405; depositor and the bank, falls under the category of accounts which
the law precisely seeks to protect for the purpose of boosting the
2. Whether petitioners Trust Account No. 858 and Savings economic development of the country.
Account No. 0116-17345-9 are excepted from the protection of R.A.
1405; and Trust Account No. 858 is, without doubt, one such account. The
Trust Agreement between petitioner and Urban Bank provides that
3. Whether the extremely-detailed information contained in the the trust account covers deposit, placement or investment of
Special Prosecution Panels requests for subpoena was obtained funds by Urban Bank for and in behalf of petitioner.[6] The money
through a prior illegal disclosure of petitioners bank accounts, in deposited under Trust Account No. 858, was, therefore, intended not
violation of the fruit of the poisonous tree doctrine. merely to remain with the bank but to be invested by it elsewhere. To
hold that this type of account is not protected by R.A. 1405 would
encourage private hoarding of funds that could otherwise be invested
Respondent People posits that Trust Account No. 858[5] may be by banks in other ventures, contrary to the policy behind the law.
inquired into, not merely because it falls under the exceptions to the
coverage of R.A. 1405, but because it is not even contemplated Section 2 of the same law in fact even more clearly shows that the
therein. For, to respondent People, the law applies only to deposits term deposits was intended to be understood broadly:
which strictly means the money delivered to the bank by which a
creditor-debtor relationship is created between the depositor and the SECTION 2. All deposits of whatever nature with banks or
bank. banking institutions in the Philippines including investments in bonds
issued by the Government of the Philippines, its political subdivisions
The contention that trust accounts are not covered by the term and its instrumentalities, are hereby considered as of an absolutely
deposits, as used in R.A. 1405, by the mere fact that they do not confidential nature and may not be examined, inquired or looked into
entail a creditor-debtor relationship between the trustor and the bank, by any person, government official, bureau or office, except upon
does not lie. An examination of the law shows that the term deposits written permission of the depositor, or in cases of impeachment, or
used therein is to be understood broadly and not limited only to upon order of a competent court in cases of bribery or dereliction of
accounts which give rise to a creditor-debtor relationship between duty of public officials, or in cases where the money deposited or
the depositor and the bank. invested is the subject matter of the litigation. (Emphasis and
underscoring supplied)
members of his family, relatives by affinity or consanguinity, business
associates, subordinates or other persons, amasses, accumulates
The phrase of whatever nature proscribes any restrictive or acquires ill-gotten wealth through a combination or series of
interpretation of deposits. Moreover, it is clear from the immediately overt or criminal acts as described in Section 1(d) hereof, in the
quoted provision that, generally, the law applies not only to money aggregate amount or total value of at least Seventy-five million pesos
which is deposited but also to those which are invested. This further (P75,000,000.00), shall be guilty of the crime of plunder and shall be
shows that the law was not intended to apply only to deposits in the punished by life imprisonment with perpetual absolute
strict sense of the word. Otherwise, there would have been no need disqualification from holding any public office. Any person who
to add the phrase or invested. participated with said public officer in the commission of plunder shall
likewise be punished. In the imposition of penalties, the degree of
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account participation and the attendance of mitigating and extenuating
No. 858. circumstances shall be considered by the court. The court shall
declare any and all ill-gotten wealth and their interests and other
The protection afforded by the law is, however, not absolute, there incomes and assets including the properties and shares of stock
being recognized exceptions thereto, as above-quoted Section 2 derived from the deposit or investment thereof forfeited in favor of
provides. In the present case, two exceptions apply, to wit: (1) the the State. (Emphasis and underscoring supplied)
examination of bank accounts is upon order of a competent court in
cases of bribery or dereliction of duty of public officials, and (2) the
money deposited or invested is the subject matter of the litigation. An examination of the overt or criminal acts as described in Section
1(d) of R.A. No. 7080 would make the similarity between plunder and
Petitioner contends that since plunder is neither bribery nor bribery even more pronounced since bribery is essentially included
dereliction of duty, his accounts are not excepted from the protection among these criminal acts. Thus Section 1(d) states:
of R.A. 1405. Philippine National Bank v. Gancayco[7] holds
otherwise: d) Ill-gotten wealth means any asset, property, business enterprise
or material possession of any person within the purview of Section
Cases of unexplained wealth are similar to cases of bribery or Two (2) hereof, acquired by him directly or indirectly through
dereliction of duty and no reason is seen why these two classes of dummies, nominees, agents, subordinates and or business
cases cannot be excepted from the rule making bank deposits associates by any combination or series of the following means or
confidential. The policy as to one cannot be different from the policy similar schemes.
as to the other. This policy expresses the notion that a public
office is a public trust and any person who enters upon its 1) Through misappropriation, conversion, misuse, or malversation of
discharge does so with the full knowledge that his life, so far as public funds or raids on the public treasury;
relevant to his duty, is open to public scrutiny.
2) By receiving, directly or indirectly, any commission, gift,
share, percentage, kickbacks or any other form of pecuniary
Undoubtedly, cases for plunder involve unexplained wealth. Section benefit from any person and/or entity in connection with any
2 of R.A. No. 7080 states so. government contract or project or by reason of the office or
position of the public officer concerned;
SECTION 2. Definition of the Crime of Plunder;
Penalties. Any public officer who, by himself or in connivance with
3) By the illegal or fraudulent conveyance or disposition of assets
belonging to the National Government or any of its subdivisions, Petitioner contends that the Court of Appeals confuses the cause of
agencies or instrumentalities or government-owned or -controlled action with the subject of the action. In Yusingco v. Ong Hing Lian,
corporations and their subsidiaries; petitioner points out, this Court distinguished the two concepts.

4) By obtaining, receiving or accepting directly or indirectly any x x x The cause of action is the legal wrong threatened or committed,
shares of stock, equity or any other form of interest or participation while the object of the action is to prevent or redress the wrong by
including promise of future employment in any business enterprise or obtaining some legal relief; but the subject of the action is neither of
undertaking; these since it is not the wrong or the relief demanded, the subject of
the action is the matter or thing with respect to which the controversy
5) By establishing agricultural, industrial or commercial monopolies has arisen, concerning which the wrong has been done, and this
or other combinations and/or implementation of decrees and orders ordinarily is the property or the contract and its subject matter, or the
intended to benefit particular persons or special interests; or thing in dispute.

6) By taking undue advantage of official position, authority, The argument is well-taken. We note with approval the difference
relationship, connection or influence to unjustly enrich himself or between the subject of the action from the cause of action. We also
themselves at the expense and to the damage and prejudice of the find petitioners definition of the phrase subject matter of the action is
Filipino people and the Republic of the Philippines. (Emphasis consistent with the term subject matter of the litigation, as the latter is
supplied) used in the Bank Deposits Secrecy Act.

In Mellon Bank, N.A. v. Magsino, where the petitioner bank


Indeed, all the above-enumerated overt acts are similar to bribery inadvertently caused the transfer of the amount of US$1,000,000.00
such that, in each case, it may be said that no reason is seen why instead of only US$1,000.00, the Court sanctioned the
these two classes of cases cannot be excepted from the rule making examination of the bank accounts where part of the money was
bank deposits confidential.[8] subsequently caused to be deposited:

