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EN BANC

[G.R. No. L-60033. July 18, 1985.] TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS, petitioners, vs. THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. LOTA and CLEMENT DAVID, respondents.

petitioners.

Lorenzo Taada, Teofisto Guingona and Feliciano C. Tumale for Vicente V. Asuncion Jr. for private respondent.
DECISION

AQUINO, J :
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Respondent Clement David filed a motion for the reconsideration of this Court's decision dated April 4, 1984, 128 SCRA 577. He contends that this Court failed to consider that the petitioners entered in the records and books of the Nation Savings and Loan Association only P305,821.92 out of his deposits in the amounts of P1,145,546.20, P15,531.94 and $75,000 and that they admitted that they did not deliver the difference when they assumed in their personal capacities the obligation to pay him. He argues that the petitioners committed estafa through misappropriation.
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On the other hand, the petitioners contend that the decision had already become final because the Solicitor General did not file any motion for reconsideration; that David cannot adopt a theory which is inconsistent with his original theory; that his claim is clearly civil, not criminal; that his claim has been novated, and that prohibition is proper to stop a void proceeding, to prevent the unlawful and oppressive exercise of lawful authority and to provide a just and orderly administration of justice.

The petitioners filed this prohibition action because their obligation is allegedly civil in character and because of the adverse publicity supposedly instigated by David. The factual background may be restated as follows: 1.Clement David and his sister Denise Kuhne during the period from March 20, 1979 to March, 1981 made placements with the Nation Savings and Loan Association, Inc. in the total sum of P1,145,546.20 as evidenced by seven bankers acceptances and five certificates of time deposits. He and his sister Denise also had savings deposits in the Nation Savings in the sum of P13,531.94 as shown in Passbooks Nos. 6-632 and 29-740. They also invested in Nation Savings US$75,000 in 1980 as evidenced by receipts, of which $50,000 was deposited in the account of Teofisto Guingona, Jr. with the Security Bank and Trust Company. Aggregate investments of David and Kuhne in Nation Savings: P1,159,078.14 in local currency and 75,000 in U.S. dollars. Nation Savings allegedly paid David from 1979 to the early part of 1981 interests of P240,000 a year (p. 193, Rollo).

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At the time the deposits were made, Antonio I. Martin was the president of Nation Savings, Teresita G. Santos was its general manager, and Guingona was a director. 2.On March 21, 1981, Nation Savings was placed under receivership by the Central Bank because of serious fraud and irregularities committed by its key officers (Annex 12). 3.On June 17, 1981, Guingona and Martin executed a promissory note acknowledging a debt of P1,336,614.02 and $75,000 to be paid in installments within 180 days from said date with interest at 16% per annum from July 1, 1981 until fully paid. 4.The promissory note was novated by another note, antedated June 17, 1981, whereby Guingona acknowledged one-half of the obligation as his debt or the sums of P668,307.01 and $37,500 and secured the same by second mortgages on his Quezon City properties (Annex D). Guingona paid P200,000 on that note. 5.Martin assumed the other half of the total debt. He secured it with the pledge of a ring valued according to him at P560,000 but appraised by a jewel appraiser

at P280,000. Martin is also indebted to David in the sum of P60,000 which David paid to Monte de Piedad to redeem the ring. 6.On July 22, 1981, David received a report from the Central Bank that only P305,821.92 of the placements made by him and his sister were entered in the NSLA records (Annex 4, p. 218, Rollo). The director of the CB Department of Rural Banks and Savings and Loan Associations in a report dated June 23, 1981 recommended that the irregularities be brought to the attention of the CB

consultant on criminal cases for appropriate investigation of Nation Savings' officials (p. 240, Rollo).

7.In view of the promissory note and the mortgages, David, on July 22, 1981, executed an affidavit wherein he bound himself to desist from any prosecution of Guingona without prejudice to the balance of his claim against Nation Savings (Annex M, p. 46, Rollo). 8.On November 19, 1981, Guingona filed against David Civil Case No. Q-33865 in the Quezon City Court of First Instance. He prayed for damages of P785,000 against David for his failure to accept payment of a cashier's check for P300,000 (in addition to the P200,000) and to release one of the mortgaged properties (Annex K, p. 37, Rollo). 9.On December 22, 1981, David filed with the City Fiscal's Office, Manila I.S. No. 81-31938, a complaint for estafa and violation of CB Circular No. 364 and related regulations. He claimed that the difference between his placements of P1,159,078.14 and $75,000, on one hand, and the sum of P305,821.92, the amount entered in Nation Savings' books, on the other hand, constitutes the defraudation against him.
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10.He filed the complaint against Guingona, as board chairman, director and principal stockholder of Nation Savings; Martin, as vice-president, director and shareholder, and Santos, as general manager. David dealt directly with Guingona, Martin and Santos in his transactions with Nation Savings. The three filed a counter-charge of perjury against David and his lawyers (p. 59, Rollo). 11.On January 20, 1982, David sought to foreclose extrajudicially the two mortgages (p. 58, Rollo). The foreclosure was restrained by the Quezon City Court of First Instance. 12.On March 15, 1982, the Solicitor General, in behalf of the Central Bank, filed a petition in the Court of First Instance of Manila for assistance in the liquidation of Nation Savings as an insolvent firm (Spec. Proc. No. 82-7552, p. 111, Rollo). The

receivership was challenged by Nation Savings stockholders in Special Proceedings No. 82-1655 (p. 125, Rollo). The Solicitor General answered that petition by alleging that Nation Savings was plagued with irregularities (p. 225, Rollo). With the foregoing background, the prohibition petition should be dismissed. The petitioners have no cause of action for prohibition because the City Fiscal has jurisdiction to conduct the preliminary investigation. It has not been finished. The filing of this petition is premature. The case does not fall within any of the exceptions when prohibition lies to stop the preliminary investigation (Hernandez vs. Albano, 125 Phil. 513). "As a general rule, an injunction will not be granted to restrain a criminal prosecution" (People vs. Mencias, 124 Phil. 1436, 1441). With more reason will injunction not lie when the case is still at the preliminary investigation stage. This Court should not usurp the primary function of the City Fiscal to conduct the preliminary investigation of the estafa charge and of the petitioners' countercharge for perjury, which was consolidated with the estafa charge (p. 59, Rollo). The City Fiscal's office should be allowed to finish its investigation and make its factual findings. This Court should not conduct the preliminary investigation. It is not a trier of facts. * The instant case is primarily a litigation between David and the petitioners. The fact that the Solicitor General, as counsel of the public respondents, did not file a motion for reconsideration does not estop David from continuing with the prosecution of the petitioners. In the present posture of the case, the City Fiscal occupies the analogous position of judge. He has to maintain an attitude of neutrality, not that of partiality. In view of the foregoing considerations, the decision is reconsidered, the petition is dismissed and the City Fiscal of Manila is directed to finish the preliminary investigation. No costs.
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SO ORDERED. Escolin, Gutierrez, Jr., De la Fuente and Cuevas, JJ., concur. Fernando, C.J., took no part. Abad Santos, J., I vote to deny the motion for reconsideration.

Plana, J., took no part.

Separate Opinions
CONCEPCION, JR., J., Separate Vote and Statement: On December 23, 1981, private respondent Clement David, an Australian citizen, filed I.S. No. 81-31938 in the Office of the City Fiscal of Manila charging petitioners and one, Robert Marshall, together with eight others who were directors of the Nation Savings and Loan Association, with estafa and violation of Central Bank Circular No. 364 and related Central Bank circulars and regulations on foreign exchange transactions. Briefly, David alleges that he delivered to petitioners P1,145,546.20, P15,531.94, and U.S. $75,000 to be deposited as time deposits or savings account with Nation Savings and Loan Association. Of these amounts only P305,821.92 were entered in the records and books of the said Association. At the start of the investigation, petitioners moved to dismiss the case "for lack of jurisdiction because the claims alleged in the charge compromise a purely civil obligation which has been novated," which motion was promptly denied. The first witness of private respondent David was the Deputy Receiver of the Central Bank, Mrs. Yu Donato. After her testimony, petitioners again moved to dismiss the case on the same ground. This was also denied. Hence this petition. The issue before Us is: Can We or should We stop the City Fiscal from completing his preliminary investigation on the ground that the charges are civil in nature? I hold We cannot and We should not. In the complaint before the City Fiscal's Office, there are some other respondents aside from petitioners. In addition to estafa, there are charges of violation of Central Bank circulars. To determine who are liable, if any, and for what charges requires that the presentation of evidence be completed.
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The procedure laid down by law is for the City Fiscal to complete his investigation and thereafter to make a resolution.

Whatever be the resolution is subject to review by the Ministry of Justice. In the case before Us, prohibition does not lie to stop the preliminary investigation being conducted by the City Fiscal. To hold otherwise, would be to usurp the duties and functions of the City Fiscal and the power to review the resolution of the City Fiscal by the Ministry of Justice. The Solicitor General is only a nominal party at most. The People of the Philippines is not a party to the entire proceedings, and as provided for by law the actuations of the City Fiscal have been defended by respondent David. RELOVA, J., concurring: I vote to grant the motion for reconsideration and to dismiss the petition for prohibition. To justify the issuance of the writ the following requisites are necessary, to wit: (1) it must be directed against the tribunal, corporation, board, or person exercising functions judicial or ministerial; (2) the tribunal, corporation, board or person has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion; and, (3) there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of the law. In the case at bar, it cannot be said that respondent City Fiscal did act without or in excess of his jurisdiction, or with grave abuse of discretion. On the contrary, he has jurisdiction over the case and should have been allowed to terminate the preliminary investigation and to render his resolution thereon. Thereafter, the aggrieved party may appeal to the Minister of Justice.

The contention of petitioner that the resolution of the Court granting the petition for prohibition has become final because the Solicitor General, representing the City Fiscal, did not file a motion for reconsideration, is without merit. The rule is clear that when a petition for prohibition is filed, the petitioner shall join as parties defendant the person or persons interested in sustaining the proceedings in the court; and it should be the duty of such person or persons to appear and defend, both in his or their own behalf and in behalf of the court or judge affected by the proceedings in the court. It must be for this reason that the Solicitor General did not file a motion for reconsideration on the resolution of this Court granting the petition because it was incumbent upon the private respondent to appear and defend the act of the respondent City Fiscal.
Alampay, J., I share the same view expressed by Justice Relova in this case.

Melencio-Herrera, J., concurring:

I concur with this Resolution and with the Concurring Opinion of Justice Relova.
TEEHANKEE, J., dissenting: I concur with the extended dissenting opinion of Mr. Justice Felix V. Makasiar, whose original ponencia in the Court's (Second Division's) original decision of April 4, 1984 1 (with the concurrence of Messrs. Justices Concepcion, Jr., Guerrero, Abad Santos, de Castro and Escolin, 2 with Mr. Justice Aquino taking no part) would now be overturned by the Resolution at bar. The original decision of April 4, 1984 granted the petition for prohibition and injunction and made permanent the temporary restraining order issued on March 31, 1982 ordering the respondents, their officers, agents, representatives and/or person or persons acting upon their (respondents') orders or in their place or stead to refrain from proceeding with the preliminary investigation in Case No. 81-31938 of the Office of the City Fiscal of Manila. Said investigation was being conducted as a result of charges for alleged estafa and violation of Central Bank Circular No. 364 and related regulations regarding foreign exchange transactions filed by private respondent Clement David, an Australian national. The Resolution at bar would set aside the decision on the ground of prematurity of the filing of the petition and directs the respondent city fiscal "to finish the preliminary investigation." Stripped down to essentials, I vote to deny the motion for reconsideration for the following reasons: 1.The original decision of April 4, 1984 became final and executory upon the expiration on April 21, 1984 of the 15-day reglementary period from receipt thereof by the Solicitor General on April 6, 1984 without his having filed a motion for reconsideration, and entry of judgment should therefore have been made on April 23, 1984 (April 22nd being a Sunday). Private respondent Clement David and his sister Denise Kuhne who is supposed to be co-owner of the money placements but has not even come to the Philippines nor filed any complaint, have no legal personality nor standing in a criminal case and cannot adopt a stand inconsistent with or contrary to that of the Solicitor General who has supervision and control over all criminal cases. David's filing of a separate motion for reconsideration did not toll the period for finality of the original judgment nor prevent its having become final and executory on April 23, 1984 as expressly

admitted by the Solicitor General in his manifestation dated August 23, 1984 and filed on August 28, 1984. 3 (Cabral vs. Puno, 70 SCRA 606.) 2.The record and the Resolution at bar itself as well as the original decision of April 4, 1984 of Mr. Justice Makasiar and his present dissenting opinion show beyond peradventure that any obligation or liability incurred by petitioners as to David's and his sister's funds is purely civil in character. Paragraphs 3 to 5 of the Resolution show the respective civil obligations of the petitioners as per their promissory notes as subsequently novated, with mortgages and collaterals placed by them. David had been executed an affidavit of desistance on his own behalf and that of his sister, and therefore they have no standing or personality whatever to file the criminal charge in the fiscal's office. Petitioners' good faith and lack of criminal intent are self-evident in the aforecited pronouncements and acts. 3.It cannot be overemphasized that the issues in this case were joined between petitioners and public and private respondents, and were resolved in the original decision of April 4, 1984 on the question of whether there existed any criminal liability on the part of petitioners that would warrant the continuation of the fiscal's preliminary investigation. This issue of lack of criminal liability was fully discussed by all parties at the hearing and in their extensive memoranda. The Solicitor General accepted the finality on April 23, 1984 of the Court's negative verdict of April 4, 1984. The city fiscal's office remains permanently enjoined by this Court's final judgment, and such finality which is now res judicata cannot be set aside under the guise of acting on David's motion for reconsideration which should be regarded as a mere scrap of paper because of his lack of legal personality and standing. Any continuation of the fiscal's preliminary investigation has been rendered moot and academic by this Court's judgment of lack of any criminal liability which became final and executory on April 23, 1984 with the acceptance thereof by public respondents headed by the Solicitor General. If "the instant case is primarily a litigation between David and the petitioners", as stated in the Resolution (at page 6), such litigation is purely civil in nature and has to be pursued and settled in the various pending civil cases of the parties as a private matter between them. 4.The original decision correctly applied here the saving clause to the general rule against enjoining or aborting criminal prosecution, viz, that the extraordinary and equitable writ of injunction may be resorted to and issued "for the orderly administration of justice, to prevent the use of the strong arm of the law in an oppressive and vindictive manner, to avoid multiplicity of actions and to afford adequate protection to constitutional rights-" The injunction proceedings here

