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004. GSIS v.

CA
GOVERNMENT SERVICE INSURANCE SYSTEM, PETITIONER, VS. THE HONORABLE 15TH DIVISION OF THE COURT OF APPEALS
AND INDUSTRIAL BANK OF KOREA, TONG YANG MERCHANT BANK, HANAREUM BANKING CORP., LAND BANK OF THE
PHILIPPINES, WESTMONT BANK AND DOMSAT HOLDINGS, INC., RESPONDENTS.
Date: June 8, 2011
Ponente: Perez

The case in a nutshell: A group of banks, including Westmont Bank, agreed to lend $11 million to Domsat
Holdings, Inc. to finance the latter’s lease of a Gorizon Satellite from Intersputnik. To secure its payment of the
loan, Domsat obtained a surety bond from GSIS. When Domsat failed to pay the loan, GSIS refused to comply
with its obligation, reasoning that Domsat did not use the loan proceeds to pay for the rental of the satellite,
and instead transferred the funds to its account with Westmont. The banks filed a complaint for collection of
sum of money and damages against Domsat and GSIS. In the course of the hearing, GSIS requested for the
issuance of a subpoena duces tecum to Westmont’s custodian of records for the ledger covering Domsat’s
account with Westmont. The RTC initially issued the subpoena, but upon the bank’s MR, quashed it. On
appeal, the CA upheld the quashal, declaring that the deposit was covered by R.A. No. 6426 (Foreign Currency
Deposit Act).The SC affirmed. Domsat’s deposit with Westmont Bank cannot be examined and inquired into.
R.A. No. 1405 (Law on Secrecy of Bank Deposits) does not apply, because Domsat’s deposit is a foreign
currency deposit, thus covered by R.A. No. 6426 (Foreign Currency Deposit Act). Under the latter law, only
the consent of the depositor shall serve as the exception for the disclosure of his/her deposit. There was no
such written permission in this case. All GSIS had was the testimony of Westmont’s incumbent president, but
that is not the written consent contemplated by R.A. No. 6426.

Facts:
1) This case stemmed from a Loan Agreement, whereby the Industrial Bank of Korea, Tong Yang
Merchant Bank, First Merchant Banking Corporation, Land Bank of the Philippines, and Westmont
Bank (now United Overseas Bank) agreed to lend US$11 Million to Domsat Holdings, Inc. for the
purpose of financing the latter’s lease and/or purchase of a Gorizon Satellite from the International
Organization of Space Communications (Intersputnik).
2) To secure the payment of the loan from the banks, Domsat obtained a surety bond from GSIS.
3) When Domsat failed to pay the loan, GSIS refused to comply with its obligation, reasoning that
Domsat did not use the loan proceeds to pay for the rental of the satellite.
a. GSIS alleged that Domsat, with Westmont Bank as the conduit, transferred the loan proceeds
from the Industrial Bank of Korea to Westmont’s Citibank New York account, and from there
to Westmont’s Binondo branch.
4) The banks filed a complaint for collection of sum of money and damages in the RTC of Makati against
Domsat and GSIS.
5) In the course of the hearing, GSIS requested for the issuance of a subpoena duces tecum to
Westmont’s custodian of records to produce the ff. documents:
a. Ledger covering the account of Domsat with Westmont, and any and all documents, records,
files, books, deeds, papers, notes, and other data and materials relating to Domsat’s account
or transactions with or through Westmont for the period January 1997 to December 2002;
b. All applications for cashier’s/manager’s checks and bank transfers funded by Domsat’s
account with or through Westmont for the period January 1997 to December 2002, and all
other data and materials covering said applications;
c. Ledger covering the account of Philippine Agila Satellite, Inc. with Westmont, and any and all
documents, records, files, books, deeds, papers, notes, and other data and materials relating
to the account or transactions of Philippine Agila Satellite, Inc. with or through Westmont for
the period January 1997 to December 2002; and
d. All applications for cashier’s/manager’s checks funded by the account of Philippine Agila
Satellite, Inc. with or through Westmont for the period January 1997 to December 2002, and
all other data and materials covering said applications.
6) The RTC issued the subpoena and denied the banks’ motion to quash.
7) The banks filed 2 MRs. The RTC denied the first one, but granted the second one, and quashed the
subpoena.
a. The court invoked the ruling in Intengan v. CA, where it was held that foreign currency
deposits are absolutely confidential and may be examined only when there is a written
permission from the depositor.
8) The RTC denied GSIS’ MR, so it filed a petition for certiorari in the CA.
9) The CA partially granted GSIS’ MR. It upheld the quashal of the subpoena for the production of
Domsat’s ledger, declaring that the deposit was covered by R.A. No. 6426 (Foreign Currency Deposit
Act). But it ordered the RTC to issue subpoena duces tecum ad testificandum directing Westmont’s
custodian of records to bring to court the following documents:
a. All applications for cashier’s/manager’s checks and bank transfers funded by Domsat’s
account with or through Westmont for the period January 1997 to December 2002, and all
other data and materials covering said applications; and
b. Copy of an agreement and/or contract and/or memorandum between Domsat and/or
Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon
satellite.
10) GSIS filed a petition for certiorari in the SC.

