REPUBLIC VS. CABRINI, GREEN, & ROSS, INC. G.R. NO. 154522

Republic vs. Cabrini, Green, & Ross, Inc.

G.R. NO. 154522

DATE: May 05, 2006

PONENTE: Corona, J.

FACTS: In the exercise of its power under Section 10 of RA 9160, the Anti-Money Laundering Council (AMLC) issued freeze orders against various bank accounts of respondents. The frozen bank accounts were previously found prima facie to be related to the unlawful activities of respondents.

Under RA 9160, a freeze order issued by the AMLC is effective for a period not exceeding 15 days unless extended “upon order of the court.” Accordingly, before the lapse of the period of effectivity of its freeze orders, the AMLC2 filed with the Court of Appeals (CA) various petitions for extension of effectivity of its freeze orders.

The AMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to issue a TRO or writ of injunction against any freeze order issued by the AMLC carried with it the power to extend the effectivity of a freeze order. In other words, the AMLC interpreted the phrase “upon order of the court” to refer to the CA.

However, the CA disagreed with the AMLC and dismissed the petitions.

ISSUE/S: Which court has jurisdiction to extend the effectivity of a freeze order?

RULING: Court of Appeals.

During the pendency of these petitions, or on March 3, 2003, Congress enacted RA 9194 (An Act Amending Republic Act No. 9160, Otherwise Known as the “Anti-Money Laundering Act of 2001”).6 It amended Section 10 of RA 9160

as follows:

SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows:

SEC. 10. Freezing of Monetary Instrument or Property.—The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Sec. 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.”(emphasis supplied)

Section 12 of RA 9194 further provides:

SEC. 12. Transitory Provision.—Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after theeffectivity of this Act, unless extended by the Court of Appeals.

(emphasis supplied)

The Office of the Solicitor General (OSG) filed a “Very Urgent Motion to Remand Cases to the Honorable

Court of Appeals. The OSG prayed for the remand of these cases to the CA pursuant to RA 9194.

The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over the extension of freeze orders. As the law now stands, it is solely the CA which has the authority to issue a freeze order as well as to extend its effectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued by the AMLC vis-à- vis accounts and deposits related to money-laundering activities.

PDIC VS BIR G.R. NO. 172892

PHILIPPINE DEPOSIT INSURANCE CORPORATION vs. BUREAU OF INTERNAL REVENUE

G.R. NO. 172892

DATE: June 13, 2013

PONENTE: LEONARDO-DE CASTRO, J.

FACTS: The Monetary Board of the BSP prohibited the Rural Bank of Tuba (Benguet), Inc. (RBTI) from doing business in the Philippines, placed it under receivership and designated the PDIC as receiver. PDIC conducted an evaluation of RBTI’s financial condition and determined that RBTI remained insolvent. Monetary Board issued Resolution directing PDIC to proceed with the liquidation of RBTI.

ISSUE/S: Whether a bank placed under liquidation has to secure a tax clearance from the BIR before the project of distribution of the assets of the bank can be approved by the liquidation court.

RULING: NO. Section 52(C) of the Tax Code of 1997 is not applicable to banks ordered placed under liquidation by the Monetary Board, and a tax clearance is not a prerequisite to the approval of the project of distribution of the assets of a bank under liquidation by the PDIC.

Thus, this Court has held that the RTC, acting as liquidation court under Section 30 of the New Central Bank Act, commits grave abuse of discretion in ordering the PDIC, as liquidator of a bank ordered closed by the Monetary Board, to first secure a tax clearance from the appropriate BIR Regional Office, and holding in abeyance the approval of the project of distribution of the assets of the closed bank by virtue thereof. Three reasons have been given.

First, Section 52(C) of the Tax Code of 1997 pertains only to a regulation of the relationship between the SEC and the BIR with respect to corporations contemplating dissolution or reorganization. On the other hand, banks under liquidation by the PDIC as ordered by the Monetary Board constitute a special case governed by the special rules and procedures provided under Section 30 of the New Central Bank Act, which does not require that a tax clearance be secured from the BIR.