which have brought out the pertinent facts, have served the purpose of a continuation of the preliminary investigation, "to secure the innocent against hasty, malicious and oppressive prosecution, and to protect him from an open and public accusation of crime, from the trouble, expense and anxiety of a public trial, and also to protect the state from useless and expensive trials. (Trocio v. Manta, 118 SCRA 241; citing Hashim v. Boncan, 71 Phil. 216)." 4 With all due deference, nothing would be gained nor achieved by still directing the fiscal "to finish the preliminary investigation," when the issue of criminal liability or not has been submitted to and resolved by this Court. In no way is the question of jurisdiction of the city fiscal to conduct the preliminary investigation derogated or impaired, as is the thrust of the Resolution and Mr. Justice Relova's separate opinion particularly, since the majority in adopting the Resolution made it clear in the deliberations that it was in no way passing judgment upon the existence or non-existence of criminal liability as resolved and determined negatively in the original judgment of April 4, 1984 but was only directing the fiscal to continue with and terminate the investigation on the premise that "the filing of this petition is premature," (at page 5) The only point is that the said judgment has long become final and executory on April 23, 1984 and the permanent injunction issued therein against further continuation of the investigation can no longer be set aside. 5.This is in accord with the general policy that the fiscal's office should not be used or abused as a collection agency. We have here the case of a non-resident alien, respondent Clement David, who came here for special treatment for his "investments" as special accounts "and only a portion of which was to be reported because he did not want the Australian government to tax his total earnings, nor to know his total investments." 5 When things went awry, he made sure that he was fully covered with collaterals by petitioners, who executed them in all good faith and he in turn executed an affidavit of desistance. He cannot and should not be allowed to misuse our prosecutorial agencies for collection or enforcement of a purely civil liability.

MAKASIAR, J., dissenting: On April 30, 1984, private respondent Clement David, thru counsel Atty. Norberto Quisumbing, filed a motion dated April 28, 1984 for the reconsideration of the decision promulgated on April 4, 1984 granting the petition of herein petitioners and making permanent the temporary restraining order previously issued with costs against private respondent.

I The Solicitor General, as counsel for public respondent, did not file within the reglementary period any motion for reconsideration of the aforesaid decision of April 4, 1984, which the Solicitor General received on April 6, 1984. Hence, the aforesaid decision, as expressly admitted by the Solicitor General, became final and executory on April 22, 1984 with respect to public respondents.
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As expressly stated by the Solicitor General in his manifestation dated August 23, 1984 and filed on August 28, 1984, ". . . 2. the office of the Solicitor General received the copy of the aforesaid decision on April 6, 1984, and did not file a motion for reconsideration, hence, the Decision became executory as to the public respondent on April 22, 1984" (p. 418, rec.). WE ruled in Singh vs. Liberty Insurance Corp. (8 SCRA 517, 520 [1963]) that: "as against other parties adversely affected by the decision who did not appeal the decision must be deemed to have become final and executory. A contrary view would lead to indefeasible results." Since the Solicitor General has supervision and control over a criminal action (in this case, herein petitioners were charged with estafa and violation of Section 3 of Central Bank Circular No. 364 and Nos. 343 and 865 on foreign exchange; par. 1 of Section 4, Rule 110, Revised Rules of Court of 1964), the aforesaid decision of April 4, 1984 shall likewise be considered as final and executory with respect to herein private respondent Clement David who cannot adopt a stand inconsistent with that of the Fiscal. WE held in Tan Jr. vs. Gallardo (73 SCRA 306, 311-314 [1976]):
"And in any event, whether an offended party intervenes in the prosecution of a criminal action, his intervention must always be subject to the direction and control of the prosecuting official. As explained in Herrero vs. Diaz, supra, the 'intervention of the offended party or his attorney is authorized by section 15 of Rule 106 of the Rules of Court (now section 15, Rule 110), subject to the provisions of section 4 of the same Rule that all criminal actions either commenced by complaint or by

information shall be prosecuted under the direction and control of the Fiscal.'

"Therefore, although the private prosecutors may be permitted to intervene, they are not in control of the case, and their interests are subordinate to those of the People of the Philippines represented by the fiscal. The right which the procedural law reserves to the injured party is

that of intervening in the prosecution for the sole purpose of enforcing the civil liability for the criminal action and not of demanding punishment of the accused. As explained in People vs. Orais: " 'The position occupied by the offended party is subordinate to that of the promoter fiscal because as the promoter fiscal alone is authorized to represent the public prosecution, or the People of the Philippine Islands, in the prosecution of offenders, and to control the proceeding, and as it is discretionary with him to institute and prosecute a criminal proceeding, being at liberty to commence it or not to refrain from prosecuting it or not, depending upon whether or not there is, in his opinion, sufficient evidence to establish the guilt of the accused beyond a reasonable doubt, except when the case is pending in the Court of First Instance, the continuation of the offended party's intervention depends upon the continuation of the proceeding. Consequently, if the promoter fiscal desists from pressing the charge or asks the competent Court of First Instance in which the case is pending for the dismissal thereof, and said court grants the petition the intervention of the person injured by the commission of the offense ceases by virtue of the principle that the accessory follows the principal. Consequently, as the offended party is not entitled to represent the People of the Philippine Islands in the prosecution of a public offense, or to control the proceeding once it is commenced, and as his right to intervene therein is subject to the promoter fiscal's right of control, it cannot (sic) be stated that an order of dismissal decreed upon petition of the promoter fiscal himself deprives the offended party of his right to appeal from an order overruling a complaint or information, which right belongs exclusively to the promoter fiscal by virtue of the provisions of section 44 of General Order No. 58. To permit a person injured by the commission of an offense to appeal from an order dismissing a criminal case issued by a Court of First Instance upon petition of the promoter fiscal, would be tantamount to giving said offended party of the direction and control of a criminal proceeding in violation of the provisions of the above-cited section 107 of General Order No. 58.' xxx xxx xxx "It is evident, therefore, that since the Solicitor General alone is authorized to represent the State or the People of the Philippines, the interest of the private prosecutors is subordinate to that of the State and they cannot be allowed to take a stand inconsistent with that of the Solicitor General, for that would be tantamount to giving the latter the direction and control of the criminal proceedings, contrary to the

provisions of law and the settled rules on the matter" (pp. 311-314; italics supplied).

Again, in the case of Cabral vs. Puno (70 SCRA 606-610 [1976]), citing several cases, We ruled that: "While it is true that the offended party, Silvino San Diego, through the private prosecutor, filed a motion for reconsideration within the

reglementary fifteen-day period, such move did not stop the running of the period for appeal. He did not have the legal personality to appeal or to file a motion for reconsideration on his behalf. The prosecution in a criminal case through the private prosecutor is under the direction and control of the Fiscal, and only the motion for reconsideration or appeal filed by the Fiscal could have interrupted a period for appeal" (italics supplied).
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This fact alone by itself suffices to warrant the denial of the motion for reconsideration filed by private respondent Clement David as complainant. II And because of the compromise agreement entered into prior to the filing of the criminal information in court, the said compromise agreement or novation converted the original relationship between the parties into ordinary creditordebtor situation. Such novation or compromise prevents the institution of a criminal prosecution (Ong vs. CA, et al., 124 SCRA 578, 580-81 [1983] penned by Justice Relova, concurred in by Justices Melencio-Herrera, Plana, Vasquez and Gutierrez). In said Ong case, Mr. Justice Relova quoted Mr. Justice J.B.L. Reyes in People vs. Nery (10 SCRA 244), thus:
"The novation theory may perhaps apply to the filing of the criminal information in court by the state prosecutors because up to that time the original trust relation may be converted by the parties into an ordinary creditor-debtor situation, thereby placing the complainant in estoppel to insist on the original trust. But after the justice authorities have taken cognizance of the crime and instituted action in court, the offended party may no longer divest the prosecution of its power to exact the criminal liability, as distinguished from the civil. The crime being an offense against the state, only the latter can renounce it (People vs. Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil. 76; U.S. vs. Montaes, 8 Phil. 620)" (124 SCRA 578, 580-581).

Also, in the case of Gonzales vs. Manila City Fiscal Eulogio Serrano (25 SCRA 64, Sept. 23, 1968), Mr. Chief Justice Roberto Concepcion, with the concurrence of

Associate Justices J.B.L. Reyes, Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, ruled that:
"As pointed out in People vs. Nery, novation prior to the filing of the criminal information as in the case at bar may convert the relation between the parties into an ordinary creditor-debtor relation, and place the complainant in estoppel to insist on the original transaction or `cast doubt on the true nature' thereof" (25 SCRA 69).

In the oft-cited case of People vs. Nery (10 SCRA 244, Feb. 5, 1964), Mr. Justice J.B.L. Reyes, spoke for the Court, with the full concurrence of Chief Justice Cesar Bengzon, Justices Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal.
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III Moreover, private respondent cannot now intervene in the prosecution of the criminal offense because he has waived his right to the civil action when he filed his answer with counterclaim in Civil Case No. Q-33865 in then Court of First Instance, now Regional Trial Court in Quezon City. It should be recalled that petitioners Teofisto Guingona, Jr., Antonio I. Martin, and Teresita Santos were respectively Director, President and General Manager of the Nation Savings and Loan Association (NSLA) from March, 1978 until October or November, 1980. From March 20, 1979 to March, 1981, private respondent David, an Australian citizen, invested with the NSLA dealing directly with petitioners Martin and Santos as NSLA President and General Manager the sum of P1,145,546.20 on time deposits, P13,531.94 on savings account deposits (jointly with his sister Denise Kuhne); US$10,000.00 on time deposits, US$15,000.00 under receipts and guarantee of payment and US$50,000.00 under a receipt dated June 8, 1980 (all jointly with Denise Kuhne); that upon private respondent David's insistence, the aforesaid investments were treated as special accounts with interest above the legal rate, and recorded in separate confidential documents; that only a portion of said deposits or investments were to be reported because respondent David did not want the Australian government to tax his total earnings nor to know his total investments. All transactions with private respondent David were recorded except the sum of US$15,000.00 which was a personal loan to Santos.

The check of US$50,000.00 was cleared thru Guingona's dollar account with the Security Bank because NSLA did not have any dollar account.
Thereafter, respondent David, as he himself admitted, received periodic interests on his deposits averaging P5,000.00 a week (pp. 397-398, rec.). When the NSLA was placed under receivership on March 21, 1981, petitioners Guingona and Martin, upon request of private respondent David, assumed the obligation of the Bank to respondent David and executed on June 17, 1981 a promissory note in favor of David acknowledging indebtedness of P1,336,614.02 and US$75,000.00 (p. 80, rec.), which amounts were based on the statement of account as of June 30, 1981 prepared by private respondent David himself. Thereafter, on July 17, 1981, petitioners Guingona and Martin agreed to divide said indebtedness equally, each one assuming an indebtedness of P668,507.01 and US$37,500.00 in favor of private respondent David (Annex "D", p. 25, rec.). Guingona executed a new promissory note for his one-half share of the assumed indebtedness which was secured by second mortgages of two parcels of land (Annex "E", Petition, pp. 26-29, rec.) with stipulation that the mortgage of one parcel should be cancelled upon payment of 1/2 of his one-half share in their obligation to David. The other half of the indebtedness assumed by petitioner Martin was secured by a 9 1/2 karat diamond ring with a net value of P510,000.00.
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On September 15, 1981, Guingona paid P200,000.00 to David who received the same. When he tendered on October 15, 1981 and on October 21, 1981 another P300,000.00, respondent David refused to accept, compelling petitioner Guingona to file Civil Case No. Q-33865 in the CFI of Quezon City on November 19, 1981 (T. Guingona Jr. vs. Clement David) for specific performance with damages, praying among others, for the release of the mortgage over one of the two parcels of land conveyed to private respondent David as stipulated in the deed of second mortgage. In said Civil Case No. Q-33865 before the Quezon City RTC, private respondent David filed on December 19, 1981 an answer to the complaint for damages with

counter-claim for the remaining balance of petitioner Guingona's indebtedness in the amount of P638,691.36 and US$49,320.45 plus interests, damages, and attorney's fees) pp. 104-105, rec.).
Because of the filing by petitioner Guingona of Civil Case No. Q-33865, private respondent David filed his affidavit-complaint dated December 23, 1981 in the

Office of the City Fiscal of Manila against herein petitioners for estafa and violation of Central Bank Circular No. 364 (Sec. 3) and related regulations on foreign transaction. It would appear therefore that private respondent David impliedly waived his right to intervene in this criminal case because four days before the criminal complaint was filed with the City Fiscal of Manila, respondent David already filed an answer with counterclaim in Civil Case No. Q-33865 filed in the Quezon City RTC by petitioner Guingona which is akin to an express reservation of his right to file a separate civil action. Thus, it has been ruled that "an offended party loses his right to intervene in the prosecution of a criminal case not only when he has waived the civil action or expressly reserved his right to institute it, but also when he has actually

instituted the civil action even if he has not made the waiver or reservation adverted to"(Gorospe and Gorospe vs. Gatmaitan, et al., 98 Phil. 600, 603
[1956]).