The crime of bribery and the overt acts constitutive of plunder are x x x Section 2 of [Republic Act No. 1405] allows the disclosure of
crimes committed by public officers, and in either case the noble idea bank deposits in cases where the money deposited is the subject
that a public office is a public trust and any person who enters upon matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed
its discharge does so with the full knowledge that his life, so far as at recovering the amount converted by the Javiers for their own
relevant to his duty, is open to public scrutiny applies with equal benefit, necessarily, an inquiry into the whereabouts of the
force. illegally acquired amount extends to whatever is concealed by
being held or recorded in the name of persons other than the
Plunder being thus analogous to bribery, the exception to R.A. 1405 one responsible for the illegal acquisition.
applicable in cases of bribery must also apply to cases of plunder.
Clearly, Mellon Bank involved a case where the money deposited
Respecting petitioners claim that the money in his bank accounts is was the subject matter of the litigation since the money deposited
not the subject matter of the litigation, the meaning of the phrase was the very thing in dispute. x x x (Emphasis and underscoring
subject matter of the litigation as used in R.A. 1405 is explained supplied)
in Union Bank of the Philippines v. Court of Appeals,[9] thus:
The plunder case now pending with the Sandiganbayan necessarily As no plunder case against then President Estrada had yet been
involves an inquiry into the whereabouts of the amount purportedly filed before a court of competent jurisdiction at the time the
acquired illegally by former President Joseph Estrada. Ombudsman conducted an investigation, petitioner concludes that
the information about his bank accounts were acquired illegally,
In light then of this Courts pronouncement in Union Bank, the subject hence, it may not be lawfully used to facilitate a subsequent inquiry
matter of the litigation cannot be limited to bank accounts under the into the same bank accounts.
name of President Estrada alone, but must include those accounts to
which the money purportedly acquired illegally or a portion thereof Petitioners attempt to make the exclusionary rule applicable to the
was alleged to have been transferred. Trust Account No. 858 and instant case fails. R.A. 1405, it bears noting, nowhere provides that
Savings Account No. 0116-17345-9 in the name of petitioner fall an unlawful examination of bank accounts shall render the evidence
under this description and must thus be part of the subject matter of obtained therefrom inadmissible in evidence. Section 5 of R.A. 1405
the litigation. only states that [a]ny violation of this law will subject the offender
upon conviction, to an imprisonment of not more than five years or a
In a further attempt to show that the subpoenas issued by the fine of not more than twenty thousand pesos or both, in the
Sandiganbayan are invalid and may not be enforced, petitioner discretion of the court.
contends, as earlier stated, that the information found therein, given
their extremely detailed character, could only have been obtained by The case of U.S. v. Frazin,[11] involving the Right to Financial Privacy
the Special Prosecution Panel through an illegal disclosure by the Act of 1978 (RFPA) of the United States, is instructive.
bank officials concerned. Petitioner thus claims that, following the Because the statute, when properly construed, excludes a
fruit of the poisonous tree doctrine, the subpoenas must be quashed. suppression remedy, it would not be appropriate for us to provide
one in the exercise of our supervisory powers over the administration
Petitioner further contends that even if, as claimed by respondent of justice. Where Congress has both established a right and provided
People, the extremely-detailed information was obtained by the exclusive remedies for its violation, we would encroach upon the
Ombudsman from the bank officials concerned during a previous prerogatives of Congress were we to authorize a remedy not
investigation of the charges against President Estrada, such inquiry provided for by statute. United States v. Chanen, 549 F.2d 1306,
into his bank accounts would itself be illegal. 1313 (9th Cir.),cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d
83 (1977).
Petitioner relies on Marquez v. Desierto[10] where the Court held:

We rule that before an in camera inspection may be allowed there The same principle was reiterated in U.S. v. Thompson:[12]
must be a pending case before a court of competent
jurisdiction. Further, the account must be clearly identified, the x x x When Congress specifically designates a remedy for one of its
inspection limited to the subject matter of the pending case before acts, courts generally presume that it engaged in the necessary
the court of competent jurisdiction. The bank personnel and the balancing of interests in determining what the appropriate penalty
account holder must be notified to be present during the inspection, should be. See Michaelian, 803 F.2d at 1049 (citing
and such inspection may cover only the account identified in the cases); Frazin, 780 F.2d at 1466. Absent a specific reference to an
pending case. (Underscoring supplied) exclusionary rule, it is not appropriate for the courts to read such a
provision into the act.
Even assuming arguendo, however, that the exclusionary rule
applies in principle to cases involving R.A. 1405, the Court finds no In compliance with the said subpoena dated February 16, 2001, Ms.
reason to apply the same in this particular case. Dela Paz, as interim receiver, furnished the Office of the
Ombudsman certified copies of documents under cover latter
Clearly, the fruit of the poisonous tree doctrine [13] presupposes a dated February 21, 2001:
violation of law. If there was no violation of R.A. 1405 in the instant
case, then there would be no poisonous tree to begin with, and, thus, 1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-
no reason to apply the doctrine. 99, 11-22-99, 1-07-00, 04-03-00 and 04-24-00;
2. Report of Unregularized TAFs & TDs for UR COIN A & B
How the Ombudsman conducted his inquiry into the bank accounts Placements of Various Branches as of February 29, 2000 and as of
of petitioner is recounted by respondent People of December 16, 1999; and
the Philippines, viz: 3. Trading Orders Nos. A No. 78102 and A No. 078125.

x x x [A]s early as February 8, 2001, long before the issuance of Trading Order A No. 07125 is filed in two copies a white copy which
the Marquez ruling, the Office of the Ombudsman, acting under the showed set up information; and a yellow copy which showed reversal
powers granted to it by the Constitution and R.A. No. 6770, and information. Both copies have been reproduced and are enclosed
acting on information obtained from various sources, including with this letter.
impeachment (of then Pres. Joseph Estrada) related reports, articles
and investigative journals, issued a Subpoena Duces We are continuing our search for other records and documents
Tecum addressed to Urban Bank.(Attachment 1-b) It should be pertinent to your request and we will forward to you on Friday, 23
noted that the description of the documents sought to be produced at February 2001, such additional records and documents as we might
that time included that of numbered accounts 727, 737, 747, 757, find until then. (Attachment 4)
777 and 858 and included such names as Jose Velarde, Joseph E.
Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy The Office of the Ombudsman then requested for the mangers
Osorio, Rowena Lopez, Kevin or Kelvin Garcia. The subpoena did checks, detailed in the Subpoena Duces Tecum dated March 7,
not single out account 858. 2001. (Attachment 5)

xxxx PDIC again complied with the said Subpoena Duces


Tecum dated March 7, 2001and provided copies of the managers
Thus, on February 13, 2001, PDIC, as receiver of Urban Bank, checks thus requested under cover letter dated March 16,
issued a certification as to the availability of bank documents relating 2001. (Attachment 6)[14] (Emphasis in the original)
to A/C 858 and T/A 858 and the non-availability of bank records as to
the other accounts named in the subpoena.(Attachments 2, 2-1 and
2-b) The Sandiganbayan credited the foregoing account of respondent
People.[15]The Court finds no reason to disturb this finding of fact by
Based on the certification issued by PDIC, the Office of the the Sandiganbayan.
Ombudsman on February 16, 2001 again issued a Subpoena Duces
Tecum directed to Ms. Corazon dela Paz, as Interim Receiver, The Marquez ruling notwithstanding, the above-described
directing the production of documents pertinent to account A/C 858 examination by the Ombudsman of petitioners bank accounts,
and T/C 858. (Attachment 3)
conducted before a case was filed with a court of competent charged, this Court, citing P.D. 1630,[19]Section 10, the relevant part
jurisdiction, was lawful. of which states:

For the Ombudsman issued the subpoenas bearing on the bank (d) He may issue a subpoena to compel any person to appear, give
accounts of petitioner about four months before Marquez was sworn testimony, or produce documentary or other evidence the
promulgated on June 27, 2001. Tanodbayan deems relevant to a matter under his inquiry,

While judicial interpretations of statutes, such as that made


in Marquez with respect to R.A. No. 6770 or the Ombudsman Act of
1989, are deemed part of the statute as of the date it was originally held that The power of the Tanodbayan to issue subpoenae ad
passed, the rule is not absolute. testificandum and subpoenae duces tecum at the time in
question is not disputed, and at any rate does not admit of
Columbia Pictures, Inc. v. Court of Appeals[16] teaches: doubt.[20]

It is consequently clear that a judicial interpretation becomes a part As the subpoenas subject of Banco Filipino were issued during a
of the law as of the date that law was originally passed, subject only preliminary investigation, in effect this Court upheld the power of the
to the qualification that when a doctrine of this Court is Tandobayan under P.D. 1630 to issue subpoenas duces tecum
overruled and a different view is adopted, and more so when for bank documents prior to the filing of a case before a court of
there is a reversal thereof, the new doctrine should be competent jurisdiction.
applied prospectively and should not apply to parties who relied on
the old doctrine and acted in good faith. (Emphasis and underscoring Marquez, on the other hand, practically reversed this ruling in Banco
supplied) Filipinodespite the fact that the subpoena power of the Ombudsman
under R.A. 6770 was essentially the same as that under P.D.
1630. Thus Section 15 of R.A. 6770 empowers the Office of the
When this Court construed the Ombudsman Act of 1989, in light of Ombudsman to
the Secrecy of Bank Deposits Law in Marquez, that before an in
camera inspection may be allowed there must be a pending case (8) Administer oaths, issue subpoena and subpoena duces tecum,
before a court of competent jurisdiction, it was, in fact, reversing an and take testimony in any investigation or inquiry, including the
earlier doctrine found in Banco Filipino Savings and Mortgage Bank power to examine and have access to bank accounts and records;
v. Purisima[17].
A comparison of this provision with its counterpart in Sec. 10(d) of
Banco Filipino involved subpoenas duces tecum issued by the Office P.D. 1630 clearly shows that it is only more explicit in stating that
of the Ombudsman, then known as the Tanodbayan,[18] in the course the power of the Ombudsman includes the power to examine and
of its preliminary investigation of a charge of violation of the Anti- have access to bank accounts and records which power was
Graft and Corrupt Practices Act. recognized with respect to the Tanodbayan through Banco Filipino.