Second, only a final tax return is required to satisfy the interest of the BIR in the liquidation of a closed bank, which is the determination of the tax liabilities of a bank under liquidation by the PDIC. In view of the timeline of the liquidation proceedings under Section 30 of the New Central Bank Act, it is unreasonable for the liquidation court to require that a tax clearance be first secured as a condition for the approval of project of distribution of a bank under liquidation.

To our mind, what the BIR should have requested from the RTC, and what was within the discretion of the RTC to grant, is not an order for PDIC, as liquidator of RBBI, to secure a tax clearance; but, rather, for it to submit the final return of RBBI. The first paragraph of Section 30(C) of the Tax Code of 1997, read in conjunction with Section 54 of the same Code, clearly imposes upon PDIC, as the receiver and liquidator of RBBI, the duty to file such a return.

The filing by PDIC of a final tax return, on behalf of RBBI, should already address the supposed concern of the BIR and would already enable the latter to determine if RBBI still had outstanding tax liabilities.

The unreasonableness and impossibility of requiring a tax clearance before the approval by the RTC of the Project of Distribution of the assets of the RBBI becomes apparent when the timeline of the proceedings is considered.

The BIR can only issue a certificate of tax clearance when the taxpayer had completely paid off his tax liabilities. The certificate of tax clearance attests that the taxpayer no longer has any outstanding tax obligations to the Government.

Should the BIR find that RBBI still had outstanding tax liabilities, PDIC will not be able to pay the same because the Project of Distribution of the assets of RBBI remains unapproved by the RTC; and, if RBBI still had outstanding tax liabilities, the BIR will not issue a tax clearance; but, without the tax clearance, the Project of Distribution of assets, which allocates the payment for the tax liabilities, will not be approved by the RTC. It will be a chicken-and-egg dilemma.

Third, it is not for this Court to fill in any gap, whether perceived or evident, in current statutes and regulations as to the relations among the BIR, as tax collector of the National Government; the BSP, as regulator of the banks; and the PDIC, as the receiver and liquidator of banks ordered closed by the BSP. It is up to the legislature to address the matter through appropriate legislation, and to the executive to provide the regulations for its implementation.

There is another reason. The position of the BIR, insisting on prior compliance with the tax clearance requirement as a condition for the approval of the project of distribution of the assets of a bank under liquidation, is contrary to both the letter and intent of the law on liquidation of banks by the PDIC.

The law expressly provides that debts and liabilities of the bank under liquidation are to be paid in accordance with the rules on concurrence and preference of credit under the Civil Code. Duties, taxes, and fees due the Government enjoy priority only when they are with reference to a specific movable property, under Article 2241(1) of the Civil Code, or immovable property, under Article 2242(1) of the same Code. However, with reference to the other real and personal property of the debtor, sometimes referred to as "free property," the taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242(1) of the Civil Code, such as the corporate income tax, will come only in ninth place in the order of preference. On the other hand, if the BIR’s contention that a tax clearance be secured first before the project of distribution of the assets of a bank under liquidation may be approved, then the tax liabilities will be given absolute preference in all instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code. In order to secure a tax clearance which will serve as proof that the taxpayer had completely paid off his tax liabilities, PDIC will be compelled to settle and pay first all tax liabilities and deficiencies of the bank, regardless of the order of preference under the pertinent provisions of the Civil Code. Following the BIR’s stance, therefore, only then may the project of distribution of the bank’s assets be approved and the other debts and claims thereafter settled, even though under Article 2244 of the Civil Code such debts and claims enjoy preference over taxes and assessments due the National Government. The BIR effectively wants this Court to ignore Section 30 of the New Central Bank Act and disregard Article 2244 of the Civil Code. However, as a court of law, this Court has the solemn duty to apply the law. It cannot and will not give its imprimatur to a violation of the laws.

MARQUEZ vs DESIERTO

MARQUEZ vs DESIERTO

G.R. NO. 135882

June 27, 2001

Pardo, J.

FACTS: Marquez, branch manager of Union Bank Julia Vargas, received an Order from Ombudsman to produce several bank documents for purposes of inspection in camera. The Ombudsman wanted to conduct such in camera inspection on the accounts based on a trail of manager’s checks by a certain Trivinio who purchased 51 managers checks for a total amount of P272M. Marquez agreed to the inspection.