The counterclaim of private respondent David for the remaining balance of the share in the obligation of petitioner Guingona included in his answer in the aforesaid civil case before the Quezon City RTC is in effect a civil action for the enforcement of the civil liability of herein petitioner Guingona. It should be stressed that after receiving the first payment to him of P200,000.00 from petitioner Guingona, the latter offered him four personal checks covering the amount of P300,000.00 which amount was due on October 15, 1981 as stipulated; but private respondent David requested that the four personal checks be changed to manager's check and extended the period of payment to October 20, 1981. When petitioner Guingona complied with the request by delivering the cashier's check covering the amount of P300,000.00 on October 21, 1981, private respondent David refused to accept the same claiming that petitioner Guingona was already in default and that the entire remaining balance had already become due and payable (p. 57, rec.).
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Likewise, it should be emphasized that private respondent David executed on July 17, 1981 an affidavit of desistance wherein he, for himself and in behalf of his sister Denise Kuhne, agreed to desist from any prosecution of petitioner Guingona (p. 46, rec.). His affidavit of desistance states:

"3.That on or about July 17, 1981, Mr. Teofisto Guingona Jr. executed, in my favor, a Promissory Note dated June 17, 1981 for the amount of P668,307.01 and US$37,500 with interest at 16% per annum from July 1, 1981, of which P50,000.00 has been paid, and two Second Real Estate Mortgages covering two parcels of land, with buildings and improvements, situated at Quezon City, with Transfer Certificate of Title Nos. 137940 and 137941 of the Registry of Deeds of Quezon City; "4.That I, therefore, withdraw my claim with the Central Bank only insofar as Mr. Teofisto Guingona Jr. is concerned to the extent of the Promissory Note and the Mortgages in the amounts indicated in the Promissory Note, and undertake to desist from any prosecution against him. This is without prejudice to the balance of my claim against Nation "5.That I execute this affidavit not only for myself but also in behalf of my sister, Denise Kuhne."

Savings and Loan Association, Inc. and its other officers and employees;

IV As We stated in the decision sought to be reconsidered, the investments or private respondent David in the NSLA by way of time deposits and savings deposits are loans under the express provisions of Articles 248, 1933, 1953 and 1980 of the New Civil Code and decisions on the matter. Thus, in the case of Serrano vs. CB (96 SCRA 96, 102 [Feb. 14, 1980]), Mr. Justice Hermogenes Concepcion Jr., speaking for the Second Division, and concurred in by Justices Barredo, Antonio, Aquino and Abad Santos, stated:
"Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans (Art. 1980, Civil Code; Gullas vs. Phil. National Bank, 62 Phil. 519). Current and savings deposits are loans to a bank because it can use the same. The petitioner here in making time deposits that earn interests with respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and not a depositor. The respondent Bank was in turn a debtor of petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay its obligation as a debtor and not a breach of trust arising from a depositary's failure to return the subject matter of the deposit" (pp. 102-103).
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Again, in the case of CB vs. Morfe (63 SCRA 114) [March 12, 1975]), Justice Ramon C. Aquino, speaking for the Second Division, with the concurrence of

Chief Justice Makalintal and Justices Fernando, Barredo, and Fernandez, enunciated that:
"It should be noted that fixed, savings, and current deposits of money in banks and similar institutions are not true deposits. They are considered simple loans and, as such, are not preferred credits (Art. 1980, Civil Code; In re Liquidation of Mercantile Bank of China; Tan Tiong Tick vs. American Apothecaries Co., 65 Phil. 414; Pacific Coast Biscuit Co. vs. Chinese Grocers Association, 65 Phil. 375; Fletcher American National Bank vs. Ang Cheng Lian, 65 Phil. 385; Pacific Commercial Co. vs. American Apothecaries Co., 65 Phil. 429; Gopoco Grocery vs. Pacific Coast Biscuit Co., 65 Phil. 443)" [p. 119].

V In his motion for reconsideration, private respondent contends that the money, amounting to P1,145,546.20; P13,531.93 and US$75,000.00, to be deposited as time and savings deposit with the Nation Savings and Loan Association, was delivered to petitioners herein in their personal capacity, who in turn had the obligation to deliver the same to the bank. Since they did not deliver or deposit the money with the Nation Savings and Loan Association, they became liable for estafa by misappropriation as the Central Bank discovered that only P305,821.92 were entered in the records of the bank, and that petitioners' assumption of the obligation of the bank to private respondent was an admission that they did not deliver the money to the bank. But as pointed out by petitioners herein, this constitutes a complete change of private respondent's original theory in the City Fiscal's Office as shown by his affidavit-complaint on December 23, 1981, wherein he stated that from March 20, 1979 to March, 1981, he, together with his sister, Denise Kuhne, invested with the Nation Savings and Loan Association the sum of P1,145,546.20 on time deposits and the sum of P13,531.94 on savings account deposits or a total of P1,159,078.14 (pp. 15-16, rec.). He likewise made investments in the aforesaid bank in the amount of US$75,000.00 (p. 17, rec.). He further stated that when the bank was placed under receivership by the Central Bank, he filed his claim for all of his investments and later received a report from the Central Bank that only P305,821.92 of his investments with the bank were entered in its records. So, he filed a complaint for estafa and violation of Section 3 of Central Bank Circular No. 364 and related Central Bank regulations regarding foreign exchange transactions against the Nation Savings and Loan Association and the entire board of directors including the petitioners herein.
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Private respondent's new theory in his motion for reconsideration has no factual basis. The following facts and circumstances on record indisputably show that private respondent Clement David invested his money on time and savings deposits with the Nation Savings and Loan Association directly and not with herein petitioners as private individuals:

1.Private respondent himself categorically stated in his affidavit-complaint that he invested with the Nation Savings and Loan Association the sum of P1,145,546.20 on time deposits and the sum of P13,531.94 on savings account deposits or a total of P1,159,078.14, as well as the amount of US$75,000.00 (p. 17, rec.). Mrs. Yu Donato, the Deputy Receiver of the Central Bank, testified under oath before the Assistant City Fiscal that one of the recognized ways of recording transactions is to keep on file the duplicate original of the accounting forms used in the transactions (pp. 126, 406, rec.). It appears that the original instruments of indebtedness were given to private respondent, while the duplicate original of said instruments were on file in the Nation Savings and Loan Association. 2.The promissory notes executed by petitioners Guingona and Martin wherein they assumed the obligation of the Nation Savings and Loan Association to private respondent, upon the latter's request, stated that the same were executed as a result of deposits made by Clement David and Denise Kuhne with the Nation Savings and Loan Association (pp. 25, 80, rec.). 3.Private respondent testified under oath before the Assistant City Fiscal of Manila that he made the deposits in the principal office of the Nation Savings and Loan Association during office hours, before authorized officers of the bank, and properly receipted for in bank forms (pp. 397-398, rec.). 4.In his verified answer to the complaint of petitioner Guingona in Civil Case Q33865 for specific performance with damages, private respondent admitted that he was a depositor of the Nation Savings and Loan Association (p. 101, rec.).
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5.Private respondent further admitted under oath that he received periodic interests on his deposits at an average of P5,000.00 a week (pp. 397-398, rec.). The bank would not have paid him such substantial interest weekly if he were not a depositor of said NSLA. 6.The report dated June 23, 1981 of Director Consolacion Odra of the Central Bank Department for Rural Banks and Savings and Loan Associations, stated that private respondent David and Denise Kuhne could be allowed payment of their

recorded deposits up to P15,000.00 each, or a total of P30,000.00 under the Philippine Deposit Insurance Corporation Law (p. 240, rec.). It is undisputed that private respondent had already filed and received his claim and that of his sister in the total amount of P30,000.00 from the PDIC. Under the law, only deposits of distressed banks are entitled to such payment from the PDIC. 7.Private respondent's investments were treated as special accounts with special rates upon his insistence and because Nation Savings and Loan Association was urgently in need of funds. The investments were recorded in separate confidential documents, and only a portion of which was to be reported because he did not want the Australian government to tax his total earnings, nor to know his total investments (p. 21, rec.). 8.Private respondent's pleadings, particularly his comment dated April 21, 1982 and memorandum dated December 21, 1982, and documents, such as the statement of account (re: time and savings deposits) as of June 30, 1981 prepared by private respondent and his affidavit of desistance, filed before this Court show that he deposited his money with the Nation Savings and Loan Association. Furthermore, private respondent cannot be permitted, at this stage of the proceedings, to adopt a theory which is different from that which he sustained in the City Fiscal' s Office, especially after We ruled in Our main decision sought to be reconsidered that bank deposits are in the nature of simple loans, and the failure of the bank to return the deposits will not constitute estafa through misappropriation, but it will only give rise to civil liability. It is improper to change theory on appeal and more so in a motion for reconsideration. It would be unfair and unjust to the other party litigant as it violates petitioners' constitutional right to due process. It could also unduly prolong litigations because a party can always change postures to suit his own advantage.
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Thus, in People vs. Archilla (1 SCRA 698, 701 [1961], citing several cases), this Court said:
"It is well-settled that parties to a judicial proceeding may not, on appeal, adopt a theory inconsistent with that which they sustained in the lower court. Consequently, appellee is now estopped from invoking the idea of double jeopardy upon the theory that she could still be convicted under an information which she branded to be insufficient in the lower court."

Again, in the case of Velasco vs. Manila Electric Company (42 SCRA 556, 560 [1971]), We held that.
"But as pointed out, this issue was not raised, nor was the inverse condemnation doctrine invoked in the trial court, so that it would be improper to consider it on appeal, and worse still, on a motion for reconsideration of the decision on its merits" (italics supplied).

And, in the recent case of Dosch vs. National Labor Relations Commission (123 SCRA 296, 310 [1983]), We said:
"Realizing that its `resignation' theory was weak and flimsy, Northwest abandoned it and contended for the first time that petitioner was guilty of insubordination when he refused to comply with the transfer order. This change of theory on appeal is improper; it is offensive to the

basic rules of fair play and justice and violative of petitioner's constitutional right to due process of law. Appellate courts may not entertain questions of law or fact not raised in the lower courts (Sec. 18, Rule 46, Revised Rules of Court), for that would constitute a change of theory not permissible on appeal (Toribio vs. Decasa, 55 Phil. 461).
" 'It is undoubtedly the law, that, where a cause has been tried upon the theory that the pleadings are at issue, or that a particular issue is made by the pleadings, or where an issue is tacitly accepted by all parties as properly presented for trial and as the only issue, the appellate court will proceed upon the same theory (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep. 504; Molina vs. Somes, 24 Phil. Rep. 45). It would be unjust

and oppressive for the appellate court to adopt a theory at variance with that on which the case was presented to and tried by the lower court. It would surprise the parties, to take them unaware and off their guard, and would in effect, deprive them of their day in court (Limpangco Sons
vs. Yangco Steamship Co., 34 Phil. 597, 605-609)' " [Italics supplied].

VI To deprive petitioners herein of the foregoing defenses that (1)failure to file a motion for reconsideration of a decision inevitably renders such decision final and executory;
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(2)a compromise executed before the institution of the criminal action in court precludes the filing of such criminal action;

(3)the filing of a civil action, which includes interposing a counterclaim in an answer, before the institution in court of a criminal action estops or bars the complainant from intervening in the criminal action; (4)all bank deposits whether savings, current or time deposits are in the nature of loans, under which the depositor is the creditor of the bank, which thereby becomes the debtor of the depositor, and gives rise only to a civil obligation; and (5)the extraordinary writs of injunction are available for the orderly administration of justice, to prevent the use of the strong arm of the law in an oppressive and vindictive manner, to avoid multiplicity of actions and to afford adequate protection to constitutional rights which defenses were already existing long before the filing on December 23, 1981 by respondent David of his affidavit-complaint before the City Fiscal would be akin to a violation of petitioners' right against ex post factolaws. As held in the 1970 case of Kay Villegas Kami (35 SCRA 429, 431) citing the case of Mekin vs. Wolfe (2 Phil. 74), one of the six kinds of ex post facto law is that which "deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection of a former conviction or acquittal, or a proclamation of amnesty." The aforecited defenses were already available to herein petitioners and afford them legal protection already secured to them prior to the filing of the complaint with the City Fiscal even before any criminal information has been filed in court. Additionally, the compromise and affidavit of desistance have the effect of an amnesty complete absolution from any criminal liability. Decisions of the Supreme Court are part of the law of the land. Article 8 of the New Civil Code of 1950 directs that "judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines" (People vs. Licera, 65 SCRA 270 [1975]). Judicial decisions of the Supreme Court assume the same authority as the statute itself (Caltex vs. Palomar, 18 SCRA 247; 124 Phil. 763).

Consequently, any modification or revocation of the previous doctrines aforequoted cannot be given retroactive effect in the instant criminal prosecution.
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Insistence on the criminal prosecution of herein petitioners, who already acquired vested right in the aforesaid defenses against such prosecution, would therefore be clearly ex post facto. To continue with the prosecution of herein petitioners, in spite of the foregoing legal constitutional defenses, would subvert the orderly administration of justice, deny them their constitutional rights, expose the petitioners to undue and oppressive harassment and aggravate their anguish and expenses, in much the same way that such unnecessary prosecution exposes the State to useless and expensive trials (Trocio vs. Manta, 118 SCRA 241 [1982]; Hashim vs. Boncan, 71 Phil. 216 [1941]; see also Mercado vs. Court, etc., 116 SCRA 93 [1982]). VII There is no need of prior exhaustion of administrative remedies; because the instant case is an exception to the principle of exhaustion as only constitutional and legal questions are involved herein (Limoico vs. Board, etc., L-40244, Oct. 31, 1984, per Justice Melencio-Herrera; Del Mar vs. PVA, 51 SCRA 340 [1973]; Teoxon vs. Members, etc., 33 SCRA 585 [1970]; Begosa vs. Chairman, etc., 32 SCRA 466 [1970]; Gonzales vs. Hechanova, 9 SCRA 230 [1963]; Tapales vs. President, etc., et al., L-17523, March 30, 1963, 7 SCRA 553; Pascual vs. Provincial Board, etc., L-11959, Oct. 31, 1959, 106 Phil. 466, 470) and because of the urgency of the relief demanded by petitioners (Guerrero vs. Carbonell, L7180, March 15, 1955, unpublished).