While the main issue in Banco Filipino was whether R.A. 1405 The Marquez ruling that there must be a pending case in order for
precluded the Tanodbayans issuance of subpoena duces tecum of the Ombudsman to validly inspect bank records in camera thus
bank records in the name of persons other than the one who was reversed a prevailing doctrine.[21]Hence, it may not be retroactively
applied.
Only with such prior independent information could it have been
The Ombudsmans inquiry into the subject bank accounts prior to the possible for the Ombudsman to issue the February 8,
filing of any case before a court of competent jurisdiction was 2001 subpoena duces tecum addressed to the President and/or
therefore valid at the time it was conducted. Chief Executive Officer of Urban Bank, which described the
documents subject thereof as follows:
Likewise, the Marquez ruling that the account holder must be notified
to be present during the inspection may not be applied retroactively (a) bank records and all documents relative thereto pertaining to
to the inquiry of the Ombudsman subject of this case. This ruling is all bank accounts (Savings, Current, Time Deposit, Trust, Foreign
not a judicial interpretation either of R.A. 6770 or R.A. 1405, but a Currency Deposits, etc) under theaccount names of Jose Velarde,
judge-made law which, as People v. Luvendino[22]instructs, can only Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez,
be given prospective application: Peach Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737,
747, 757, 777 and 858. (Emphasis and underscoring supplied)
x x x The doctrine that an uncounselled waiver of the right to
counsel is not to be given legal effect was initially a judge-
made one and was first announced on 26 April 1983 in Morales The information on the existence of Bank Accounts bearing number
v. Enrile and reiterated on 20 March 1985 in People v. Galit. x x x 858 was, according to respondent People of the Philippines,
obtained from various sources including the proceedings during the
While the Morales-Galit doctrine eventually became part of Section impeachment of President Estrada, related reports, articles and
12(1) of the 1987 Constitution, that doctrine affords no comfort to investigative journals.[23] In the absence of proof to the contrary, this
appellant Luvendino for the requirements and restrictions explanation proffered by respondent must be upheld. To presume
outlined in Morales and Galit have no retroactive effect and do that the information was obtained in violation of R.A. 1405 would
not reach waivers made prior to 26 April 1983 the date of infringe the presumption of regularity in the performance of official
promulgation of Morales. (Emphasis supplied) functions.