Marquez wrote to the Ombudsman saying that the accounts in question cannot readily be identified and asked for time to respond to the order. The Ombudsman replied that the Bank should have preserved records despite the accounts being dormant.

Ombudsman issued order to direct Marquez to produce the bank documents due to the unjustified delay by the Bank since the in camera inspection had already been extended twice.

Marquez filed for declaratory relief to clear the rights of petitioners under the bank secrecy law

ISSUE/S: Whether the in camera inspection orders are allowed as an exception to the bank secrecy law? NO

RULING:  The in camera inspection is not allowed. There being no pending case before a court of competent jurisdiction.

An exception to the bank secrecy law is when the money deposited is the subject matter of a litigation.

Therefore, it may be allowed on the ground of a pending case when:

o     The case is pending in court of competent jurisdiction

o     The account must be clearly identified

o     Inspection is limited to the subject matter of the pending case

o     The Bank personnel and account holder must be notified to be present during the inspection

o     Such inspection may cover only the account identified in the pending case

The order for in camera inspection is based on a pending investigation of the Ombudsman for violations of RA 3019, Sec 3(e)(g). Clearly, there is no pending litigation yet before a court of competent authority. It is only an investigation by the Ombudsman.  

JOSE GO VS. BANGKO SENTRAL NG PILIPINAS G.R. No. 178429

JOSE GO VS. BANGKO SENTRAL NG PILIPINAS

G.R. No. 178429

October 23, 2009

Brion, J.

FACTS:  Jose Go, the Director and the President and Chief Executive Officer of the Orient Commercial Banking Corporation (Orient Bank) was charged before the RTC for violation of Section 83 of RA 337 or the General Banking Act. Go allegedly borrowed the deposits/funds of the Orient Bank and/or acting as guarantor, indorser of obligor for loans to other persons. He then used the borrowed deposits/funds in facilitating and granting and/or of credit lines/loans to the New Zealand Accounts loans in the total amount of PHP 2,754,905,857. He completed the alleged transaction without the written approval of the majority of the Board of Directors of said Orient Bank.

Go then filed a motion to quash the Information. He averred that the use of the word "and/or" meant that he was charged for being either a borrower or a guarantor, or for being both. Thus the charge do not constitute an offense. That the Section 83 of RA 337 penalized only directors and officers xxx who acted either as borrower or as guarantor, but not as both. Also that the Information did not constitute an offense since the information failed to state the amount he purportedly borrowed. According to Go, the second paragraph of Section 83, serves as an exception to the first paragraph which allows the banks to extend credit accommodations to their directors, officers, and stockholders, provided it is "limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank."

ISSUE/S:

1)     Whether or not the allegation that Go acted as borrower or gurantor rendered the information defective? NO

2)     Whether or not the failure to state that Go borrowed beyond the limit of his outstanding deposits and book value of the paid-in capital contribution in the bank rendered the Information defective? NO

RULING:

The following elements of violation of Section 83 of RA 337 which must be present to constitute a violation of its first paragraph:

1.     the offender is a director or officer of any banking institution;

2.     the offender, either directly or indirectly, for himself or as representative or agent of another, performs any of the following acts:

a. he borrows any of the deposits or funds of such bank; or

b. he becomes a guarantor, indorser, or surety for loans from such bank to others, or

c. he becomes in any manner an obligor for money borrowed from bank or loaned by it;

3. the offender has performed any of such acts without the written approval of the majority of the directors of the bank, excluding the offender, as the director concerned.

The language of the law is broad enough to encompass either act of borrowing or guaranteeing, or both. Banks were not created for the benefit of their directors and officers; they cannot use the assets of the bank for their own benefit, except as may be permitted by law. Congress has thus deemed it essential to impose restrictions on borrowings by bank directors and officers in order to protect the public, especially the depositors. Hence, when the law prohibits directors and officers of banking institutions from becoming in any manner an obligor of the bank (unless with the approval of the board), the terms of the prohibition shall be the standards to be applied to directors’transactions such as those involved in the present case.

Credit accommodation limit is not an exception nor is it an element of the offense as contrary to Go’s claims.

Section 83 of RA 337 actually imposes three restrictions: approval, reportorial, and ceiling requirements.