Appealing to the appropriate administrative authorities concerned from the action of the City Fiscal then to the Regional Trial Court and finally back to this Supreme Tribunal, would render the remedy inadequate and not speedy enough to save herein petitioners from so much harassment, anguish and expenses or irreparable damage. Exhaustion of administrative remedies is not required where the action of the administrative officer is clearly and obviously devoid of any legality or authority (Mangubat vs. Osmea, L-12837, April 30, 1959, 105 Phil. 1308-1309; Palamine vs. Zagado, L-6901, March 5, 1954; Manuel vs. de la Fuente, 48 Off. Gaz., 4829; F. Jose vs. Lacson, L-10477, May 17, 1957; Festijo vs. Mun. Mayor of Nabua, 51

Off. Gaz. 121; Covacha vs. Amante, L-8358, May 25, 1956; Carmona vs. Amante, 52 Off. Gaz. 5109; Senarillos vs. Hermosisima, L-10662, December 14, 1956; and Briones vs. Osmea, Jr., L-12536, Sept. 24, 1958), or where the challenged action will create irreparable damage (De Lara, et al. vs. Cloribel, et al., L-21653, May 31, 1965, 14 SCRA 269, 272-273). Hence, the motion for reconsideration of private respondent should be denied.
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SECOND DIVISION
[G.R. No. L-38427. March 12, 1975.] CENTRAL BANK OF THE PHILIPPINES as Liquidator of the FIDELITY SAVINGS BANK, petitioner, vs. HONORABLE JUDGE JESUS P. MORFE, as Presiding Judge of Branch XIII, Court of First Instance of Manila, Spouses AUGUSTO and ADELAIDA PADILLA and Spouses MARCELA and JOB ELIZES, respondents.

F.E. Evangelista & Agapito S. Fajardo for petitioner. Juan C. Nabong, Jr. for respondent Spouses Augusto and Adelaida Padilla. Albert R. Palacio for respondent spouses Marcela and Job Elizes.
SYNOPSIS Private respondents secured against Savings Bank, after the same had been declared insolvent, final judgments for the recovery of the balance of their time deposits. Payment of the same as preferred credits evidenced by final judgments in accordance with Article 2244 (14) (b) of the Civil Code was directed by the liquidation court. From this order, the Central Bank appealed by certiorari. The Supreme Court held that Art. 2244 (14) (b) of the Civil Code does not apply and the judgments obtained by the respondents against the involvent savings bank do not enjoy preference. Orders of the lower court reversed and set aside. SYLLABUS 1.BANKS: CLAIMS AND CREDITS AGAINST AN INSOLVENT BANK; JUDGMENT OBTAINED AFTER DECLARATION OF INSOLVENCY NOT A PREFERRED CLAIM. Article 2244 (14)(b) of the Civil Code on preferred credits does not apply to

judgments for the payment of the deposits in an insolvent savings bank which obtained after the declaration of insolvency. 2.ID.; ID.; ID.; RATIONALE. A contrary rule on practice would be productive of injustice, mischief and confusion. To recognize such judgments as entitled to priority would mean that depositors in insolvent banks, after learning that the bank is insolvent as shown by the fact that it can no longer pay withdrawals or that it has closed its doors or has been enjoined by the Monetary Board from doing business, would rush to the courts to secure judgments for the payment of their deposits. In such eventuality, the courts would be swamped with suits of that character. Some of the judgments would be default judgment. Depositors armed with such judgments would pester the liquidation court with claims for preference on the basis of Article 2244 (14)(b) of the Civil Code. Less alert depositors would be prejudiced. That inequitable situation could not have been contemplated by the framers of section 29 of the General Banking Law on the proceedings upon insolvency. 3.ID.; ID.; ASSETS OF INSOLVENT BANK HELD IN TRUST FOR THE EQUAL BENEFIT OF ALL CREDITORS. "The general principle of equality that the assets of an insolvent are to be distributed ratably among general creditors applies with full force to the distribution of the assets of a bank. A general depositor of a bank is merely a general creditor, and, as such, is not entitled to any preference or priority over other general creditors. The assets of a bank in process of liquidation are held in trust for the equal benefit of all creditors, and one cannot be permitted to obtain an advantage or preference over, another by an attachment, execution or otherwise. 4.ID.; ID.; EFFECT OF JUDGMENT OBTAINED BY A CREDITOR. The effect of a judgment obtained against it by a creditor is only to fix the amount of debt. He can acquire no lien which will give him any preference or advantage over other general creditors. DECISION AQUINO, J :
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This case involves the question of whether a final judgment for the payment of a time deposit in a savings bank, which judgment was obtained after the bank was

declared insolvent, is a preferred claim against the bank. The question arises under the following facts: On February 18, 1969 the Monetary Board found the Fidelity Savings Bank to be insolvent. The Board directed the Superintendent of Banks to take charge of its assets, forbade it to do business, and instructed the Central Bank Legal Counsel to take appropriate legal actions (Resolution No. 350). On December 9, 1969 the Board resolved to seek the court's assistance and supervision in the liquidation of the bank. The resolution was implemented only on January 25, 1972 when the Central Bank of the Philippines filed the corresponding petition for assistance and supervision in the Court of First Instance of Manila (Civil Case No. 86005 assigned to Branch XIII). Prior to the institution of the liquidation proceeding but after the declaration of insolvency, or, specifically, sometime in March, 1971, the spouses Job Elizes and Marcela P. Elizes filed a complaint in the Court of First Instance of Manila against the Fidelity Savings Bank for the recovery of the sum of P50,584 as the balance of their time deposits (Civil Case No. 82520 assigned to Branch I). In the judgment rendered in that case on December 13, 1972 the Fidelity Savings Bank was ordered to pay the Elizes spouses the sum of P50,584 plus accumulated interest. In another case, assigned to Branch XXX of the Court of First Instance of Manila, the spouses Augusto A. Padilla and Adelaida Padilla secured on April 14, 1972 a judgment against the Fidelity Savings Bank for the sums of P80,000 as the balance of their time deposits, plus interests, P70,000 as moral and exemplary damages and P9,600 as attorney's fees (Civil Case No. 84200 where the action was filed on September 6, 1971). In its orders of August 20, 1973 and February 25, 1974, the lower court (Branch XIII having cognizance of the liquidation proceeding), upon motions of the Elizes and Padilla spouses and over the opposition of the Central Bank, directed the latter, as liquidator, to pay their time deposits as preferred credits, evidenced by final judgments, within the meaning of article 2244(14)(b) of the Civil Code, if there are enough funds in the liquidator's custody in excess of the credits more preferred under section 30 of the Central Bank Law in relation to articles 2244 and 2251 of the Civil Code. From the said order, the Central Bank appealed to this Court by certiorari. It contends that the final judgments secured by the Elizes and Padilla spouses do

not enjoy any preference because (a) they were rendered after the Fidelity Savings Bank was declared insolvent and (b) under the charter of the Central Bank and the General Banking Law, no final judgment can be validly obtained against an insolvent bank. Republic Act No. 265 provides:
"SEC. 29.Proceedings upon insolvency. Whenever, upon examination by the Superintendent or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the Superintendent forthwith, in writing, to inform the Monetary Board of the facts, and the Board, upon finding the statements of the Superintendent to be true, shall forthwith forbid the institution to do business in the Philippines and shall take charge of its assets and proceeds according to law. "The Monetary Board shall thereupon determine within thirty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its creditors and shall prescribe the conditions under which such resumption of business shall take place. In such case the expenses and fees in the administration of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. "At any time within ten days after the Monetary Board has taken charge of the assets of any banking institution, such institution may apply to the Court of First Instance for an order requiring the Monetary Board to show cause why it should not be enjoined from continuing such charge of its assets, and the court may direct the Board to refrain from further proceedings and to surrender charge of its assets. "If the Monetary Board shall determine that the banking institution cannot resume business with safety to its creditors, it shall, by the Solicitor General, file a petition in the Court of First Instance reciting the proceedings which have been taken and praying the assistance and supervision of the court in the liquidation of the affairs of the same. The Superintendent shall thereafter, upon order of the Monetary Board and under the supervision of the court and with all convenient speed, convert the assets of the banking institution to money.

"SEC. 30.Distribution of assets. In case of liquidation of a banking institution, after payment of the costs of the proceedings, including reasonable expenses and fees of the Central Bank to be allowed by the court, the Central Bank shall pay the debts of such institution, under the order of the court, in accordance with their legal priority."

The General Banking Act, Republic Act No. 337, provides:


"SEC. 85.Any director or officer of any banking institution who receives or permits or causes to be received in said bank any deposit, or who pays out or permits or causes to be paid out any funds of said bank, or who transfers or permits or causes to be transferred any securities or property of said bank, after said bank becomes insolvent, shall be punished by fine of not less than one thousand nor more than ten thousand pesos and by imprisonment for not less than two nor more than ten years."

The Civil Code provides:


"ART. 2237.Insolvency shall be governed by special laws insofar as they are not inconsistent with this Code. (n) "ART. 2244.With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named: xxx xxx xxx (14)Credits which, without special privilege, appear in (a) a public instrument; or (b) in a final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments, respectively. ( 1924a)

"ART. 2251. Those credits which do not enjoy any preference with respect to specific property, and those which enjoy preference, as to the amount not paid, shall be satisfied according to the following rules: (1)In the order established in article 2244;(2) Common credits referred to in article 2246 shall be paid pro rata regardless of dates. (1929a)".

The trial court or, to be exact, the liquidation court noted that there is no provision in the charter of the Central Bank and in the General Banking Law (Republic Acts Nos. 265 and 337, respectively) which suspends or abates civil actions against an insolvent bank pending in courts other than the liquidation court. It reasoned out that, because such actions are not suspended, judgments against insolvent banks could be considered as preferred credits under article 2244(14)(b) of the Civil Code. It further noted that, in contrast with the Central Bank Act, section 18 of the Insolvency Law provides that upon the issuance by the court of an order declaring a person insolvent, "all civil proceedings against the said insolvent shall be stayed". The liquidation court directed the Central Bank to honor the writs of execution issued by Branches I and XXX for the enforcement of the judgments obtained by the Elizes and Padilla spouses. It suggested that, after satisfaction of the judgments, the Central Bank, as liquidator, should include said judgments in the list of preferred credits contained in the "Project of Distribution" "with the notation 'already paid'". On the other hand, the Central Bank argues that after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets "for the equal benefit of all the creditors, including the depositors". The Central Bank cites the ruling that "the assets of an insolvent banking institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise" (Rohr vs. Stanton Trust & Savings Bank, 76 Mont. 248, 245 Pac. 947). The stand of the Central Bank is that all depositors and creditors of the insolvent bank should file their actions with the liquidation court. In support of that view it cites the provision that the Insolvency Law does not apply to banks (last sentence, sec. 52 of Act No. 1956). It also invokes the provision penalizing a director or officer of a hank who disburses, or allows disbursement, of the funds of the bank after it becomes insolvent (Sec. 85, General Banking Act, Republic Act No. 337). It cites the ruling that "a creditor of an insolvent state bank in the hands of a liquidator who recovered a judgment against it is not entitled to a preference for (by) the mere fact that he is a judgment creditor" (Thomas H. Briggs & Sons, Inc. vs. Allen, 207 N. Carolina 10, 175 S. E. 838, Braver, Liquidation of Financial Institutions, p. 922).

It should be noted that fixed, savings, and current deposits of money in banks and similar institutions are not true deposits. They are considered simple loans and, as such, are not preferred credits (Art. 1980, Civil Code; In re Liquidation of Mercantile Bank of China: Tan Tiong Tick vs. American Apothecaries Co., 65 Phil. 414; Pacific Coast Biscuit Co. vs. Chinese Grocers Association, 65 Phil. 375; Fletcher American National Bank vs. Ang Cheng Lian, 65 Phil. 385; Pacific Commercial Co. vs. American Apothecaries Co., 65 Phil. 429; Gopoco Grocery vs. Pacific Coast Biscuit Co., 65 Phil. 443). The aforequoted section 29 of the Central Bank's charter explicitly provides that when a bank is found to be insolvent, the Monetary Board shall forbid it to do business and shall take charge of its assets. The Board in its Resolution No. 350 dated February 18, 1969 banned the Fidelity Savings Bank from doing business. It took charge of the bank's assets. Evidently, one purpose in prohibiting the insolvent bank from doing business is to prevent some depositors from having an undue or fraudulent preference over other creditors and depositors. That purpose would be nullified if, as in this case, after the bank is declared insolvent, suits by some depositors could be maintained and judgments would be rendered for the payment of their deposits and then such judgments would be considered preferred credits under article 2244(14)(b) of the Civil Code. We are of the opinion that such judgments cannot be considered preferred and that article 2244(14)(b) does not apply to judgments for the payment of the deposits in an insolvent savings bank which were obtained after the declaration of insolvency. A contrary rule or practice would be productive of injustice, mischief and confusion. To recognize such judgments as entitled to priority would mean that depositors in insolvent banks, after learning that the bank is insolvent as shown by the fact that it can no longer pay withdrawals or that it has closed its doors or has been enjoined by the Monetary Board from doing business, would rush to the courts to secure judgments for the payment of their deposits. In such an eventuality, the courts would be swamped with suits of that character. Some of the judgments would be default judgments. Depositors armed with such judgments would pester the liquidation court with claims for preference on the basis of article 2244(14)(b). Less alert depositors would be prejudiced. That inequitable situation could not have been contemplated by the framers of section 29.