Thus, with the filing of the plunder case against former President
In fine, the subpoenas issued by the Ombudsman in this case were Estrada before the Sandiganbayan, the Ombudsman, using the
legal, hence, invocation of the fruit of the poisonous tree doctrine is above independent information, may now proceed to conduct the
misplaced. same investigation it earlier conducted, through which it can
eventually obtain the same information previously disclosed to it by
AT ALL EVENTS, even if the challenged subpoenas are quashed, the PDIC, for it is an inescapable fact that the bank records of
the Ombudsman is not barred from requiring the production of the petitioner are no longer protected by R.A. 1405 for the reasons
same documents based solely on information obtained by it from already explained above.
sources independent of its previous inquiry.
Since conducting such an inquiry would, however, only result in the
In particular, the Ombudsman, even before its inquiry, had already disclosure of the same documents to the Ombudsman, this Court, in
possessed information giving him grounds to believe that (1) there avoidance of what would be a time-wasteful and circuitous way of
are bank accounts bearing the number 858, (2) that such accounts administering justice,[24] upholds the challenged subpoenas.
are in the custody of Urban Bank, and (3) that the same are linked
with the bank accounts of former President Joseph Estrada who was Respecting petitioners claim that the Sandiganbayan violated his
then under investigation for plunder. right to due process as he was neither notified of the requests for the
issuance of the subpoenas nor of the grant thereof, suffice it to state
that the defects were cured when petitioner ventilated his arguments WHEREFORE, the petition is DISMISSED. The Sandiganbayan
against the issuance thereof through his earlier quoted letter Resolutions dated February 7 and 12, 2003 and March 11, 2003 are
addressed to the Sandiganbayan and when he filed his motions to upheld.
quash before the Sandiganbayan.
The Sandiganbayan is hereby directed, consistent with this Courts
IN SUM, the Court finds that the Sandiganbayan did not commit ruling in Marquez v. Desierto, to notify petitioner as to the date the
grave abuse of discretion in issuing the challenged subpoenas for subject bank documents shall be presented in court by the persons
documents pertaining to petitioners Trust Account No. 858 and subpoenaed.
Savings Account No. 0116-17345-9 for the following reasons:
SO ORDERED.
1. These accounts are no longer protected by the Secrecy of Bank
Deposits Law, there being two exceptions to the said law applicable
in this case, namely: (1) the examination of bank accounts is upon KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr.,
order of a competent court in cases of bribery or dereliction of duty of father and Natural Guardian, and Spouses FEDERICO N.
public officials, and (2) the money deposited or invested is the SALVACION, JR., and EVELINA E. SALVACION, petitioners,
subject matter of the litigation. Exception (1) applies since the vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING
plunder case pending against former President Estrada is analogous CORPORATION and GREG BARTELLI y
to bribery or dereliction of duty, while exception (2) applies because NORTHCOTT, respondents.
the money deposited in petitioners bank accounts is said to form part DECISION
of the subject matter of the same plunder case. TORRES, JR., J.:
In our predisposition to discover the original intent of a statute, courts
2. The fruit of the poisonous tree principle, which states that once the become the unfeeling pillars of the status quo. Little do we realize
primary source (the tree) is shown to have been unlawfully obtained, that statutes or even constitutions are bundles of compromises
any secondary or derivative evidence (the fruit) derived from it is also thrown our way by their framers. Unless we exercise vigilance, the
inadmissible, does not apply in this case. In the first place, R.A. 1405 statute may already be out of tune and irrelevant to our day.
does not provide for the application of this rule. Moreover, there is no The petition is for declaratory relief. It prays for the following reliefs:
basis for applying the same in this case since the primary source for a.) Immediately upon the filing of this petition, an Order be issued
the detailed information regarding petitioners bank accounts the restraining the respondents from applying and enforcing Section 113
investigation previously conducted by the Ombudsman was lawful. of Central Bank Circular No. 960;
b.) After hearing, judgment be rendered:
3. At all events, even if the subpoenas issued by the Sandiganbayan 1.) Declaring the respective rights and duties of petitioners and
were quashed, the Ombudsman may conduct on its own the same respondents;
inquiry into the subject bank accounts that it earlier conducted last 2.) Adjudging Section 113 of Central Bank Circular No. 960 as
February-March 2001, there being a plunder case already pending contrary to the provision of the Constitution, hence void; because its
against former President Estrada. To quash the challenged provision that Foreign currency deposits shall be exempt from
subpoenas would, therefore, be pointless since the Ombudsman attachment, garnishment, or any other order to process of any court,
may obtain the same documents by another route. Upholding the legislative body, government agency or any administrative body
subpoenas avoids an unnecessary delay in the administration of whatsoever
justice.
i.) has taken away the right of petitioners to have the bank deposit of Northcott, the criminal cases were archived in an Order dated
defendant Greg Bartelli y Northcott garnished to satisfy the judgment February 28, 1989.
rendered in petitioners favor in violation of substantive due process Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order
guaranteed by the Constitution; dated February 22, 1989 granting the application of herein
ii.) has given foreign currency depositors an undue favor or a class petitioners, for the issuance of the writ of preliminary
privilege in violation of the equal protection clause of the attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU
Constitution; Insurance Corporation in the amount P100,000.00, a Writ of
iii.) has provided a safe haven for criminals like the herein Preliminary Attachment was issued by the trial court on February 28,
respondent Greg Bartelli y Northcott since criminals could escape 1989.
civil liability for their wrongful acts by merely converting their money On March 1, 1989, the Deputy Sheriff of Makati served a Notice of
to a foreign currency and depositing it in a foreign currency deposit Garnishment on China Banking Corporation. In a letter dated March
account with an authorized bank. 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation
The antecedents facts: invoked Republic Act No. 1405 as its answer to the notice of
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, garnishment served on it. On March 15, 1989, Deputy Sheriff of
coaxed and lured petitioner Karen Salvacion, then 12 years old to go Makati Armando de Guzman sent his reply to China Banking
with him to his apartment. Therein, Greg Bartelli detained Karen Corporation saying that the garnishment did not violate the secrecy
Salvacion for four days, or up to February 7, 1989 and was able to of bank deposits since the disclosure is merely incidental to a
rape the child once on February 4, and three times each day on garnishment properly and legally made by virtue of a court order
February 5, 6, and 7, 1989. On February 7, 1989, after policemen which has placed the subject deposits in custodia legis. In answer to
and people living nearby, rescued Karen, Greg Bartelli was arrested this letter of the Deputy Sheriff of Makati, China Banking
and detained at the Makati Municipal Jail. The policemen recovered Corporation, in a letter dated March 20, 1989, invoked Section 113 of
from Bartelli the following items: 1.) Dollar Check No. 368, Control Central Bank Circular No. 960 to the effect that the dollar deposits of
No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank defendant Greg Bartelli are exempt from attachment, garnishment, or
Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account China any other order or process of any court, legislative body, government
Banking Corp., US $/A#54105028-2; 4.) ID-122-30- agency or any administrative body, whatsoever.
8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 This prompted the counsel for petitioners to make an inquiry with the
pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the Central Bank in a letter dated April 25, 1989 on whether Section 113
complainant. of CB Circular No. 960 has any exception or whether said section
On February 16, 1989, Makati Investigating Fiscal Edwin G. has been repealed or amended since said section has rendered
Condaya filed against Greg Bartelli, Criminal Case No. 801 for nugatory the substantive right of the plaintiff to have the claim sought
Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, to be enforced by the civil action secured by way of the writ of
and 805 for four (4) counts of Rape. On the same day, petitioners preliminary attachment as granted to the plaintiff under Rule 57 of
filed with the Regional Trial Court of Makati Civil Case No. 89-3214 the Revised Rules of Court. The Central Bank responded as follows:
for damages with preliminary attachment against Greg Bartelli. On May 26, 1989
February 24, 1989, the day there was a scheduled hearing for Ms. Erlinda S. Carolino
Bartellis petition for bail the latter escaped from jail. 12 Pres. Osmea Avenue
On February 28, 1989, the court granted the fiscals Urgent Ex- South Admiral Village
Parte Motion for the Issuance of Warrant of Arrest and Hold Paranaque, Metro Manila
Departure Order. Pending the arrest of the accused Greg Bartelli y Dear Ms. Carolino:
This is in reply to your letter dated April 25, 1989 regarding your as per report of the Jail Warden of Makati to the Presiding Judge,
inquiry on Section 113, CB Circular No. 960 (1983). Honorable Manuel M. Cosico of the Regional Trial Court of Makati,
The cited provision is absolute in application. It does not admit of any Branch 136, where he was charged with four counts of Rape and
exception, nor has the same been repealed nor amended. Serious Illegal Detention (Crim. Cases Nos. 802 to
The purpose of the law is to encourage dollar accounts within the 805). Accordingly, upon motion of plaintiffs, through counsel,
countrys banking system which would help in the development of the summons was served upon defendant by publication in the Manila
economy. There is no intention to render futile the basic rights of a Times, a newspaper of general circulation as attested by the
person as was suggested in your subject letter. The law may be Advertising Manager of the Metro Media Times, Inc., the publisher of
harsh as some perceive it, but it is still the law. Compliance is, the said newspaper. Defendant, however, failed to file his answer to
therefore, enjoined. the complaint despite the lapse of the period of sixty (60) days from
Very truly yours, the last publication; hence, upon motion of the plaintiffs through
(SGD) AGAPITO S. FAJARDO counsel, defendant was declared in default and plaintiffs were
Director[1] authorized to present their evidence ex parte.
Meanwhile, on April 10, 1989, the trial court granted petitioners In support of the complaint, plaintiffs presented as witness the minor
motion for leave to serve summons by publication in the Civil Case Karen E. Salvacion, her father, Federico N. Salacion, Jr., a certain
No. 89-3214 entitled Karen Salvacion. et al. vs. Greg Bartelli y Joseph Aguilar and a certain Liberato Mandulio, who gave the
Northcott. Summons with the complaint was published in the Manila following testimony:
Times once a week for three consecutive weeks. Greg Bartelli failed Karen took her first year high school in St. Marys Academy in Pasay
to file his answer to the complaint and was declared in default on City but has recently transferred to Arellano University for her second
August 7, 1989. After hearing the case ex-parte, the court rendered year.
judgment in favor of petitioners on March 29, 1990, the dispositive In the afternoon of February 4, 1989, Karen was at the Plaza Fair
portion of which reads: Makati Cinema Square, with her friend Edna Tangile whiling away
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and her free time. At about 3:30 p.m. while she was finishing her snack
against defendant, ordering the latter: on a concrete bench in front of Plaza Fair, an American approached
1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as her. She was then alone because Edna Tangile had already left, and
moral damages; she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., The American asked her name and introduced himself as Greg
and Evelina E. Salvacion the amount of P150,000.00 each or a total Bartelli. He sat beside her when he talked to her. He said he was a
of P300,000.00 for both of them; Math teacher and told her that he has a sister who is a nurse in New
3. To pay plaintiffs exemplary damages of P100,000.00; and York. His sister allegedly has a daughter who is about Karens age
4. To pay attorneys fees in an amount equivalent to 25% of the total and who was with him in his house along Kalayaan Avenue. (TSN,
amount of damages herein awarded; Aug. 15, 1989, pp. 4-5).
5. To pay litigation expenses of P10,000.00; plus The American asked Karen what was her favorite subject and she
6. Costs of the suit. told him its Pilipino. He then invited her to go with him to his house
SO ORDERED. where she could teach Pilipino to his niece. He even gave her a
The heinous acts of respondents Greg Bartelli which gave rise to the stuffed toy to persuade her to teach his niece. (Id., pp.5-6)
award were related in graphic detail by the trial court in its decision They walked from Plaza Fair along Pasong Tamo, turning right to
as follows: reach the defendants house along Kalayaan Avenue. (Id., p.6)
The defendant in this case was originally detained in the municipal When they reached the apartment house, Karen notices that
jail of Makati but was able to escape therefrom on February 24, 1989 defendants alleged niece was not outside the house but defendant
told her maybe his niece was inside. When Karen did not see the stored downstairs; it was he who cooked the rice that is why it looks
alleged niece inside the house, defendant told her maybe his niece like lugaw. For the third time, Karen was raped again during the