The approval requirement (found in the first sentence of the first paragraph of the law) refers to the written approval of the majority of the bank’s board of directors required before bank directors and officers can in any manner be an obligor for money borrowed from or loaned by the bank. Failure to secure the approval renders the bank director or officer concerned liable for prosecution and, upon conviction, subjects him to the penalty provided in the third sentence of first paragraph of Section 83.

The reportorial requirement, on the other hand, mandates that any such approval should be entered upon the records of the corporation, and a copy of the entry be transmitted to the appropriate supervising department. The reportorial requirement is addressed to the bank itself, which, upon its failure to do so, subjects it to quo warranto proceedings under Section 87 of RA 337.

The ceiling requirement under the second paragraph of Section 83 regulates the amount of credit accommodations that banks may extend to their directors or officers by limiting these to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank. Again, this is a requirement directed at the bank. In this light, a prosecution for violation of the first paragraph of Section 83, such as the one involved here, does not require an allegation that the loan exceeded the legal limit. Even if the loan involved is below the legal limit, a written approval by the majority of the bank’s directors is still required; otherwise, the bank director or officer who becomes an obligor of the bank is liable. Compliance with the ceiling requirement does not dispense with the approval requirement.

Evidently, the failure to observe the three requirements under Section 83 paves the way for the prosecution of three different offenses, each with its own set of elements. A successful indictment for failing to comply with the approval requirement will not necessitate proof that the other two were likewise not observed.

INTENGAN vs. COURT OF APPEALS G.R. No. 128996

INTENGAN vs. COURT OF APPEALS

G.R. No. 128996, February 15, 2002

PONENTE: DE LEON, JR., J.:.

FACTS: On September 21, 1993, Citibank filed a complaint for violation of section 31 in relation to section 144 of the Corporation Code against two (2) of its officers, Dante L. Santos and Marilou Genuino.

The complaint was attached with the affidavit of Vic Lim, VP of Citibank, who was then instructed by the higher management of the bank to investigate the anomalous/highly irregular activities of the said officers.

As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and Genuino. Some of the documents pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and Rita P. Brawner.

In turn, private respondent Joven Reyes, vice-president/business manager of the Global Consumer Banking Group of Citibank, admits to having authorized Lim to state the names of the clients involved and to attach the pertinent bank records, including those of petitioners’

Petitioners aver that respondents violated RA 1405 (Bank Secrecy Law).

ISSUES: Whether or not Respondents are liable for violation of Secrecy of Bank Deposits Act, RA 1405.

RULING: NO. The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act No. 1405, but Republic Act (R.A.) No. 6426, known as the “Foreign Currency Deposit Act of the Philippines,”section 8 of which provides: Sec. 8. Secrecy of Foreign Currency Deposits.—All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever.

Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is allowed only upon the written permission of the depositor. .

A case for violation of Republic Act No. 6426 should have been the proper case brought against private respondents. Private respondents Lim and Reyes admitted that they had disclosed details of petitioners’dollar deposits without the letter’s written permission. It does not matter if that such disclosure was necessary to establish Citibank’s case against Dante L. Santos and Marilou Genuino. Lim’s act of disclosing details of petitioners’bank records regarding their foreign currency deposits, with the authority of Reyes, would appear to belong to that species of criminal acts punishable by special laws, called malum prohibitum.

FIRST PHILIPPINE INTERNATIONAL BANK and MERCURIO RIVERA vs. CA, CARLOS EJERCITO G.R. No. 115849

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA vs. CA, CARLOS EJERCITO in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO

G.R. No. 115849

January 24, 1996

J. PANGANIBAN

FACTS:  Producer Bank of the Philippines acquired 6 parcels of land at Laguna. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. Demetrio Demetria and Jose O. Janolo wanted to purchase the property and thus initiated negotiations for that purpose.

In August 1987, Demetria and Janolo met with Mercurio Rivera, Manager of the Property Management Department of the Bank to discuss their plan to buy the property. Thereafter, they had a series of letters where parties accepted the offer of Demetria and Janolo. Later in October, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced; and subsequently the proposal of Demetria and Janolo to buy the properties was under study pursuant to the new conservator’s mandate. After which, a series of demands ensued.