Issues:
1) Can Domsat’s deposit with Westmont be examined and inquired into? NO.
a. Which law is applicable, R.A. No. 1405 (Law on Secrecy of Bank Deposits) or R.A. No. 6426
(Foreign Currency Deposit Act)? R.A. No. 6426.

Held: WHEREFORE, the petition for certiorari is DISMISSED. The Decision dated 29 February 2008 and 19
June 2009 Resolution of the Court of Appeals are hereby AFFIRMED.

Ratio:
1) Domsat’s deposit with Westmont Bank cannot be examined and inquired into. R.A. No. 1405 (Law on
Secrecy of Bank Deposits) does not apply, because Domsat’s deposit is a foreign currency deposit,
thus covered by R.A. No. 6426 (Foreign Currency Deposit Act). Under the latter law, only the consent
of the depositor shall serve as the exception for the disclosure of his/her deposit. There was no such
consent in this case.
a. R.A. No. 1405 (Law on Secrecy of Bank Deposits) was enacted in 1955. Sec. 2 thereof, as
amended by P.D. No. 1792 and R.A. No. 7653, now reads:
Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except upon written permission of
the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of
duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.
i. Under this provision, there are 4 exceptions when records of deposits may be
disclosed, namely:
1. upon written permission of the depositor,
2. In cases of impeachment,
3. Upon order of a competent court in the case of bribery or dereliction of duty
of public officials,
4. When the money deposited or invested is the subject matter of the
litigation, or
5. In cases of violation of the Anti-Money Laundering Act (AMLA), the Anti-
Money Laundering Council (AMLC) may inquire into a bank account upon
order of any competent court.
b. R.A. No. 6426 (Foreign Currency Deposit Act) was enacted in 1974. Sec. 8 thereof, as
amended by P.D. No. 1035, now reads:
Section 8. Secrecy of Foreign Currency Deposits. - All foreign currency deposits authorized under this Act, as
amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except
upon the written permission of the depositor, in no instance shall foreign currency deposits be examined,
inquired or looked into by any person, government official, bureau or office whether judicial or administrative or
legislative or any other entity whether public or private; Provided, however, That said foreign currency deposits
shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.
i. Under this provision, the lone exception to the non-disclosure of foreign currency
deposits is disclosure upon the written permission of the depositor.
c. There is no conflict between R.A. No. 1405 (Law on Secrecy of Bank Deposits) and R.A. No.
6426 (Foreign Currency Deposit Act). Both laws support the confidentiality of bank deposits.
The former is a general law, while the latter is a special law. A general law does not nullify a
special law.
i. R.A. No. 1405 covers all bank deposits in the Philippines, and no distinction was
made between domestic and foreign deposits. Thus, it is considered a law of general
application.
ii. R.A. No. 6426 was intended to encourage deposits from foreign lenders and
investors. Thus, it is a special law, designed especially for foreign currency deposits
in the Philippines.
d. R.A. No. 6426 (Foreign Currency Deposit Act) applies in this case.
i. For foreign currency deposits, such as U.S. dollar deposits, the applicable law is R.A.
No. 6426. (Intengan v. CA; China Banking Corporation v. CA)
e. Applying Sec. 8 of R.A. No. 6426, without written permission from Domsat, Westmont Bank
cannot be legally compelled to disclose Domsat’s bank deposits.
i. Otherwise, it might expose itself to criminal liability under Sec. 10 of the same act,
which provides:
Section 10. Penal provisions. - Any willful violation of this Act or any regulation duly promulgated by
the Monetary Board pursuant hereto shall subject the offender upon conviction to an imprisonment
of not less than one year nor more than five years or a fine of not less than five thousand pesos nor
more than twenty-five thousand pesos, or both such fine and imprisonment at the discretion of the
court.
ii. There was no such written permission in this case. All GSIS had was the testimony of
Westmont’s incumbent president, but that is not the written consent contemplated
by Republic Act No. 6426.