was upstairs, and invited Karen to go upstairs. (Id., p. 7) night. During those three times defendant succeeded in inserting his
Upon entering the bedroom defendant suddenly locked the sex organ but she could not say whether the organ was inserted
door. Karen became nervous because his niece was not wholly.
there. Defendant got a piece of cotton cord and tied Karens hands Karen did not see any firearm or any bladed weapon. The defendant
with it, and then he undressed her. Karen cried for help but did not tie her hands and feet nor put a tape on her mouth anymore
defendant strangled her. He took a packing tape and he covered her but she did not cry for help for fear that she might be killed; besides,
mouth with it and he circled it around her head. (Id., p. 7) all those windows and doors were closed. And even if she shouted
Then, defendant suddenly pushed Karen towards the bed which was for help, nobody would hear her. She was so afraid that if somebody
just near the door. He tied her feet and hands spread apart to the would hear her and would be able to call a police, it was still possible
bed posts. He knelt in front of her and inserted his finger in her sex that as she was still inside the house, defendant might kill
organ. She felt severe pain. She tried to shout but no sound could her. Besides, the defendant did not leave that Sunday, ruling out her
come out because there were tapes on her mouth. When defendant chance to call for help. At nighttime he slept with her again. (TSN,
withdrew his finger it was full of blood and Karen felt more pain after Aug. 15, 1989, pp. 12-14)
the withdrawal of the finger. (Id., p.8) On February 6, 1989, Monday, Karen was raped three times, once in
He then got a Johnsons Baby Oil and he applied it to his sex organ the morning for thirty minutes after breakfast of biscuits; again in the
as well as to her sex organ.After that he forced his sex organ into her afternoon; and again in the evening. At first, Karen did not know that
but he was not able to do so. While he was doing it, Karen found it there was a window because everything was covered by a carpet,
difficult to breathe and she perspired a lot while feeling severe until defendant opened the window for around fifteen minutes or less
pain. She merely presumed that he was able to insert his sex organ to let some air in, and she found that the window was covered by
a little, because she could not see. Karen could not recall how long styrofoam and plywood. After that, he again closed the window with
the defendant was in that position. (Id., pp. 8-9) a hammer and he put the styrofoam, plywood, and carpet back. (Id.,
After that, he stood up and went to the bathroom to wash. He also pp. 14-15)
told Karen to take a shower and he untied her hands. Karen could That Monday evening, Karen had a chance to call for help, although
only hear the sound of the water while the defendant, she presumed, defendant left but kept the door closed. She went to the bathroom
was in the bathroom washing his sex organ. When she took a and saw a small window covered by styrofoam and she also spotted
shower more blood came out from her. In the meantime, defendant a small hole. She stepped on the bowl and she cried for help through
changed the mattress because it was full of blood. After the shower, the hole. She cried: Maawa na po kayo sa akin. Tulungan nyo akong
Karen was allowed by defendant to sleep. She fell asleep because makalabas dito. Kinidnap ako! Somebody heard her. It was a
she got tired crying.The incident happened at about 4:00 p.m. Karen woman, probably a neighbor, but she got angry and said she
had no way of determining the exact time because defendant was istorbo. Karen pleaded for help and the woman told her to sleep
removed her watch. Defendant did not care to give her food before and she will call the police. She finally fell asleep but no policeman
she went to sleep.Karen woke up at about 8:00 oclock the following came. (TSN, Aug. 15, 1989, pp. 15-16)
morning. (Id., pp. 9-10) She woke up at 6:00 oclock the following morning, and she saw
The following day, February 5, 1989, a Sunday, after breakfast of defendant in bed, this time sleeping. She waited for him to wake
biscuit and coke at about 8:30 to 9:00 a.m. defendant raped Karen up. When he woke up, he again got some food but he always kept
while she was still bleeding. For lunch, they also took biscuit and the door locked. As usual, she was merely fed with biscuit and
coke. She was raped for the second time at about 12:00 to 2:00 coke. On that day, February 7, 1989, she was again raped three
p.m. In the evening, they had rice for dinner which defendant had times. The first at about 6:30 to 7:00 a.m., the second at about 8:30
9:00, and the third was after lunch at 12:00 noon. After he had raped At the headquarters, she was asked several questions by the
her for the second time he left but only for a short while. Upon his investigator. The written statement she gave to the police was
return, he caught her shouting for help but he did not understand marked Exhibit A. Then they proceeded to the National Bureau of
what she was shouting about. After she was raped the third time, he Investigation together with the investigator and her parents. At the
left the house.(TSN, Aug. 15, 1989, pp. 16-17) She again went to the NBI, a doctor, a medico-legalofficer, examined her private parts. It
bathroom and shouted for help. After shouting for about five minutes, was already 3:00 in early morning, of the following day when they
she heard many voices. The voices were asking for her name and reached the NBI, (TSN, Aug. 15, 1989, p. 22) The findings of
she gave her name as Karen Salvacion. After a while, she heard a the medico-legal officer has been marked as Exhibit B.
voice of a woman saying they will just call the police. They were also She was studying at the St. Marys Academy in Pasay City at the
telling her to change her clothes. She went from the bathroom to the time of the Incident but she subsequently transferred to Apolinario
room but she did not change her clothes being afraid that should the Mabini, Arellano University, situated along Taft Avenue, because she
neighbors call the police and the defendant see her in different was ashamed to be the subject of conversation in the school. She
clothes, he might kill her. At that time she was wearing a T-shirt of first applied for transfer to Jose Abad Santos, Arellano University
the American bacause the latter washed her dress. (Id., p. 16) along Taft Avenue near the Light Rail Transit Station but she was
Afterwards, defendant arrived and opened the door. He asked her if denied admission after she told the school the true reason for her
she had asked for help because there were many policemen outside transfer. The reason for their denial was that they might be
and she denied it. He told her to change her clothes, and she did implicated in the case. (TSN, Aug. 15, 1989, p. 46)
change to the one she was wearing on Saturday. He instructed her xxx xxx xxx
to tell the police that she left home and willingly; then he went After the incident, Karen has changed a lot. She does not play with
downstairs but he locked the door. She could hear people her brother and sister anymore, and she is always in a state of
conversing but she could not understand what they were saying. (Id., shock; she has been absent-minded and is ashamed even to go out
p. 19) of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be
When she heard the voices of many people who were conversing restless or sad. (Id., p. 11) The father prays for P500,000.00 moral
downstairs, she knocked repeatedly at the door as hard as she damages for Karen for this shocking experience which probably, she
could. She heard somebody going upstairs and when the door was would always recall until she reaches old age, and he is not sure if
opened, she saw a policeman. The policeman asked her name and she could ever recover from this experience. (TSN, Sept. 24, 1989,
the reason why she was there. She told him she was pp. 10-11)
kidnapped. Downstairs, he saw about five policemen in uniform and Pursuant to an Order granting leave to publish notice of decision,
the defendant was talking to them. Nakikipag-areglo po sa mga said notice was published in the Manila Bulletin once a week for
pulis, Karen added. The policeman told him to just explain at the three consecutive weeks. After the lapse of fifteen (15) days from the
precinct. (Id., p. 20) date of the last publication of the notice of judgment and the decision
They went out of the house and she saw some of her neighbors in of the trial court had become final, petitioners tried to execute on
front of the house. They rode the car of a certain person she called Bartellis dollar deposit with China Banking Corporation. Likewise, the
Kuya Boy together with defendant, the policeman, and two of her bank invoked Section 113 of Central Bank Circular No. 960.
neighbors whom she called Kuya Bong Lacson and one Ate Thus, petitioners decided to seek relief from this Court.
Nita. They were brought to Sub-Station I and there she was The issues raised and the arguments articulated by the parties boil
investigated by a policeman. At about 2:00 a.m., her father arrived, down to two:
followed by her mother together with some of their neighbors. Then May this Court entertain the instant petition despite the fact that
they were brought to the second floor of the police original jurisdiction in petitions for declaratory relief rests with the
headquarters. (Id., p. 21) lower court? She Section 113 of Central Bank Circular No. 960 and
Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known Expanding, the Central Bank said; that one reason for exempting the
as the Foreign Currency Deposit Act be made applicable to a foreign foreign currency deposits from attachment, garnishment or any other
transient? order process of any court, is to assure the development and speedy
Petitioners aver as heretofore stated that Section 113 of Central growth of the Foreign Currency Deposit System and the Offshore
Bank Circular No. 960 providing that Foreign currency deposits shall Banking System in the Philippines; that another reason is to
be exempt from attachment, garnishment, or any other order or encourage the inflow of foreign currency deposits into the banking
process of any court, legislative body, government agency or any institutions thereby placing such institutions more in a position to
administrative body whatsoever. should be adjudged as properly channel the same to loans and investments in the
unconstitutional on the grounds that: 1.) it has taken away the right of Philippines, thus directly contributing to the economic development
petitioners to have the bank deposit of defendant Greg Bartelli y of the country; that the subject section is being enforced according to
Northcott garnished to satisfy the judgment rendered in petitioners the regular methods of procedure; and that it applies to all currency
favor in violation of substantive due process guaranteed by the deposits made by any person and therefore does not violate the
Constitution;2.) it has given foreign currency depositors an undue equal protection clause of the Constitution.
favor or a class privilege n violationof the equal protection clause of Respondent Central Bank further avers that the questioned provision
the Constitution; 3.) it has provided a safe haven for criminals like the is needed to promote the public interest and the general welfare; that
herein respondent Greg Bartelli y Northcott since criminal could the State cannot just stand idly by while a considerable segment of
escape civil liability for their wrongful acts by merely converting their the society suffers from economic distress; that the State had to take
money to a foreign currency and depositing it in a foreign currency some measures to encourage economic development; and that in so
deposit account with an authorized bank; and 4.)The Monetary doing persons and property may be subjected to some kinds of
Board, in issuing Section 113 of Central Bank Circular No. 960 has restraints or burdens to secure the general welfare or public
exceeded its delegated quasi- legislative power when it took interest. Respondent Central Bank also alleges that Rule 39 and
away: a.) the plaintiffs substantive right to have the claim sought to Rule 57 of the Revised Rules of Court provide that some properties
be enforced by the civil action secured by way of the writ of are exempted from execution/attachment especially provided by law
preliminary attachment as granted by Rule 57 of the Revised Rules and R.A. No. 6426 as amended is such a law, in that it specifically
of Court; b.) the plaintiffs substantive right to have the judgment provides, among others, that foreign currency deposits shall be
credit satisfied by way of the writ of execution out of the bank deposit exempted from attachment, garnishment, or any other order or
of the judgment debtor as granted to the judgment creditor by Rule process of any court, legislative body, government agency or any
39 of the Revised Rules of Court, which is beyond its power to do so. administrative body whatsoever.
On the other hand, respondent Central Bank, in its Comment alleges For its part, respondent China Banking Corporation, aside from
that the Monetary Board in issuing Section 113 of CB Circular No. giving reasons similar to that of respondent Central Bank, also stated
960 did not exceed its power or authority because the subject that respondent China Bank is not unmindful of the inhuman
Section is copied verbatim from a portion of R.A. No. 6426 as sufferings experienced by the minor Karen E. Salvacion from the
amended by P.D. 1246. Hence, it was not the Monetary Board that beastly hands of Greg Bartelli; that it is not only too willing to release
grants exemption from attachment or garnishment to foreign the dollar deposit of Bartelli which may perhaps partly mitigate the
currency deposits, but the law (R.A. 6426 as amended) itself; that it sufferings petitioner has undergone; but it is restrained from doing so
does not violate the substantive due process guaranteed by the in view of R.A. No. 6426 and Section 113 of Central Bank Circular
Constitution because a.) it was based on a law; b.) the law seems to No. 960; and that despite the harsh effect to these laws on
be reasonable; c.) it is enforced according to regular methods of petitioners, CBC has no other alternative but to follow the same.
procedure; and d.) it applies to all members of a class. This court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the naive and credulous to believe easily that defendant, an American