The Rohr case (supra) supplies some illumination on the disposition of the instant case. It appears in that case that the Stanton Trust & Savings Bank of Great Falls closed its doors to business on July 9, 1923. On November 7, 1924 the bank (then already under liquidation) issued to William Rohr a certificate stating that he was entitled to claim from the bank $1,191.72 and that he was entitled to dividends thereon. Later, Rohr sued the bank for the payment of his claim. The bank demurred to the complaint. The trial court sustained the demurrer. Rohr appealed. In affirming the order sustaining the demurrer, the Supreme Court of Montana said:
"The general principle of equity that the assets of an insolvent are to be distributed ratably among general creditors applies with full force to the distribution of the assets of a bank. A general depositor of a bank is merely a general creditor, and, as such, is not entitled to any preference or priority over other general creditors. "The assets of a bank in process of liquidation are held in trust for the equal benefit of all creditors. and one cannot be permitted to obtain an advantage or preference over another by an attachment, execution or otherwise. A disputed claim of a creditor may be adjudicated, but those whose claims are recognized and admitted may not successfully maintain action thereon. So to permit would defeat the very purpose of the liquidation of a bank whether being voluntarily accomplished or through the intervention of a receiver. xxx xxx xxx "The available assets of such a bank are held in trust, and so conserved that each depositor or other creditor shall receive payment or dividend according to the amount of his debt, and that none of equal class shall receive any advantage or preference over another."

And with respect to a national bank under voluntary liquidation, the court noted in the Rohr case that the assets of such a bank "become a trust fund, to be administered for the benefit of all creditors pro rata, and, while the bank retains its corporate existence, and may be sued, the effect of a judgment obtained against it by a creditor is only to fix the amount of debt. He can acquire no lien which will give him any preference or advantage over other general creditors ." (245 Pac. 249)** Considering that the deposits in question, in their inception, were not preferred credits, it does not seem logical and just that they should be raised to the category of preferred credits simply because the depositors, taking advantage of

the long interval between the declaration of insolvency and the filing of the petition for judicial assistance and supervision, were able to secure judgments for the payment of their time deposits. The judicial declaration that the said deposits were payable to the depositors, as indisputably they were due, could not have given the Elizes and Padilla spouses a priority over the other depositors whose deposits were likewise indisputably due and owing from the insolvent bank but who did not want to incur litigation expenses in securing a judgment for the payment of the deposits. The circumstance that the Fidelity Savings Bank, having stopped operations since February 19, 1969, was forbidden to do business (and that ban would include the payment of time deposits) implies that suits for the payment of such deposits were prohibited. What was directly prohibited should not be encompassed indirectly. (See Maurello vs. Broadway Bank & Trust Co. of Paterson, 176 Atl. 391, 114 N.J.L. 167). It is noteworthy that in the trial court's order of October 3, 1972, which contains the Bank Liquidation Rules and Regulations, it indicated in Step III the procedure for processing the claims against the insolvent bank. In Step IV, the court directed the Central Bank, as liquidator, to submit a Project of Distribution which should include "a list of the preferred credits to be paid in full in the order of priorities established in Articles 2241, 2242, 2243, 2246 and 2247" of the Civil Code (note that article 2244 was not mentioned). There is no cogent reason why the Elizes and Padilla spouses should not adhere to the procedure outlined in the said rules and regulations. WHEREFORE, the lower court's orders of August 20, 1973 and February 25, 1974 are reversed and set aside. No costs. SO ORDERED.

Makalintal, C.J., Fernando, Barredo and Fernandez, JJ., concur. Antonio, J., did not take part.

EN BANC
[G.R. No. 168446. September 18, 2009.] (formerly G.R. Nos. 144174-75) PEOPLE OF THE PHILIPPINES, appellee, vs. ERNESTO CRUZ, JR. y CONCEPCION and REYNALDO AGUSTIN y RAMOS, appellants. DECISION PERALTA, J :
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The present appeal is from a Decision 1 dated April 8, 2005 of the Court of Appeals (CA) in CA-G.R. CR No. 00264, affirming in toto the Joint Decision 2 dated May 25, 2000 of the Regional Trial Court (RTC), Branch 78, Malolos, Bulacan, finding appellants Ernesto Cruz, Jr. and Reynaldo Agustin guilty beyond reasonable doubt of the crimes of Kidnapping and Serious Illegal Detention (Article 267, Revised Penal Code [RPC] as amended by Republic Act [R.A.] No. 7659) and Robbery (Article 294, RPC, as amended by R.A. No. 7659). The antecedent facts, as culled from the records, are the following: On August 23, 1998, on or about 6:30 in the evening, Atty. Danilo Soriano, a Legal Officer of Del Monte Philippines, had just ended his usual Sunday visit to his farm in Masuso, Pandi, Bulacan. 3 Wanting to go home to his residence in Malabon, Metro Manila, Atty. Soriano requested his caretaker, appellant Reynaldo Agustin, to have the latter's son drive the former in a motorcycle to the jeepney stop, so that he could board a jeepney going to the Pandi-Balagtas terminal. Appellant Agustin volunteered to take Atty. Soriano to his destination using the former's motorbike, to which Atty. Soriano accepted. 4 It was raining then and barely 30 to 50 meters away from the jeepney stop, appellant Agustin stopped his motorbike beside a parked stainless owner-type jeep. 5 Three men were inside the said vehicle, while another one was standing beside it. Appellant Agustin spoke with the men and said, "Ano ba? Si Attorney!" After which,

appellant Agustin told Atty. Soriano to board the said jeep. Atty. Soriano boarded after appellant Agustin told him that one of the men inside the jeep, appellant Ernesto Cruz, Jr., was his compadre and they were all bound for Balagtas, Bulacan. Thereafter, appellant Agustin left them. 6 While the vehicle was on the road, appellant Cruz put his left arm around the neck of Atty. Soriano, poked a gun at the latter and announced a hold-up. Narciso Buluran (now deceased), held Atty. Soriano's hands, while accused Totchie Kulot grabbed Atty. Soriano's eyeglasses and used his umbrella to shield them from approaching vehicles. The men then got Atty. Soriano's bag and took his wristwatch, P2,500.00 cash, Totes umbrella worth P880.00, pager worth P3,000.00, a Swiss knife worth P1,500.00 and tools worth P1,500.00, totaling P12,000.00. 7 Then they brought Atty. Soriano to a dimly-lighted hut, but was later transferred to another hut. Atty. Soriano remained there for a week, closely guarded by Narciso Buluran, who was armed with an armalite rifle, and Tochie Kulot, who was armed with a revolver. Appellant Cruz visited him most of the time, while accused Allen Francisco prepared the food. 8
DEcITS

A day after the abduction, or on a Monday, appellant Cruz demanded ransom from Atty. Soriano; otherwise, they would kill the latter. Atty. Soriano was allowed to write two letters 9 to his wife Iluminada (Luming) and a note 10 on which he was told to write as follows:
OFFER OF COMPROMISE 1.P100,000 cash payable today 2.US $20,000, telegraphic transfer to PNB-Makati Ave. payable upon credit to local account or by express delivery to me or representative. (Sgd. Illegible) 8-25-98

The letters were eventually sent to his wife, while appellant Cruz kept the short note in his wallet. 11 Appellant Cruz also called the victim's family from the cellular phone using the telephone number found on Soriano's diary. 12 That Friday or on August 28th, appellant Cruz arrived in the hut late in the evening appearing to be drunk and told Atty. Soriano that the ransom money had been raised and that the latter would be released the following day. 13

That Saturday, August 29th, at 11:30 a.m., appellant Cruz went with accused Enrique Avendao to the agreed place of pay-off at I. S. Pavilion, a mall located at Meycauayan, Bulacan, to collect the ransom money from Atty. Soriano's daughter, Clarissa. After receiving the parcel containing the ransom money, appellant Cruz and Avendao left on board a tricycle. Unknown to them, some Presidential Anti-Organized Crime Task Force (PAOCTF) operatives had been monitoring the pay-off and accosted appellant Cruz and accused Avendao near the Meycauayan Public Market, while they were still carrying the parcel containing the ransom money and the Nokia cellular phone used to contact Atty. Soriano's family. The PAOCTF operatives were able to learn from appellant Cruz the whereabouts of Atty. Soriano. 14 Around 5:30 p.m. of the same day, the PAOCTF operatives and local barangay officials of Camachilihan, Bustos, Bulacan entered the premises of appellant Cruz's fishpond in Camachilihan, Bustos, Bulacan, where they heard a gunshot, prompting the team to return fire. They were able to rescue Atty. Soriano and in the process, killing Narciso Buluran. They arrested appellant Agustin and accused Francisco within the vicinity of the fishpond, while Tochie Kulot was able to escape. They were able to recover a gun, an icepick, an M-16 rifle, one (1) magazine, three (3) empty shells of M-16, two (2) shells of .45 caliber and one (1) wallet while searching the premises. 15 Then PAOCTF Chief Superintendent (now Senator) Panfilo Lacson later handed to Atty. Soriano a bag containing the ransom money recovered, consisting of 10 bundles of P1,000.00 bills. 16 As a consequence thereof, an Information 17 dated September 22, 1998 was filed against Ernesto Cruz, Jr, Enrique Avendao, Allen Francisco, Reynaldo Agustin, John Doe a.k.a. Tochie Kulot, and Richard Does charging them with the crime of Kidnapping and Serious Illegal Detention, as amended by R.A. 7659, which reads as follows:
Criminal Case No. 1489-M-98 That on or about 6:30 o'clock in the evening of August 23, 1998 at the intersection of Pasong Kalabaw and J. Bernardino Streets, Poblacion Pandi, Bulacan and within the jurisdiction of this Honorable Court, the said accused, conspiring, confederating and mutually aiding one another, did then and there wilfully, unlawfully and feloniously kidnap ATTY. DANILO SORIANO for the purpose of demanding ransom for the latter's release, and in fact, accused collected and received the ransom money in the amount of ONE MILLION (P1,000,000.00) PESOS,

detaining and depriving Atty. Danilo Soriano of his personal liberty until his rescue by police officers on August 29, 1998.
IEHSDA

CONTRARY TO LAW, particularly Article 267 of the Revised Penal Code, as amended by Republic Act No. 7659.

Another Information 18 was also filed against Ernesto Cruz, Jr., John Doe a.k.a. Tochie Kulot, and two unidentified men with violation of Article 294 of the Revised Penal Code, reading:
Criminal Case No. 1490-M-98 That on or about 6:30 o'clock in the evening of August 23, 1998 at the intersection of Pasong Kalabaw and J. Bernardino Streets, Poblacion, Pandi, Bulacan and within the jurisdiction of this Honorable Court, the said accused conspiring, confederating and mutually aiding one another, did then and there wilfully, unlawfully and feloniously, with intent to gain and by means of force, violence and intimidation and with the use of a firearm, robbed and took the following articles from Atty. Danilo Soriano, to wit: 1. 2. 3. 4. 5. 6. 7. 8. Cash Money Eyeglasses Pager Casio calculator Totes Umbrella Imported Swiss knife Folding pliers, screw driver and other handy tools Other personal belongings of nominal value P2,500.00 1,500.00 3,000.00 800.00 800.00 1,500.00 2,000.00

_____________ P12,180.00

To the damage and prejudice of ATTY. DANILO SORIANO in the aforesaid amount. CONTRARY TO LAW.

Upon arraignment 19 on October 16, 1998, appellant Ernesto Cruz, appellant Reynaldo Agustin and Enrique Avendao, assisted by counsel de parte, and Allen Francisco, assisted by counsel de officio, all pleaded Not Guilty of the crime/s charged.
cSaCDT

After Pre-trial on November 12, 1998, trial on the merits ensued. The prosecution presented as witnesses, Atty. Soriano, SMART Telecommunications Supervisor, Daisy Sazon, Senior Police Inspector (SPO)1 Ricardo Valencia, SPO4 Willy Nuas and SPO4 Romano Desumala whose testimonies were earlier mentioned. On the other hand, the defense presented the testimonies of accused Allen Francisco, appellant Agustin, appellant Cruz, Lilibeth Francisco, Danilo Agustin, Isabelita Agustin and Bonifacio Moramion. According to accused Allen Francisco, he was merely a helper and caretaker of the fishpond of appellant Cruz and knew nothing about the kidnapping. 20 This was corroborated by his wife, Lilibeth, who stated that she prepared food for Atty. Soriano, a visitor who stayed in the hut from August 25 to 29, 1998, and wondered why the visitor was not allowed to leave the hut. 21 Appellant Agustin, the caretaker of Atty. Soriano's farm, testified that he only drove Atty. Soriano to the jeepney stop on August 23, 1998 as his son, Gerardo Agustin, met an accident earlier that day. When he and Atty. Soriano were already near the town, it began to rain and fearing that they would both get wet, and seeing appellant Cruz's jeepney parked at the intersection of Pasong Kalabaw and Bernardino Streets, appellant Agustin requested appellant Cruz to allow Atty. Soriano to ride with him to the town proper. At about 2 p.m. of the following day, Atty. Soriano's brother-in-law, Dan Roding, arrived at appellant Agustin's house and broke the news that Atty. Soriano failed to go home. 22 Agustin then told Dan Roding that he had asked his friend, appellant Cruz to drive Atty. Soriano up to the Pandi-Balagtas terminal. Dan Roding then requested permission to go to appellant Cruz's house in Bagbagin, Pandi, Bulacan to inquire about the matter. He arrived there at 3:30 p.m.. Appellant Cruz told him that he had dropped Atty. Soriano off at the terminal. Appellant Agustin then went home and told Dan Roding, who was still there, about appellant Cruz's answer. On August 25, 1998, appellant Agustin and his wife went to Atty. Soriano's house in Malabon, where Dan Roding and his wife, Atty. Soriano's sister, Atty. Soriano's wife Luming, and daughter Clarissa were there crying. Luming told him that she had received a telephone call asking for money. Appellant Agustin told Clarissa, "Huwag kang mag-alala, makakauwi din yon". They stayed in Atty. Soriano's house for two hours. Afterwards, he asked his son and wife to call up the Sorianos and inquire after Atty. Soriano. When asked why he was at appellant Cruz's farm in Camachilihan, Bustos, Bulacan at

the time of the arrest on August 29, appellant Agustin said that he was there to request appellant Cruz to catch fingerlings of hito for them. 23