ISSUE: WON the conservator may revoke a perfected and enforceable contract. NO.

RULING: Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:

Section 28-A - Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary.

While admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank, it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability." Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment clause of the Constitution.

Section 28-A merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective. Hence, the conservator merely takes the place of a bank's board of directors, so what the board cannot do; the conservator cannot do either. His power is however, not unilateral as he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts.

In the case, it is not disputed that the bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. Moreover, there was absolutely no evidence that the Conservator, at the time the contract was perfected, actually repudiated or overruled said contract of sale. The bank never objected to the sale, what it unilaterally repudiated was—not the contract —but the authority of Rivera to make a binding offer —and which unarguably came months after the perfection of the contract.

The conservator’s authority would be only to bring court actions to assail such contracts —as he has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another or come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank.

EJERCITO V. SANDIGANBAYAN G.R. NO. 157294-95

Ejercito v. Sandiganbayan

G.R. NO. 157294-95

DATE: November 30, 2006

PONENTE: CARPIO-MORALES

FACTS:

The Special Prosecution Panel filed before the Sandiganbayan a Request for Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing the President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her authorized representative to produce documents relating to Trust Account No. 858 and Savings Account of President Estrada. The SB granted the request.

Estrada filed a Motion to Quash the subpoenas claiming that his bank accounts are covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under any of the exceptions stated therein. He further claimed that the specific identification of documents in the questioned subpoenas, including details on dates and amounts, could only have been made possible by an earlier illegal disclosure thereof by the EIB and the Philippine Deposit Insurance Corporation (PDIC) in its capacity as receiver of the then Urban Bank. The disclosure being illegal, petitioner concluded, the prosecution in the case may not be allowed to make use of the information. The SB denied the motion.

ISSUE/S:

1. Is the Trust Account covered by the term “deposit”under the Bank Secrecy Law?

2. Are the Trust and Savings Accounts of Estrada excepted from the protection of the Bank Secrecy Law?

3. Does the fruit of poisonous tree principle apply?

RULING:

1. YES. The contention that trust accounts are not covered by the term “deposits,”as used in R.A. 1405, by the mere fact that they do not entail a creditor-debtor relationship between the trustor and the bank, does not lie. An examination of the law shows that the term “deposits”used therein is to be understood broadly and not limited only to accounts which give rise to a creditor-debtor relationship between the depositor and the bank. If the money deposited under an account may be used by banks for authorized loans to third persons, then such account, regardless of whether it creates a creditor-debtor relationship between the depositor and the bank, falls under the category of accounts which the law precisely seeks to protect for the purpose of boosting the economic development of the country.

Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between Estrada and Urban Bank provides that the trust account covers “deposit, placement or investment of funds”by Urban Bank for and in behalf of Estrada. The money deposited under Trust Account No. 858, was, therefore, intended not merely to remain with the bank but to be invested by it elsewhere. To hold that this type of account is not protected by R.A. 1405 would encourage private hoarding of funds that could otherwise be invested by banks in other ventures, contrary to the policy behind the law.

The phrase “of whatever nature”proscribes any restrictive interpretation of “deposits.”Moreover, it is clear from the immediately quoted provision that, generally, the law applies not only to money which is deposited but also to those which are invested. This further shows that the law was not intended to apply only to “deposits”in the strict sense of the word. Otherwise, there would have been no need to add the phrase “or invested.” Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.

2. YES. The protection afforded by the law is, however, not absolute, there being recognized exceptions thereto, as abovequoted Section 2 provides. In the present case, two exceptions apply, to wit: (1) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2) the money deposited or invested is the subject matter of the litigation.

Estrada contends that since plunder is neither bribery nor dereliction of duty, his accounts are not excepted from the protection of R.A. 1405. He is wrong. Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy expresses the notion that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny. 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 bribery even more pronounced since bribery is essentially included among these criminal acts. Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must also apply to cases of plunder.

The plunder case now pending with the SB necessarily involves an inquiry into the whereabouts of the amount purportedly acquired illegally by former President Joseph Estrada. In light then of this Court’s pronouncement in Union Bank, the subject matter of the litigation cannot be limited to bank accounts under the name of President Estrada alone, but must include those accounts to which the money purportedly acquired illegally or a portion thereof was alleged to have been transferred. Trust Account No. 858 and Savings Account No. 0116-17345-9 in the name of petitioner fall under this description and must thus be part of the subject matter of the litigation.