court. But this petition for declaratory relief can only be entertained national, could not have such a bestial desire on her nor capable of
and treated as a petition for mandamus to require respondents to committing such heinous crime. Being only 12 years old when that
honor and comply with the writ of execution in Civil Case No. 89- unfortunate incident happened, she has never heard of an old
3214. Filipino adage that in every forest there is a snake, xxx.[4]
The Court has no original and exclusive jurisdiction over a petition for If Karens sad fate had happened to anybodys own kin, it would be
declatory relief.[2] However, exceptions to this rule have been difficult for him to fathom how the incentive for foreign currency
recognized. Thus, where the petition has far-reaching implications deposit could be more important than his childs right to said award of
and raises questions that should be resolved, it may be treated as damages; in this case, the victims claim for damages from this alien
one for mandamus.[3] who had the gall to wrong a child of tender years of a country where
Here is a child, a 12-year old girl, who in her belief that all Americans he is mere visitor. This further illustrates the flaw in the questioned
are good and in her gesture of kindness by teaching his alleged provisions.
niece the Filipino language as requested by the American, trustingly It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a
went with said stranger to his apartment, and there she was raped by time when the countrys economy was in a shambles; when foreign
said American tourist Greg Bartelli. Not once, but ten times. She was investments were minimal and presumably, this was the reason why
detained therein for four (4) days. This American tourist was able to said statute was enacted. But the realities of the present times show
escape from the jail and avoid punishment. On the other hand, the that the country has recovered economically; and even if not, the
child, having received a favorable judgment in the Civil Case for questioned law still denies those entitled to due process of law for
damages in the amount of more than P1,000,000.00, which amount being unreasonable and oppressive. The intention of the questioned
could alleviate the humiliation, anxiety, and besmirched reputation law may be good when enacted. The law failed to anticipate the
she had suffered and may continue to suffer for a long, long time; inquitous effects producing outright injustice and inequality such as
and knowing that this person who had wronged her has the money, as the case before us.
could not, however get the award of damages because of this It has thus been said that-
unreasonable law. This questioned law, therefore makes futile the But I also know,[5] that laws and institutions must go hand in hand
favorable judgment and award of damages that she and her parents with the progress of the human mind. As that becomes more
fully deserve. As stated by the trial court in its decision, developed, more enlightened, as new discoveries are made, new
Indeed, after hearing the testimony of Karen, the Court believes that truths are disclosed and manners and opinions change with the
it was indoubtedly a shocking and traumatic experience she had change of circumstances, institutions must advance also, and keep
undergone which could haunt her mind for a long, long time, the pace with the times We might as well require a man to wear still the
mere recall of which could make her feel so humiliated, as in fact she coat which fitted him when a boy, as civilized society to remain ever
had been actually humiliated once when she was refused admission under the regimen of their barbarous ancestors.
at the Abad Santos High School, Arellano University, where she In his comment, the Solicitor General correctly opined, thus:
sought to transfer from another school, simply because the school "The present petition has far-reaching implications on the right of a
authorities of the said High School learned about what happened to national to obtain redress for a wrong committed by an alien who
her and allegedly feared that they might be implicated in the case. takes refuge under a law and regulation promulgated for a purpose
xxx which does not contemplate the application thereof envisaged by the
The reason for imposing exemplary or corrective damages is due to allien. More specifically, the petition raises the question whether the
the wanton and bestial manner defendant had committed the acts of protection against attachment, garnishment or other court process
rape during a period of serious illegal detention of his hapless victim, accorded to foreign currency deposits PD No. 1246 and CB Circular
the minor Karen Salvacion whose only fault was in her being so No. 960 applies when the deposit does not come from a lender or
investor but from a mere transient who is not expected to maintain The purpose of PD 1246 in according protection against attachment,
the deposit in the bank for long. garnishment and other court process to foreign currency deposits is
The resolution of this question is important for the protection of stated in its whereases, viz.:
nationals who are victimized in the forum by foreigners who are WHEREAS, under Republic Act No. 6426, as amended by
merely passing through. Presidential Decree No. 1035, certain Philippine banking institutions
xxx and branches of foreign banks are authorized to accept deposits in
xxx Respondents China Banking Corporation and Central Bank of foreign currency;
the Philippines refused to honor the writ of execution issued in Civil WHEREAS, under provisions of Presidential Decree No. 1034
Case No. 89-3214 on the strength of the following provision of authorizing the establishment of an offshore banking system in the
Central Bank Circular No. 960: Philippines, offshore banking units are also authorized to receive
Sec. 113 Exemption from attachment. Foreign currency deposits foreign currency deposits in certain cases;
shall be exempt from attachment, garnishment, or any other order or WHEREAS, in order to assure the development and speedy growth
process of any court, legislative body, government agency or any of the Foreign Currency Deposit System and the Offshore Banking
administrative body whatsoever. System in the Philippines, certain incentives were provided for under
Central Bank Circular No. 960 was issued pursuant to Section 7 of the two Systems such as confidentiality subject to certain exceptions
Republic Act No. 6426: and tax exemptions on the interest income of depositors who are
Sec. 7. Rules and Regulations. The Monetary Board of the Central nonresidents and are not engaged in trade or business in the
Bank shall promulgate such rules and regulations as may be Philippines;
necessary to carry out the provisions of this Act which shall take WHEREAS, making absolute the protective cloak of confidentiality
effect after the publication of such rules and regulations in the Official over such foreign currency deposits, exempting such deposits from
Gazette and in a newspaper of national circulation for at least once a tax, and guaranteeing the vested right of depositors would better
week for three consecutive weeks. In case the Central Bank encourage the inflow of foreign currency deposits into the banking
promulgates new rules and regulations decreasing the rights of institutions authorized to accept such deposits in the Philippines
depositors, the rules and regulations at the time the deposit was thereby placing such institutions more in a position to properly
made shall govern. channel the same to loans and investments in the Philippines, thus
The aforecited Section 113 was copied from Section 8 of Republic directly contributing to the economic development of the country;
Act No. 6426. As amended by P.D. 1246, thus: Thus, one of the principal purposes of the protection accorded to
Sec. 8. Secrecy of Foreign Currency Deposits. -- All foreign currency foreign currency deposits is to assure the development and speedy
deposits authorized under this Act, as amended by Presidential growth of the Foreign Currency Deposit system and the Offshore
Decree No. 1035, as well as foreign currency deposits authorized Banking in the Philippines (3rd Whereas).
under Presidential Decree No. 1034, are hereby declared as and The Offshore Banking System was established by PD No. 1034. In
considered of an absolutely confidential nature and, except upon the turn, the purposes of PD No. 1034 are as follows:
written permission of the depositor, in no instance shall such foreign WHEREAS, conditions conducive to the establishment of an offshore
currency deposits be examined, inquired or looked into by any banking system, such as political stability, a growing economy and
person, government official, bureau or office whether judicial or adequate communication facilities, among others, exist in the
administrative or legislative or any other entity whether public or Philippines;
private: Provided, however, that said foreign currency deposits shall WHEREAS, it is in the interest of developing countries to have as
be exempt from attachment, garnishment, or any other order or wide access as possible to the sources of capital funds for economic
process of any court, legislative body, government agency or any development;
administrative body whatsoever.
WHEREAS, an offshore banking system based in the Philippines will No. 1246 against attachment, garnishment or other court
be advantageous and beneficial to the country by increasing our processes.[6]
links with foreign lenders, facilitating the flow of desired investments In fine, the application of the law depends on the extent of its
into the Philippines, creating employment opportunities and expertise justice. Eventually, if we rule that the questioned Section 113 of
in international finance, and contributing to the national development Central Bank Circular No. 960 which exempts from attachment,
effort. garnishment, or any other order or process of any court. Legislative
WHEREAS, the geographical location, physical and human body, government agency or any administrative body whatsoever, is
resources, and other positive factors provide the Philippines with the applicable to a foreign transient, injustice would result especially to a
clear potential to develop as another financial center in Asia; citizen aggrieved by a foreign guest like accused Greg Bartelli. This
On the other hand, the Foreign Currency Deposit system was would negate Article 10 of the New Civil Code which provides that in
created by PD No. 1035. Its purpose are as follows: case of doubt in the interpretation or application of laws, it is
WHEREAS, the establishment of an offshore banking system in the presumed that the lawmaking body intended right and justice to
Philippines has been authorized under a separate decree; prevail. Ninguno non deue enriquecerse tortizerzmente con damo de
WHEREAS, a number of local commercial banks, as depository bank otro. Simply stated, when the statute is silent or ambiguous, this is
under the Foreign Currency Deposit Act (RA No. 6426), have the one of those fundamental solutions that would respond to the
resources and managerial competence to more actively engage in vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377)
foreign exchange transactions and participate in the grant of foreign It would be unthinkable, that the questioned Section 113 of Central
currency loans to resident corporations and firms; Bank No. 960 would be used as a device by accused Greg Bartelli
WHEREAS, it is timely to expand the foreign currency lending for wrongdoing, and in so doing, acquitting the guilty at the expense
authority of the said depository banks under RA 6426 and apply to of the innocent.
their transactions the same taxes as would be applicable to Call it what it may but is there no conflict of legal policy here? Dollar
transaction of the proposed offshore banking units; against Peso?Upholding the final and executory judgment of the
It is evident from the above [Whereas clauses] that the Offshore lower court against the Central Bank Circular protecting the foreign
Banking System and the Foreign Currency Deposit System were depositor? Shielding or protecting the dollar deposit of a transient
designed to draw deposits from foreign lendersand investors (Vide alien depositor against injustice to a national and victim of a
second Whereas of PD No. 1034; third Whereas of PD No. 1035). It crime? This situation calls for fairness legal tyranny.
is these depositors that are induced by the two laws and given We definitely cannot have both ways and rest in the belief that we
protection and incentives by them. have served the ends of justice.
Obviously, the foreign currency deposit made by a transient or a IN VIEW WHEREOF, the provisions of Section 113 of CB Circular
tourist is not the kind of deposit encourage by PD Nos. 1034 and No. 960 and PD No. 1246, insofar as it amends Section 8 of R.A.
1035 and given incentives and protection by said laws because such 6426 are hereby held to beINAPPLICABLE to this case because of
depositor stays only for a few days in the country and, therefore, will its peculiar circumstances. Respondents are hereby REQUIRED to
maintain his deposit in the bank only for a short time. COMPLY with the writ of execution issued in Civil Case No. 89-3214,
Respondent Greg Bartelli, as stated, is just a tourist or a Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch
transient. He deposited his dollars with respondent China Banking CXLIV, RTC Makati and to RELEASE to petitioners the dollar deposit
Corporation only for safekeeping during his temporary stay in the of respondent Greg Bartelli y Northcott in such amount as would
Philippines. satisfy the judgment.
For the reasons stated above, the Solicitor General thus submits that SO ORDERED.
the dollar deposit of respondent Greg Bartelli is not entitled to the
protection of Section 113 of Central Bank Circular No. 960 and PD
CHINA BANKING CORPORATION VS CA 5) CITIBANK CHECK NO. 69003194405297 dated October 01
1997 in the amount of US$766,011.97 payable to GOTIANUY: JOSE
A Complaint for recovery of sums of money and annulment of sales AND/OR DEE: MARY MARGARET; and
of real properties and shares of stock docketed as CEB-21445 was
filed by Jose Joseph Gotianuy against his son-in-law, George Dee, 6) CITIBANK CHECK NO. 69003194405339 dated October 09
and his daughter, Mary Margaret Dee, before the Regional Trial 1997 in the amount of US$83,053.10 payable to GOTIANUY: JOSE
Court (RTC) of Cebu City, Branch 58. AND/OR DEE: MARY MARGARET.[2]