However, accused Ernesto Cruz gave a version completely different from the earlier testimonies. He claimed that Atty. Soriano had staged the kidnapping. According to him, Atty. Soriano devised the kidnapping plan after the former's teasing remark of "Atty., magpakidnap ka na lang", said during one of Atty. Soriano's frequent visits to appellant Cruz's nearby farm/fishpond. The said teasing remark was uttered after Atty. Soriano told appellant Cruz of the former's problems in dealing with bank installments for the on-going construction of his building in Santa Ana, Manila. Appellant Cruz added that Atty. Soriano set the kidnapping on August 23, 1998 at Pasong Kalabaw, Pandi, Bulacan for a ransom money of One Million Pesos (P1,000,000.00), as it was the only amount available in the family coffers. Finally, he said that Atty. Soriano promised them 10% of the ransom money. 24 On May 25, 2000, the RTC, rendered its Decision finding appellants Cruz and Agustin guilty beyond reasonable doubt of violation of Article 267 of the Revised Penal Code, as amended by R.A. No. 7659 and appellant Cruz of violation of Article 294 of the Revised Penal Code, as amended by R.A. No. 7659. However, Allen Francisco was acquitted of the crime charged. The dispositive portion of the said Decision reads:
WHEREFORE, premises considered, this Court hereby finds accused Ernesto Cruz, Jr. y Concepcion and Reynaldo Agustin y Ramos GUILTY beyond reasonable doubt of Violation of Article 267 of the Revised Penal Code, as amended by R.A. 7659, and hereby sentences them to suffer the penalty of DEATH and to pay private complainant Atty. Danilo Soriano the amount of P50,000 as moral damages.
HTIEaS

Accused Allen Francisco y Buensaleda is hereby ACQUITTED of the charge. This Court likewise finds accused Ernesto Cruz, Jr. y Concepcion GUILTY beyond reasonable doubt of Violation of Article 294 of the Revised Penal Code, as amended by R.A. 7659, and hereby sentences him to suffer the indeterminate penalty of 6 months of Arresto Mayor Maximum, as minimum, to 8 years ofPrision Mayor Medium, as maximum, and to pay herein private complainant the amount of P12,000 as actual damages. With costs.

SO ORDERED.

The cases were appealed to this Court due to the imposition of the death penalty. However, on September, 14, 2004, in conformity with the decision promulgated on July 7, 2004 in G.R. Nos. 147678-87, entitled The People of the Philippines v. Efren Mateo y Garcia, modifying the pertinent provisions of the Revised Rules of Criminal Procedure, more particularly Sections 3 and of Rule 125 and any other rule insofar as they provide for direct appeals from the RTCs to this Court in cases where the penalty imposed is death, reclusion perpetua or life imprisonment, as well as the resolution of this Court en banc, dated September 19, 1995, in "Internal Rules of the Supreme Court" in cases similarly involving the death penalty, pursuant to the Court's power to promulgate rules of procedure in all courts under Article VII, Section 5 of the Constitution, and allowing an intermediate review by the CA before such cases are elevated to this Court, this Court transferred the case to the CA for appropriate action and disposition. On April 8, 2005, the CA affirmed in toto the Decision of the RTC, with the dispositive portion reading:
WHEREFORE, all the foregoing considered, this Court renders judgment AFFIRMING the appealed decision in toto. However, instead of rendering judgment, We hereby certify and elevate the entire records of this case to the Supreme Court for its final review and disposition, consonant with the ruling in the case ofPeople v. Mateo, supra and its Resolution in A.M. No. 00-5-03-SC dated September 28, 2004. SO ORDERED.

Hence, the present appeal. Appellant Reynaldo Agustin filed his Supplemental Brief 25 dated October 7, 2005, while appellant Ernesto Cruz, Jr. filed a Manifestation dated October 12, 2005 stating that he is adopting in toto his Appellant's Brief, as well as his Supplemental Brief required in the Resolution dated July 19, 1995 of this Court. In compliance with the Court's Resolution dated July 19, 2005, the Office of the Solicitor General (OSG) also filed its Supplemental Brief dated January 5, 2006. In his earlier Brief 26 dated April 30, 2002, appellant Agustin argued that the trial court overlooked and seriously failed to weigh accurately all the material facts and circumstances of the case presented to it for reconsideration. According to him, the prosecution failed to substantiate his participation in the conspiracy to

commit the crime of kidnapping for ransom. He added that, at most, he was implicated in the commission of the crime charged based solely on circumstantial evidence, however, the circumstances presented by the prosecution were clearly inadequate to demonstrate convincingly and persuasively that he had conspired with appellant Cruz to commit the crime charged. Finally, he claims that the trial court failed to consider his defense that he never participated in kidnapping and detaining Atty. Soriano, as he had no knowledge whatsoever in the commission of the said offense. In refutation of the Brief of appellant Agustin, the OSG filed its Brief 27 dated August 28, 2002 averring that appellant Agustin's guilt for the crime of Kidnapping for Ransom as a principal by indispensable cooperation has been sufficiently established. As a reply to the brief filed by the OSG, appellant Agustin filed his Appellant's Reply Brief 28 dated November 27, 2002 insisting that his guilt as principal by indispensable cooperation in the crime charged has not been proven beyond reasonable doubt.
ECcTaH

Appellant Cruz, on the other hand, filed his Brief 29 dated December 8, 2002 and argued that the trial court erred in not giving any credence or weight to his evidence that the kidnapping of Atty. Soriano was the idea of the latter and in not considering said circumstance that had removed or cast doubt on the element of illegal restraint upon the supposed victim, even only as a mitigating circumstance. He further stated that the trial court erred in finding that the crime allegedly committed by him is Kidnapping with Serious Illegal Detention, punishable by death, whereas, there was actually no forcible taking of the person of Atty. Soriano, who appeared to have voluntarily cooperated with appellant Agustin and his companions to make Atty. Soriano's plan appear to be real. The brief does not mention about any contention as to his being found guilty beyond reasonable doubt of the crime of robbery. To refute the contentions of appellant Cruz in his brief, the OSG, in its Brief 30 dated April 3, 2003 stated that the former's guilt for Kidnapping for Ransom and Robbery with Intimidation has been sufficiently established. In his Reply Brief 31 dated February 19, 2004, appellant Ernesto Cruz, Jr. contended that he was only able to disclose the defense that Atty. Soriano planned the kidnapping during the trial because it was his first time to testify and that he told the said fact to his lawyers long before the said trial.

The appeal lacks merit. Before tackling the respective contentions of the appellants, this Court finds it apt to discuss the nature of the crime of kidnapping for ransom. The corresponding provisions and ruling 32 of this Court are as follows:
Article 267 of the Revised Penal Code, as amended by Republic Act No. 7659, reads: ART. 267.Kidnapping and serious illegal detention. Any private individual who shall kidnap or detain another, or in any other manner deprive him of his liberty, shall suffer the penalty of reclusion perpetua to death: 1.If the kidnapping or detention shall have lasted more than three days. 2.If it shall have been committed simulating public authority. 3.If any serious physical injuries shall have been inflicted upon the person kidnapped or detained, or if threats to kill him shall have been made. 4.If the person kidnapped or detained shall be a minor, except when the accused is any of the parents, female, or a public officer.
CcHDSA

The penalty shall be death where the kidnapping or detention was committed for the purpose of extorting ransom from the victim or any other person, even if none of the circumstances above-mentioned were present in the commission of the offense. When the victim is killed or dies as a consequence of the detention or is raped, or is subjected to torture or dehumanizing acts, the maximum penalty shall be imposed. (As amended by RA No. 7659). For the accused to be convicted of kidnapping, the prosecution is burdened to prove beyond reasonable doubt all the elements of the crime, namely: (a) the offender is a private individual; (b) he kidnaps or detains another, or in any manner deprives the latter of his liberty; (c) the act of detention or kidnapping must be illegal; and (d) in the commission of the offense any of the following circumstances is present:

(1) the kidnapping or detention lasts for more than three days; (2) it is committed by simulating public authority; (3) any serious physical injuries are inflicted upon the person kidnapped or detained or threats to kill him are made; or (4) the person kidnapped or detained is a minor, female, or a public officer. 33 If the victim of kidnapping and serious illegal detention is a minor, the duration of his detention is immaterial. Likewise, if the victim is kidnapped and illegally detained for the purpose of extorting ransom, the duration of his detention is immaterial. The essential elements for this crime is the deprivation of liberty of the victim under any of the above-mentioned circumstances coupled with indubitable proof of intent of the accused to effect the same. 34 There must be a purposeful or knowing action by the accused to forcibly restrain the victim coupled with intent.35

Central to the issues raised in the respective briefs of appellants Cruz and Agustin is a question of the factual findings of the RTC. However, this Court, in numerous cases, has ruled that, [W]ell-entrenched is the doctrine that the factual findings of the trial court, especially on the assessment or appreciation of the testimonies of witnesses, are accorded great weight and respect. The trial court has the singular opportunity to observe the witnesses "through the different indicators of truthfulness or falsehood, such as the angry flush of an insisted assertion or the sudden pallor of a discovered lie or the tremulous mutter of a reluctant answer or the forthright tone of a ready reply; or the furtive glance, the blush of conscious shame, the hesitation, the sincere or the flippant or sneering tone, the heat, the calmness, the yawn, the sigh, the candor or lack of it, the scant or full realization of the solemnity of an oath, the carriage and mien". 36

Appellant Agustin claims that the RTC erred in disregarding his defense that he did not conspire with appellant Cruz and that he had no knowledge of the kidnapping. He then proceeded to explain that the RTC based its conviction on circumstantial evidence. According to him, his only involvement was in accompanying Atty. Soriano to the town proper of Pandi, Bulacan. As such, he claims to be neither a principal by indispensable cooperation nor an accomplice. Circumstantial evidence, as held 37by this Court, consists of the following:
aIDHET

. . . Circumstantial evidence consists of proof of collateral facts and circumstances from which the existence of the main fact may be inferred according to reason and common experience. 38 What was once a rule of account respectability is now entombed in Section 4, Rule 133 of the

Revised Rules of Evidence which states that circumstantial evidence, sometimes referred to as indirect or presumptive evidence, is sufficient as anchor for a judgment of conviction if the following requisites concur: . . . if (a) there is more than one circumstance; (b) the facts from which the inferences are derived have been established; and (c) the combination of all the circumstances is such as to warrant a finding of guilt beyond reasonable doubt. 39 The prosecution is burdened to prove the essential events which constitute a compact mass of circumstantial evidence, and the proof of each being confirmed by the proof of the other, and all without exception leading by mutual support to but one conclusion: the guilt of accused for the offense charged. 40 For circumstantial evidence to be sufficient to support a conviction, all the circumstances must be consistent with each other, consistent with the hypothesis that accused is guilty and at the same time inconsistent with the hypothesis that he is innocent, and with every other rational hypothesis except that of guilt. 41 If the prosecution adduced the requisite circumstantial evidence to prove the guilt of accused beyond reasonable doubt, the burden of evidence shifts to the accused to controvert the evidence of the prosecution.

A careful perusal of the records and the transcript of stenographic notes clearly shows that the prosecution was able to adduce the requisite circumstantial evidence to prove the guilt of appellant Agustin beyond reasonable doubt. Atty. Soriano testified as to the participation of appellant Agustin, thus:
Q:What happened next? A:My caretaker Reynaldo Agustin was insistent that he personally drive the motorcycle, although his son was presenting himself which was the usual practice. His wife also asked if it was possible to allow his son to drive the motorcycle because there was a drinking spree in some corner and his wife did not want him to drive the motorcycle but he insisted. xxx xxx xxx Q:What happened next?

A:We were still some distance away from the waiting shed. There was a parked private owner-type jeepney along the road. Without being told, Reynaldo Agustin stopped in front of that jeepney. Q:And then what happened?
CASIEa

A:He gave some kind of signal to the four (4) men who were wearing black jacket. Three were boarded inside the jeepney and one was on the road. He gave the signal, Ano ba? Si Attorney! So I wondered what it was all about. Then he told me to board the jeepney and I asked why. Q:What else happened? A:When asked why I would have to take the jeep, he said, pointing to Ernesto Cruz, He is my compadre. 42

The above testimony, coupled with the fact that appellant Agustin was arrested in the late afternoon of August 29, 1998 while he acted as a guard outside the hut where Atty. Soriano was kept, are consistent with each other, thereby warranting the conclusion that the former indeed had an indispensable part in the crime charged. His defense that his presence outside the hut where Atty. Soriano during the rescue operation, which eventually led to his arrest, does not make him criminally liable, deserves scant consideration. It was merely a statement which is not corroborated by any other evidence; thus, it is not enough to debunk the earlier mentioned circumstantial evidence. With the above consideration, the evidence, therefore, is sufficient to show that appellant Agustin cooperated with the other appellant in the commission of the offense. Conspiracy, as ruled by this Court in People v. Pagalasan 43 means the following:
Judge Learned Hand once called conspiracy "the darling of the modern prosecutor's nursery". 44 There is conspiracy when two or more persons agree to commit a felony and decide to commit it. 45 Conspiracy as a mode of incurring criminal liability must be proven separately from and with the same quantum of proof as the crime itself. Conspiracy need not be proven by direct evidence. After all, secrecy and concealment are essential features of a successful conspiracy. Conspiracies are clandestine in nature. It may be inferred from the conduct of the accused before, during and after the commission of the crime, showing that they had acted with a common purpose and design. 46 Paraphrasing the decision of the English Court in Regina v.