In sum, exception (1) applies since the plunder case pending against former President Estrada is analogous to bribery or dereliction of duty, while exception (2) applies because the money deposited in petitioner’s bank accounts is said to form part of the subject matter of the same plunder case.

3. NO. The “fruit of the poisonous tree”principle, which states that once the primary source (the “tree”) is shown to have been unlawfully obtained, any secondary or derivative evidence (the “fruit”) derived from it is also inadmissible, does not apply in this case. In the first place, R.A. 1405 does not provide for the application of this rule. R.A. 1405, it bears noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence obtained therefrom inadmissible in evidence. Moreover, there is no basis for applying the same in this case since the primary source for the detailed information regarding petitioner’s bank accounts—the investigation previously conducted by the Ombudsman—was lawful.

CHINA BANKING CORP VS ORTEGA

CHINA BANKING CORP VS ORTEGA

GR L-34964 January 31, 2973

FACTS:

Vicente Acaban won in a civil case for sum of money against B & B Forest Development Corporation. To satisfy the judgment, the Acaban sought the garnishment of the bank deposit of the B & B Forest Development Corporation with the China Banking Corporation (CBC). Accordingly, a notice of garnishment was issued by the Deputy Sheriff of the trial court and served on said bank through its cashier, Tan Kim Liong. Liong was ordered to inform the Court whether or not there is a deposit in the CBC of B & B Forest Development Corporation, and if there is any deposit, to hold the same intact and not allow any withdrawal until further order from the Court. CBC and Liong refuse to comply with a court process garnishing the bank deposit of a judgment debtor by invoking the provisions of Republic Act No. 1405 ( Secrecy of Bank Deposits Act) which allegedly prohibits the disclosure of any information concerning to bank deposits.

ISSUES: Whether or not a banking institution may validly refuse to comply with a court processes garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.

RULING: NO. The lower court did not order an examination of or inquiry into deposit of B & B Forest Development Corporation, as contemplated in the law. It merely required Tan Kim Liong to inform the court whether or not the defendant B & B Forest Development Corporation had a deposit in the China Banking Corporation only for the purposes of the garnishment issued by it, so that the bank would hold the same intact and not allow any withdrawal until further order. It is sufficiently clear that the prohibition against examination of or inquiry into bank deposit under RA 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such a case, and the existence of the deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank.

China Banking Corp. v. Court of Appeals G.R. NO. 140687

China Banking Corp. v. Court of Appeals

G.R. NO. 140687 DATE18 Dec. 2006

PONENTE CHICO-NAZARIO, J.:

FACTS: Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US dollar deposits with Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received these amounts from Citibank N.A. through checks which she allegedly deposited at China Banking Corporation (China Bank). He likewise accused his son-in-law, George Dee, husband of his daughter, Mary Margaret, of transferring his real properties and shares of stock in George Dees name without any consideration. Jose Gotianuy, died during the pendency of the case before the trial court. He was substituted by his daughter, Elizabeth Gotianuy Lo. The latter presented the US Dollar checks withdrawn by Mary Margaret Dee from his US dollar placement with Citibank.

RTC ruling: As the foreign currency fund is deposited with the movant China Banking Corporation, the disclosure only as to the name or in whose name the said fund is deposited is not violative of the law.

China Bank filed a Petition for Certiorari with the Court of Appeals.

ISSUE/S:

Whether or not petitioner China Bank is correct in its submission that the Citibank dollar checks with both Jose Gotianuy and/or Mary Margaret Dee as payees, deposited with China Bank, may not be looked into under the law on secrecy of foreign currency deposits.

RULING: NO.

The law provides that all foreign currency deposits authorized under Republic Act No. 6426, as amended by Sec. 8, Presidential Decree No. 1246, Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034 are considered absolutely confidential in nature and may not be inquired into. There is only one exception to the secrecy of foreign currency deposits, that is, disclosure is allowed upon the written permission of the depositor.