Jose Gotianuy accused his daughter Mary Margaret Dee of stealing,


among his other properties, US dollar deposits with Citibank N.A. Upon motion of Elizabeth Gotianuy Lo, the trial court[3] issued a
amounting to not less than P35,000,000.00 and subpoena to Cristota Labios and Isabel Yap, employees of China
US$864,000.00. Mary Margaret Dee received these amounts from Bank, to testify on the case. The Order of the trial court dated 23
Citibank N.A. through checks which she allegedly deposited at China February 1999, states:
Banking Corporation (China Bank). He likewise accused his son-in-
law, George Dee, husband of his daughter, Mary Margaret, of Issue a subpoena ad testificandum requiring MS. ISABEL YAP and
transferring his real properties and shares of stock in George Dees CRISTOTA LABIOS of China Banking Corporation, Cebu Main
name without any consideration. Jose Gotianuy, died during the Branch, corner Magallanes and D. Jakosalem Sts., Cebu City, to
pendency of the case before the trial court.[1]He was substituted by appear in person and to testify in the hearing of the above entitled
his daughter, Elizabeth Gotianuy Lo. The latter presented the US case on March 1, 1999 at 8:30 in the morning, with regards to
Dollar checks withdrawn by Mary Margaret Dee from his US dollar Citibank Checks (Exhs. AAA to AAA-5) and other matters material
placement with Citibank. The details of the said checks are: and relevant to the issues of this case.[4]

1) CITIBANK CHECK NO. 69003194405412 dated September 29


1997 in the amount of US$5,937.52 payable to GOTIANUY: JOSE China Bank moved for a reconsideration. Resolving the motion, the
AND/OR DEE: MARY MARGARET; trial court issued an Order dated 16 April 1999 and held:

2) CITIBANK CHECK NO. 69003194405296 dated September 29 The Court is of the view that as the foreign currency fund (Exhs. AAA
1997 in the amount of US$7,197.59 payable to GOTIANUY: JOSE to AAA-5) is deposited with the movant China Banking Corporation,
AND/OR DEE: MARY MARGARET; 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
3) CITIBANK CHECK NO. 69003194405414 dated September 29 law. Justice will be better served if the name or names of the
1997 in the amount of US$1,198.94 payable to GOTIANUY: JOSE depositor of said fund shall be disclosed because such a disclosure
AND/OR DEE: MARY MARGARET; is material and important to the issues between the parties in the
case at bar.
4) CITIBANK CHECK NO. 69003194405413 dated September 29
1997 in the amount of US$989.04 payable to GOTIANUY: JOSE Premises considered, the motion for reconsideration is denied partly
AND/OR DEE: MARY MARGARET; 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) not distinguish, we should not make any distinction. (Gonzaga,
deposited with the movant Bank and not to other matters material Statutes and their Construction, p. 75.)[8]
and relevant to the issues in the case at bar.[5]

From the Decision of the Court of Appeals, China Bank elevated the
From this Order, China Bank filed a Petition for Certiorari[6] with the case to this Court based on the following issues:
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 I
the RTC.
THE HONORABLE COURT OF APPEALS HAS INTERPRETED
In justifying its conclusion, the Court of Appeals ratiocinated: THE PROVISION OF SECTION 8 OF R.A. 6426, AS AMENDED,
OTHERWISE KNOWN AS THE FOREIGN CURRENCY DEPOSIT
From the foregoing, it is pristinely clear the law specifically ACT, IN A MANNER CONTRARY TO THE LEGISLATIVE
encompasses only the money or funds in foreign currency deposited PURPOSE, THAT IS, TO PROVIDE ABSOLUTE
in a bank. Thus, the coverage of the law extends only to the foreign CONFIDENTIALITY OF WHATEVER INFORMATION RELATIVE TO
currency deposit in the CBC account where Mary Margaret Dee THE FOREIGN CURRENCY DEPOSIT.
deposited the Citibank checks in question and nothing more.
II
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 PRIVATE RESPONDENT IS NOT THE OWNER OF THE
CBC representatives are directed solely to divulge in whose name or QUESTIONED FOREIGN CURRENCY DEPOSIT. THUS, HE
names is the foreign currency fund (Exhs. AAA to AAA-5) deposited CANNOT INVOKE THE AID OF THE COURT IN COMPELLING
with the movant bank. It precluded inquiry on other materials and THE DISCLOSURE OF SOMEONE ELSES FOREIGN
relevant to the issues in the case at bar. We find that the directive of CURRENCY DEPOSIT ON THE FLIMSY PRETEXT THAT THE
the court below does not contravene the plain language of RA 6426 CHECKS (IN FOREIGN CURRENCY) HE HAD ISSUED MAY HAVE
as amended by P.D. No. 1246. ENDED UP THEREIN.