Murphy, 47 conspiracy may be implied if it is proved that two or more

persons aimed by their acts towards the accomplishment of the same unlawful object, each doing a part so that their combined acts, though apparently independent of each other, were, in fact, connected and cooperative, indicating a closeness of personal association and a concurrence of sentiment. 48 To hold an accused guilty as a co-principal by reason of conspiracy, he must be shown to have performed an overt act in pursuance or furtherance of the complicity. 49 There must be intentional participation in the transaction with a view to the furtherance of the common design and purpose. 50 The United States Supreme Court in Braverman v. United States, 51 held that the precise nature and extent of the conspiracy must be determined by reference to the agreement which embraces and defines its objects. For one thing, the temporal dimension of the conspiracy is of particular importance. Settled as a rule of law is that the conspiracy continues until the object is attained, unless in the meantime the conspirator abandons the conspiracy or is arrested. There is authority to the effect that the conspiracy ends at the moment of any conspirator's arrest, on the presumption, albeit rebuttable, that at the moment the conspiracy has been thwarted, no other overt act contributing to the conspiracy can possibly take place, at least as far as the arrested conspirator is concerned.52 The longer a conspiracy is deemed to continue, the greater the chances that additional persons will be found to have joined it. There is also the possibility that as the conspiracy continues, there may occur new overt acts. If the conspiracy has not yet ended, then the hearsay acts and declarations of one conspirator will be admissible against the other conspirators and one conspirator may be held liable for substantive crimes committed by the others. 53
cHSTEA

Each conspirator is responsible for everything done by his confederates which follows incidentally in the execution of a common design as one of its probable and natural consequences even though it was not intended as part of the original design. 54 Responsibility of a conspirator is not confined to the accomplishment of a particular purpose of conspiracy but extends to collateral acts and offenses incident to and growing out of the purpose intended. 55Conspirators are held to have intended the consequences of their acts and by purposely engaging in conspiracy which necessarily and directly produces a prohibited result that they are in contemplation of law, charged with intending the result. 56 Conspirators are necessarily liable for the acts of another conspirator even though such act differs radically and substantively from that which they intended to commit. 57 The Court agrees with the ruling of the Circuit Court of Appeals (Second District) per Judge Learned Hand

in United States v. Peoni 58 "that nobody is liable in conspiracy except for the fair import of the concerted purpose or agreement as he understood it; if later comers change that, he is not liable for the change; his liability is limited to the common purpose while he remains in it". Earlier, the Appellate Court of Kentucky in Gabbard v. Commonwealth 59 held that: The act must be the ordinary and probable effect of the wrongful acts specifically agreed on, so that the connection between them may be reasonably apparent, and not a fresh and independent project of the mind of one of the confederates, outside of or foreign to the common design, and growing out of the individual malice of the perpetrator. Equally persuasive is the pronouncement of the Circuit Court of Appeals (Second District) in United States v. Crimms, 60 that it is never permissible to enlarge the scope of the conspiracy itself by proving that some of the conspirators, unknown to the rest, have done what was beyond the reasonable intendment of the common understanding. This is equally true when the crime which the conspirators agreed upon is one of which they severally might be guilty though they were ignorant of the existence of some of its constitutive facts. Also, while conspirators are responsible for consequent acts growing out of the common design they are not for independent acts growing out of the particular acts of individuals. 61

It is immaterial whether appellant Agustin acted as a principal or an accomplice. What really matters is that the conspiracy was proven and he took part in it. As lucidly shown in the evidence, without the participation of appellant Agustin, the commission of the offense would not have come to fruition, and as clearly presented by the prosecution, he was the one who paved the way for Atty. Soriano to board the vehicle and his closeness with the victim led the latter to trust the former, thus, accomplishing the appellants' devious plan. Consequently, the conspirators shall be held equally liable for the crime, because in a conspiracy the act of one is the act of all. 62

For his part, appellant Cruz claims that his guilt for the crime of kidnapping for ransom has not been sufficiently established. He alleged that Atty. Soriano was not deprived of his liberty as he was free to move about, nor was the latter at any time threatened or intimidated. However, the testimony of the victim proved otherwise, thus,

Q:Going back to the place in Bustos where you claimed to have been in detention. You said you were being guarded by Narciso Buluran and Totchie Kulot round the clock? A:When I said I was being guarded from the first kubo, there were times I could sense they were taking turns. There were times when both of them were not there and I could only see Allen Francisco going around. Q:You could only sense that there were two of them guarding you on the second hut because you were in fact locked inside. It was bolted from the outside? A:Yes, sir. Q:And as you describe the place, it was 3 x 3 in measurement, no windows, only one door? A:Yes, sir. Q:And you were made to sleep on a bamboo sofa? A:Sofa, actually. Q:But there was an opening through which you could see outside the kubo?
CAaDSI

A:Yes, sir. Q:That is where you saw two persons guarding you round the clock? A:Not only 2, sometimes 3. Q:Who might be the third? A:Especially when fed by Allen Francisco because he was the one delivering the food. Q:You stated in your August 29 statement and during your testimony last time that Allen was the one preparing the food for you? A:Not exactly preparing. He was the one bringing food. Q:Your statement that it was Francisco who prepares the food is not accurate?

A:It was possible he is. It was possible somebody else because I knew he has a wife in the first kubo. Q:How did you know? A:I saw her. Q:When? A:Early morning, Monday, August 24 when she transferred to the second kubo from the first kubo. Q:So the wife of Francisco was in the second kubo when you were left in the early morning of August 25 by the group? A:Yes, sir. Q:And the wife of Francisco had to transfer to the second Jubo * to
TcaAID

take her place?


63

A:That is correct.

From the above testimony of Atty. Soriano, it was obvious that there was actual confinement and that he was deprived of his liberty. The primary element of the crime of kidnapping is actual confinement, detention and restraint of the victim. 64 There must be a showing of actual confinement or restriction of the victim, and that such deprivation was the intention of the malefactor. An accused is liable for kidnapping when the evidence adequately proves that he forcefully transported, locked up or restrained the victim. 65 There must exist indubitable proof that the actual intent of the malefactor was to deprive the victim of his liberty. The restraint of liberty must not arise merely as an incident to the commission of another offense that the offender primarily intended to commit. 66 As to the contention of appellant Cruz that there was no force or intimidation involved in the taking, this Court held in the case of People v. Santos, 67 that the fact that the victim voluntarily went with the accused did not remove the element of deprivation of liberty, because the victim went with the accused on a false inducement without which the victim would not have done so. In the present case, although Atty. Soriano boarded the vehicle without any protestation, he was under the impression that the said persons inside the same vehicle were to be trusted as he was assured by appellant Agustin about that matter. Without such assurance, the victim would not have boarded the said vehicle. Moreover, it is important to emphasize that, in kidnapping, the victim

need not be taken by the accused forcibly or against his will. What is controlling is the act of the accused in detaining the victim against his or her will after the offender is able to take the victim in his custody. In short, the carrying away of the victim in the crime of kidnapping and serious illegal detention can either be made forcibly or fraudulently. 68 Anent appellant Cruz contention that the kidnapping was concocted by Atty. Soriano himself to secure money from his relatives, such claim is specious and uncorroborated. As correctly ruled by the CA:
Accused Ernesto Cruz's defense that the kidnapping was concocted by Atty. Soriano himself to secure money from his relatives and that he was merely inveigled into it is self-serving and unworthy of belief, as it is neither logical nor satisfactory, much less consistent with human experience and knowledge. Soriano, a lawyer gainfully employed with Del Monte Philippines, with a caring family, cannot be believed to have concocted such a scheme. In People v. Enriquez, 132 SCRA 553, the High Tribunal dismissed therein appellant's theory that the kidnapping was a mere scheme concocted by the victim himself, ruling that "No normal human being could be so base and ungrateful as to conceive such scheme for the purpose of securing money from his own (parents)". Cruz's defense does not hold water; his version is either unsupported by or inconsistent with the evidence. First, Cruz alleged that he knew Soriano prior to the incident as his farm in Bagong Barrio, Pandi, Bulacan abutted that of Soriano's and that the latter often visited him. But Soriano's farm is situated in another barangay, in Brgy. Masuso, Pandi, Bulacan. Agustin's testimony that he introduced Cruz to complainant as his compadre before asking the latter to board Cruz's jeep, also belied Cruz's claim. Hence, we accord credence to private complainant's assertion that, except for appellant Agustin, he knew none of the accused prior to his abduction. It bears noting that despite Cruz's claim that Soriano confided in him and asked him to participate in the kidnapping scheme, he denied any reference to friendship, stating that he and Soriano merely developed a mutual liking for each other. Assuming this latter statement to be true, We cannot believe that complainant would propose such a delicate scheme to a mere acquaintance.

Second, appellant Cruz's testimony that Attorney Soriano was "Free to


move about", "treated like a guest", "like taking a vacation" during his stay at Cruz's hut was belied by his helpers, former co-accused Allen

Francisco and Francisco's wife, Lilibeth Mitra, who testified that they never saw complainant leave the hut (because) complainant was closely guarded by Buluran, who was armed with an armalite rifle. Moreover the presence of guns and other weapons in the alleged "kidnap me" charade, eventually resulting in the shooting to death of Narciso Buluran, strongly militates against its credence.
AECDHS

Third, the tearful reaction of complainant's family to his kidnapping was


clearly sincere and unorchestrated, belying knowledge of any scheme. Finally, appellant Cruz's silence for more than a year after his arrest and his failure to report the alleged charade to the authorities despite being in detention for one month and 18 days, or even to his family, is highly unusual and goes against the grain of human nature. It would have been the natural and logical reaction of a person in his predicament to immediately inform the authorities of the alleged scheme instead of revealing it only in court. This omission makes his defense in court of the alleged kidnap-me charade suspect. Empirical data is yet to be found in order to accurately measure the value of testimony of a witness other than its conformity to human behavior and the common experience of mankind. This Court is convinced that appellant's "kidnap me" defense is a mere afterthought in order to stave off his certain conviction. 69

From the above disquisitions, it is apparent that appellants Cruz and Agustin conspired to commit the crime of kidnapping for ransom which was proven beyond reasonable doubt by the prosecution. Finally, the RTC imposed the penalty of Death on both appellants, since it was then the prescribed penalty for violations of Article 267 of the Revised Penal Code, as amended by R.A. 7659. However, the death penalty cannot be imposed on the appellants in view of the passage of R.A. No. 9346 on June 24, 2006, prohibiting the imposition of death penalty in the Philippines. In accordance with Sections 2 and 3 thereof, the penalty that should be meted out to the appellants is reclusion perpetua without the possibility of parole. 70 WHEREFORE, the Decision dated April 8, 2005 of the Court of Appeals in CAG.R. CR No. 00264, affirming in toto the Joint Decision dated May 25, 2000 of the Regional Trial Court, Branch 78, Malolos, Bulacan, is hereby AFFIRMED with MODIFICATION. Appellants Ernesto Cruz, Jr. and Reynaldo Agustin are foundGUILTY beyond reasonable doubt of the crime of Kidnapping and Serious Illegal Detention (Article 267, RPC), as amended by R.A. No. 7659, the penalty of which, isreclusion perpetua in view of the passage of R.A. No. 9346.

SO ORDERED.

Puno, C.J., Ynares-Santiago, Carpio, Corona, Carpio Morales, Chico-Nazario, Velasco, Jr., Nachura, Leonardo-de Castro, Brion, Bersamin, Del Castillo and Abad, JJ.,concur. Quisumbing, J., is on official leave.

THIRD DIVISION
[G.R. No. 168644. February 16, 2010.] BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN, plaintiff-appellee, vs. SALLY GO a.k.a. SALLY GO-BANGAYAN, accused-appellant. DECISION PERALTA, J :
p

This is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals in CA-G.R. SP No. 87600 1 dated April 20, 2005, which reversed and set aside the September 13, 2004 2 and November 5, 2004 3 Orders issued by the Regional Trial Court of Manila, Branch 36 4 in Criminal Case No. 02-202158 for qualified theft. The said orders, in turn, respectively denied the motion filed by herein respondent Sally Go for the suppression of the testimonial and documentary evidence relative to a Security Bank account, and denied reconsideration. The basic antecedents are no longer disputed. Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein representative, Ricardo Bangayan (Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia Go and Sally Go-Bangayan, is Bangayan's wife, who was employed in the company as a cashier, and was engaged, among others, to receive and account for the payments made by the various customers of the company.