In the case at bar, there is no issue as to the source of the funds. Mary Margaret Dee declared the source to be Jose Gotianuy. There is likewise no dispute that these funds in the form of Citibank US dollar Checks are now deposited with China Bank. As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose Gotianuy has the right to inquire into the said deposits.

CENTRAL BANK OF THE PHILIPPINES vs. THE HONORABLE RAFAEL DE LA CRUZ and the RURAL BANK OF LIBMANAN

CENTRAL BANK OF THE PHILIPPINES vs. THE HONORABLE RAFAEL DE LA CRUZ and the RURAL BANK OF LIBMANAN, INC.,

G.R. No. 59957

DATE November 12, 1990

PONENTE GRIÑO-AQUINO, J.:

FACTS:

The Libmanan Bank started operations in 1965 under and by virtue of Republic Act No. 720, otherwise known as the Rural Banks’ Act. Originally owned and managed by the Albas’ family, Libmanan Bank was later sold to Manuel M. Villar and respondent Alex G. Durante, who commenced banking operations in January 1979.

The Department of Rural Banks and Savings and Loan Associations (DRBSLA) of the Central Bank of the Philippines conducted examinations of the books and affairs of Libmanan Bank and found serious irregularities in its lending and deposit operations, including false entries and false statements in the bank’s records to give it the appearance of solidity and soundness which it did not possess. As a result of its questionable transactions, the bank became insolvent.

The Monetary Board placed Libmanan Bank under statutory receivership. Libmanan Bank was advised to submit to the Monetary Board an acceptable reorganization and rehabilitation program.

As Libmanan Bank failed to submit the required acceptable reorganization and rehabilitation plan, the Monetary Board.

Solicitor General, filed for Liquidation of Libmanan Bank.

Judge issued the questioned order, restraining the respondent Central Bank from “closing the bank and from performing its customary banking business; to restore the control and management of the bank to its Board of Directors; and to desist from liquidating its assets until ordered otherwise by this Court”

ISSUE/S: Can regular courts issue a restraining order against Central Bank in placing a bank under insolvency?

RULING:

It is noteworthy that the actions of the Monetary Board in proceedings on insolvency are explicitly declared by law to be “final and executory.” They may not be set aside, or restrained, or enjoined by the courts, except upon “convincing proof that the action is plainly arbitrary and made in bad faith.”

Respondent Judge acted in plain disregard of the fourth paragraph of Section 29 of the Central Bank Act, when he restrained the petitioners from closing and liquidating the Rural Bank of Libmanan, prevented them from performing their functions, and ordered them to return the management and control of the rural bank to its board of directors (p. 51, Rollo) without receiving convincing proof that the action of the CB was plainly arbitrary and made in bad faith.

By issuing his own standards, instead of the standards set forth in Section 29 of the law, as basis for issuing a restraining order against the CB, respondent Judge committed a grave abuse of discretion tantamount to excess, or lack of jurisdiction.

Respondent Judge acted with grave abuse of discretion in issuing the contested order dated January 15, 1982 enjoining the CB liquidator from closing the rural bank and requiring it to restore the management and control of the bank to its board of directors. It is a basic procedural postulate that a preliminary injunction should never be used to transfer the possession or control of a thing to a party who did not have such possession or control at the inception of the case (Lasala vs. Fernandez, 5 SCRA 79; Emilia vs. Bado, 28 SCRA 183). Its proper function is simply to maintain the status quo at the commencement of the action. The status quo at the time of filing Civil Case No. 1309 was that Libmanan Bank was under the control of the DRBSLA Director, with Consolacion V. Odra, as liquidator appointed by the Central Bank.

Respondent Judge erred in denying the Central Bank’s motion to dismiss the complaint for prohibition and mandamus (Civil Case No. 1309) filed by Libmanan Bank (Annex C, p. 71, Rollo). This Court in the case of Rural Bank of Buhi, Inc. vs. Court of Appeals (162 SCRA 288) and Salud vs. Central Bank of the Phils. (142 SCRA 590), ruled that a bank’s claim that the resolution of the Monetary Board under Section 29 is plainly arbitrary and done in bad faith should be asserted as an affirmative defense or counter-claim in the proceedings for assistance in liquidation. It may be filed as a separate action if no petition for assistance in liquidation has been instituted yet.