The contention of petitioner that the [prescription] on absolute III


confidentiality under the law in question covers even the name of the
depositor and is beyond the compulsive process of the courts is PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF SEC. 8,
palpably untenable as the law protects only the deposits itself but not R.A. 6426, IN BEHALF OF THE FOREIGN CURRENCY
the name of the depositor. To uphold the theory of petitioner CBC is DEPOSITOR, OWING TO ITS SOLEMN OBLIGATION TO ITS
reading into the statute something that is not within the manifest CLIENT TO EXERCISE EXTRAORDINARY DILIGENCE IN THE
intention of the legislature as gathered from the statute itself, for to HANDLING OF THE ACCOUNT.[9]
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 As amended by Presidential Decree No. 1246, the law reads:
same principle is the maxim: Ubi lex non distinguit nec nos
distinguere debemos, which simply means that where the law does
SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency System in the Philippines, certain incentives were provided for under
deposits authorized under this Act, as amended by Presidential the two Systems such as confidentiality of deposits subject to certain
Decree No. 1035, as well as foreign currency deposits authorized exceptions and tax exemptions on the interest income of depositors
under Presidential Decree No. 1034, are hereby declared as and who are nonresidents and are not engaged in trade or business in
considered of an absolutely confidential nature and, except upon the Philippines;
the written permission of the depositor, in no instance shall such
foreign currency deposits be examined, inquired or looked into by Whereas, making absolute the protective cloak of confidentiality over
any person, government official, bureau or office whether judicial or such foreign currency deposits, exempting such deposits from tax,
administrative or legislative or any other entity whether public or and guaranteeing the vested rights of depositors would better
private: Provided, however, that said foreign currency deposits shall encourage the inflow of foreign currency deposits into the banking
be exempt from attachment, garnishment, or any other order or institutions authorized to accept such deposits in the Philippines
process of any court, legislative body, government agency or any thereby placing such institutions more in a position to properly
administrative body whatsoever. (As amended by PD No. 1035, and channel the same to loans and investments in the Philippines, thus
further amended by PD No. 1246, prom. Nov. 21, 1977) (Emphasis directly contributing to the economic development of the country.
supplied.)

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


Under the above provision, the law provides that all foreign currency the confidentiality rule, Presidential Decree No. 1034,[11] defines
deposits authorized under Republic Act No. 6426, as amended by deposits to mean funds in foreign currencies which are accepted and
Sec. 8, Presidential Decree No. 1246, Presidential Decree No. 1035, held by an offshore banking unit in the regular course of business,
as well as foreign currency deposits authorized under Presidential with the obligation to return an equivalent amount to the owner
Decree No. 1034 are considered absolutely confidential in nature thereof, with or without interest.[12]
and may not be inquired into. There is only one exception to the
secrecy of foreign currency deposits, that is, disclosure is It is in this light that the court in the case of Salvacion v. Central
allowed upon the written permission of the depositor. Bank of the Philippines,[13] allowed the inquiry of the foreign currency
deposit in question mainly due to the peculiar circumstances of the
This much was pronounced in the case of Intengan v. Court of case such that a strict interpretation of the letter of the law would
Appeals,[10] where it was held that the only exception to the secrecy result to rank injustice. Therein, Greg Bartelliy Northcott, an
of foreign currency deposits is in the case of a written permission of American tourist, was charged with criminal cases for serious illegal
the depositor. detention and rape committed against then 12 year-old
Karen Salvacion. A separate civil case for damages with preliminary
It must be remembered that under the whereas clause of attachment was filed against Greg Bartelli. The trial court issued an
Presidential Decree No. 1246 which amended Sec. 8 of Republic Act Order granting the Salvacionsapplication for the issuance of a writ of
No. 6426, the Foreign Currency Deposit System including the preliminary attachment. A notice of garnishment was then served on
Offshore Banking System under Presidential Decree 1034 were China Bank where Bartelli held a dollar account. China Bank
intended to draw deposits from foreign lenders and investors, and we refused, invoking the secrecy of bank deposits. The Supreme Court
quote: 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
Whereas, in order to assure the development and speedy growth of exempting foreign currency deposits from attachment, garnishment,
the Foreign Currency Deposit System and the Offshore Banking or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever would be As the owner of the funds unlawfully taken and which
used as a device by an accused x x x for wrongdoing, and in so are undisputably now deposited with China Bank, Jose Gotianuy has
doing, acquitting the guilty at the expense of the innocent.[14] the right to inquire into the said deposits.

With the foregoing, we are now tasked to determine the single A depositor, in cases of bank deposits, is one who pays money into
material issue of whether or not petitioner China Bank is correct in its the bank in the usual course of business, to be placed to his credit
submission that the Citibank dollar checks with both Jose Gotianuy and subject to his check or the beneficiary of the funds held by the
and/or Mary Margaret Dee as payees, deposited with China Bank, bank as trustee.[18]
may not be looked into under the law on secrecy of foreign currency
deposits. As a corollary issue, sought to be resolved is whether On this score, the observations of the Court of Appeals are worth
Jose Gotianuymay be considered a depositor who is entitled to seek reiterating:
an inquiry over the said deposits.
Furthermore, it is indubitable that the Citibank checks were drawn
The Court of Appeals, in allowing the inquiry, considered Jose against the foreign currency account with Citibank, NA. The monies
Gotianuy, a co-depositor of Mary Margaret Dee. It reasoned that subject of said checks originally came from the late Jose Gotianuy,
since Jose Gotianuy is the named co-payee of the latter in the the owner of the account. Thus, he also has legal rights and interests
subject checks, which checks were deposited in China Bank, then, in the CBC account where said monies were deposited. More
Jose Gotianuy is likewise a depositor thereof.On that basis, no importantly, the Citibank checks (Exhibits AAA to AAA-5)
written consent from Mary Margaret Dee is necessitated. readily demonstrate (sic) that the late Jose Gotianuy is one of
the payees of said checks. Being a co-payee thereof, then he or
We agree in the conclusion arrived at by the Court of Appeals. his estate can be considered as a co-depositor of said
checks. Ergo, since the late Jose Gotianuy is a co-depositor of the
The following facts are established: (1) Jose Gotianuy and Mary CBC account, then his request for the assailed subpoena is
Margaret Dee are co-payees of various Citibank checks;[15] (2) Mary tantamount to an express permission of a depositor for the
Margaret Dee withdrew these checks from Citibank;[16] (3) Mary disclosure of the name of the account holder. The April 16, 1999
Margaret Dee admitted in her Answer to the Request for Admissions Order perforce must be sustained.[19] (Emphasis supplied.)
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 Gotianuyand that the funds belonged exclusively to the One more point. It must be remembered that in the complaint
latter; (4) these checks were endorsed by Mary Margaret Dee at the of Jose Gotianuy, he alleged that his US dollar deposits with Citibank
dorsal portion; and (5) Jose Gotianuy discovered that these checks were illegally taken from him. On the other hand, China Bank
were deposited with China Bank as shown by the stamp of China employee Cristuta Labios testified that Mary Margaret Dee came to
Bank at the dorsal side of the checks. China Bank and deposited the money of Jose Gotianuy in Citibank
US dollar checks to the dollar account of her sister
Thus, with this, there is no issue as to the source of the funds. Mary Adrienne Chu.[20] This fortifies our conclusion that an inquiry into the
Margaret Dee declared the source to be Jose Gotianuy. There is said deposit at China Bank is justified. At the very least,
likewise no dispute that these funds in the form of Citibank US dollar Jose Gotianuy as the owner of these funds is entitled to a hearing on
Checks are now deposited with China Bank. 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, Cebu City dated 16 April
1999 is AFFIRMED and this case is ordered REMANDED to the trial
court for continuation of hearing with utmost dispatch consistent with
the above disquisition. No costs.

SO ORDERED.

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