In 2002, Bangayan filed with the Manila Prosecutor's Office a complaint for estafa and/or qualified theft 5 against respondent, alleging that several checks 6representing the aggregate amount of P1,534,135.50 issued by the company's customers in payment of their obligation were, instead of being turned over to the company's coffers, indorsed by respondent who deposited the same to her personal banking account maintained at Security Bank and Trust Company (Security Bank) in Divisoria, Manila Branch. 7 Upon a finding that the evidence adduced was uncontroverted, the assistant city prosecutor recommended the filing of the Information for qualified theft against respondent. 8
IDCScA

Accordingly, respondent was charged before the Regional Trial Court of Manila, Branch 36, in an Information, the inculpatory portion of which reads:
That in or about or sometime during the period comprised (sic) between January 1988 [and] October 1989, inclusive, in the City of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously with intent [to] gain and without the knowledge and consent of the owner thereof, take, steal and carry away cash money in the total amount of P1,534,135.50 belonging to BSB GROUP OF COMPANIES represented by RICARDO BANGAYAN, to the damage and prejudice of said owner in the aforesaid amount of P1,534,135.50, Philippine currency. That in the commission of the said offense, said accused acted with grave abuse of confidence, being then employed as cashier by said complainant at the time of the commission of the said offense and as such she was entrusted with the said amount of money. Contrary to law.
9

Respondent entered a negative plea when arraigned. 10 The trial ensued. On the premise that respondent had allegedly encashed the subject checks and deposited the corresponding amounts thereof to her personal banking account, the prosecution moved for the issuance of subpoena duces tecum/ad testificandum against the respective managers or records custodians of Security Bank's Divisoria Branch, as well as of the Asian Savings Bank (now Metropolitan Bank & Trust Co. [Metrobank]), in Jose Abad Santos, Tondo, Manila Branch. 11 The trial court granted the motion and issued the corresponding subpoena. 12 Respondent filed a motion to quash the subpoena dated November 4, 2003, addressed to Metrobank, noting to the court that in the complaint-affidavit filed

with the prosecutor, there was no mention made of the said bank account, to which respondent, in addition to the Security Bank account identified as Account No. 01-14-006, allegedly deposited the proceeds of the supposed checks. Interestingly, while respondent characterized the Metrobank account as irrelevant to the case, she, in the same motion, nevertheless waived her objection to the irrelevancy of the Security Bank account mentioned in the same complaint-affidavit, inasmuch as she was admittedly willing to address the allegations with respect thereto. 13
cTADCH

Petitioner, opposing respondent's move, argued for the relevancy of the Metrobank account on the ground that the complaint-affidavit showed that there were two checks which respondent allegedly deposited in an account with the said bank. 14 To this, respondent filed a supplemental motion to quash, invoking the absolutely confidential nature of the Metrobank account under the provisions of Republic Act (R.A.) No. 1405. 15 The trial court did not sustain respondent; hence, it denied the motion to quash for lack of merit. 16 Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan (Marasigan), the representative of Security Bank. In a nutshell, Marasigan's testimony sought to prove that between 1988 and 1989, respondent, while engaged as cashier at the BSB Group, Inc., was able to run away with the checks issued to the company by its customers, endorse the same, and credit the corresponding amounts to her personal deposit account with Security Bank. In the course of the testimony, the subject checks were presented to Marasigan for identification and marking as the same checks received by respondent, endorsed, and then deposited in her personal account with Security Bank. 17 But before the testimony could be completed, respondent filed a Motion to Suppress, 18 seeking the exclusion of Marasigan's testimony and accompanying documents thus far received, bearing on the subject Security Bank account. This time respondent invokes, in addition to irrelevancy, the privilege of confidentiality under R.A. No. 1405. The trial court, nevertheless, denied the motion in its September 13, 2004 Order. 19 A motion for reconsideration was subsequently filed, but it was also denied in the Order dated November 5, 2004. 20 These two orders are the subject of the instant case. Aggrieved, and believing that the trial court gravely abused its discretion in acting the way it did, respondent elevated the matter to the Court of Appeals via a petition for certiorari under Rule 65. Finding merit in the petition, the Court of

Appeals reversed and set aside the assailed orders of the trial court in its April 20, 2005 Decision. 21 The decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed orders dated September 13, 2004 and November 5, 2004 are REVERSED and SET ASIDE. The testimony of the SBTC representative is ordered stricken from the records. SO ORDERED.
22

With the denial of its motion for reconsideration, 23 petitioner is now before the Court pleading the same issues as those raised before the lower courts.
DcaCSE

In this Petition 24 under Rule 45, petitioner averred in the main that the Court of Appeals had seriously erred in reversing the assailed orders of the trial court, and in effect striking out Marasigan's testimony dealing with respondent's deposit account with Security Bank. 25 It asserted that apart from the fact that the said evidence had a direct relation to the subject matter of the case for qualified theft and, hence, brings the case under one of the exceptions to the coverage of confidentiality under R.A. 1405. 26 Petitioner believed that what constituted the subject matter in litigation was to be determined by the allegations in the information and, in this respect, it alluded to the assailed November 5, 2004 Order of the trial court, which declared to be erroneous the limitation of the present inquiry merely to what was contained in the information. 27 For her part, respondent claimed that the money represented by the Security Bank account was neither relevant nor material to the case, because nothing in the criminal information suggested that the money therein deposited was the subject matter of the case. She invited particular attention to that portion of the criminal Information which averred that she has stolen and carried away cash money in the total amount of P1,534,135.50. She advanced the notion that the term "cash money" stated in the Information was not synonymous with the checks she was purported to have stolen from petitioner and deposited in her personal banking account. Thus, the checks which the prosecution had Marasigan identify, as well as the testimony itself of Marasigan, should be suppressed by the trial court at least for violating respondent's right to due process. 28 More in point, respondent opined that admitting the testimony of Marasigan, as well as the evidence pertaining to the Security Bank account, would violate the secrecy rule under R.A. No. 1405. 29 In its reply, petitioner asserted the sufficiency of the allegations in the criminal Information for qualified theft, as the same has sufficiently alleged the elements

of the offense charged. It posits that through Marasigan's testimony, the Court would be able to establish that the checks involved, copies of which were attached to the complaint-affidavit filed with the prosecutor, had indeed been received by respondent as cashier, but were, thereafter, deposited by the latter to her personal account with Security Bank. Petitioner held that the checks represented the cash money stolen by respondent and, hence, the subject matter in this case is not only the cash amount represented by the checks supposedly stolen by respondent, but also the checks themselves. 30 We derive from the conflicting advocacies of the parties that the issue for resolution is whether the testimony of Marasigan and the accompanying documents are irrelevant to the case, and whether they are also violative of the absolutely confidential nature of bank deposits and, hence, excluded by operation of R.A. No. 1405. The question of admissibility of the evidence thus comes to the fore. And the Court, after deliberative estimation, finds the subject evidence to be indeed inadmissible.
caIDSH

Prefatorily, fundamental is the precept in all criminal prosecutions, that the constitutive acts of the offense must be established with unwavering exactitude and moral certainty because this is the critical and only requisite to a finding of guilt. 31 Theft is present when a person, with intent to gain but without violence against or intimidation of persons or force upon things, takes the personal property of another without the latter's consent. It is qualified when, among others, and as alleged in the instant case, it is committed with abuse of confidence. 32 The prosecution of this offense necessarily focuses on the existence of the following elements: (a) there was taking of personal property belonging to another; (b) the taking was done with intent to gain; (c) the taking was done without the consent of the owner; (d) the taking was done without violence against or intimidation of persons or force upon things; and (e) it was done with abuse of confidence. 33 In turn, whether these elements concur in a way that overcomes the presumption of guiltlessness, is a question that must pass the test of relevancy and competency in accordance with Section 3 34 Rule 128 of the Rules of Court. Thus, whether these pieces of evidence sought to be suppressed in this case the testimony of Marasigan, as well as the checks purported to have been stolen and deposited in respondent's Security Bank account are relevant, is to be addressed by considering whether they have such direct relation to the fact in issue as to induce belief in its existence or non-existence; or whether they relate collaterally to a fact from which, by process of logic, an inference may be made as to the existence or non-existence of the fact in issue. 35

The fact in issue appears to be that respondent has taken away cash in the amount of P1,534,135.50 from the coffers of petitioner. In support of this allegation, petitioner seeks to establish the existence of the elemental act of taking by adducing evidence that respondent, at several times between 1988 and 1989, deposited some of its checks to her personal account with Security Bank. Petitioner addresses the incongruence between the allegation of theft of cash in the Information, on the one hand, and the evidence that respondent had first stolen the checks and deposited the same in her banking account, on the other hand, by impressing upon the Court that there obtains no difference between cash and check for purposes of prosecuting respondent for theft of cash. Petitioner is mistaken. In theft, the act of unlawful taking connotes deprivation of personal property of one by another with intent to gain, and it is immaterial that the offender is able or unable to freely dispose of the property stolen because the deprivation relative to the offended party has already ensued from such act of execution. 36 The allegation of theft of money, hence, necessitates that evidence presented must have a tendency to prove that the offender has unlawfully taken money belonging to another. Interestingly, petitioner has taken pains in attempting to draw a connection between the evidence subject of the instant review, and the allegation of theft in the Information by claiming that respondent had fraudulently deposited the checks in her own name. But this line of argument works more prejudice than favor, because it in effect, seeks to establish the commission, not of theft, but rather of some other crime probably estafa.
cCDAHE

Moreover, that there is no difference between cash and check is true in other instances. In estafa by conversion, for instance, whether the thing converted is cash or check, is immaterial in relation to the formal allegation in an information for that offense; a check, after all, while not regarded as legal tender, is normally accepted under commercial usage as a substitute for cash, and the credit it represents in stated monetary value is properly capable of appropriation. And it is in this respect that what the offender does with the check subsequent to the act of unlawfully taking it becomes material inasmuch as this offense is a continuing one. 37 In other words, in pursuing a case for this offense, the prosecution may establish its cause by the presentation of the checks involved. These checks would then constitute the best evidence to establish their contents and to prove the elemental act of conversion in support of the proposition that the offender has indeed indorsed the same in his own name. 38

Theft, however, is not of such character. Thus, for our purposes, as the Information in this case accuses respondent of having stolen cash, proof tending to establish that respondent has actualized her criminal intent by indorsing the checks and depositing the proceeds thereof in her personal account, becomes not only irrelevant but also immaterial and, on that score, inadmissible in evidence. We now address the issue of whether the admission of Marasigan's testimony on the particulars of respondent's account with Security Bank, as well as of the corresponding evidence of the checks allegedly deposited in said account, constitutes an unallowable inquiry under R.A. 1405. It is conceded that while the fundamental law has not bothered with the triviality of specifically addressing privacy rights relative to banking accounts, there, nevertheless, exists in our jurisdiction a legitimate expectation of privacy governing such accounts. The source of this right of expectation is statutory, and it is found in R.A. No. 1405, 39 otherwise known as the Bank Secrecy Act of 1955. 40 R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time encourage the people to deposit their money in banking institutions, so that it may be utilized by way of authorized loans and thereby assist in economic development. 41 Owing to this piece of legislation, the confidentiality of bank deposits remains to be a basic state policy in the Philippines. 42 Section 2 of the law institutionalized this policy by characterizing as absolutely confidential in general all deposits of whatever nature with banks and other financial institutions in the country. It declares:
CIAacS

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.

Subsequent statutory enactments 43 have expanded the list of exceptions to this policy yet the secrecy of bank deposits still lies as the general rule, falling as it does within the legally recognized zones of privacy. 44 There is, in fact, much

disfavor to construing these primary and supplemental exceptions in a manner that would authorize unbridled discretion, whether governmental or otherwise, in utilizing these exceptions as authority for unwarranted inquiry into bank accounts. It is then perceivable that the present legal order is obliged to conserve the absolutely confidential nature of bank deposits. 45 The measure of protection afforded by the law has been explained in China Banking Corporation v. Ortega. 46 That case principally addressed the issue of whether the prohibition against an examination of bank deposits precludes garnishment in satisfaction of a judgment. Ruling on that issue in the negative, the Court found guidance in the relevant portions of the legislative deliberations on Senate Bill No. 351 and House Bill No. 3977, which later became the Bank Secrecy Act, and it held that the absolute confidentiality rule in R.A. No. 1405 actually aims at protection from unwarranted inquiry or investigation if the purpose of such inquiry or investigation is merely to determine the existence and nature, as well as the amount of the deposit in any given bank account. Thus,
. . . The lower court did not order an examination of or inquiry into the 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 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 will be noted from. the discussion of the conference committee report on Senate Bill No. 351 and House Bill No. 3977 which later became Republic Act No. 1405, that it was not the intention of the lawmakers to place banks deposits beyond the reach of execution to satisfy a final, judgment. Thus:
TIHCcA

. . . Mr. Marcos: Now, for purposes of the record, I should like the Chairman of the Committee on Ways and Means to clarify this further. Suppose an individual has a tax case. He is being held liable by the Bureau of Internal Revenue [(BIR)] or, say, P1,000.00 worth of tax liability, and because of this the deposit of this individual [has been] attached by the [BIR]. Mr. Ramos: The attachment will only apply after the court has pronounced sentence declaring the liability of such person. But where the primary aim is to determine whether he has a

bank deposit in order to bring about a proper assessment by the [BIR], such inquiry is not allowed by this proposed law. Mr. Marcos: But under our rules of procedure and under the Civil Code, the attachment or garnishment of money deposited is allowed. Let us assume for instance that there is a preliminary attachment which is for garnishment or for holding liable all moneys deposited belonging to a certain individual, but such attachment or garnishment will bring out into the open the value of such deposit. Is that prohibited by . . . the law? Mr. Ramos: It is only prohibited to the extent that the inquiry . . . is made only for the purpose of satisfying a tax liability already declared for the protection of the right in favor of the government; but when the object is merely to inquire whether he has a deposit or not for purposes of taxation, then this is fully covered by the law. . . . Mr. Marcos: The law prohibits a mere investigation into the existence and the amount of the deposit. Mr. Ramos: Into the very nature of such deposit. . . .
47

In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant case posits that the account maintained by respondent with Security Bank contains the proceeds of the checks that she has fraudulently appropriated to herself and, thus, falls under one of the exceptions in Section 2 of R.A. No. 1405 that the money kept in said account is the subject matter in litigation. To highlight this thesis, petitioner avers, citing Mathay v. Consolidated Bank and Trust Co., 48 that the subject matter of the action refers to the physical facts; the things real or personal; the money, lands, chattels and the like, in relation to which the suit is prosecuted, which in the instant case should refer to the money deposited in the Security Bank account. 49 On the surface, however, it seems that petitioner's theory is valid to a point, yet a deeper treatment tends to show

that it has argued quite off-tangentially. This, because, while Mathay did explain what the subject matter of an action is, it nevertheless did so only to determine whether the class suit in that case was properly brought to the Court.
aAcHCT

What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has been pointedly and amply addressed in Union Bank of the Philippines v. Court of Appeals, 50 in which the Court noted that the inquiry into bank deposits allowable under R.A. No. 1405 must be premised on the fact that the money deposited in the account is itself the subject of the action. 51 Given this perspective, we deduce that the subject matter of the action in the case at bar is to be determined from the indictment that charges respondent with the offense, and not from the evidence sought by the prosecution to be admitted into the records. In the criminal Information filed with the trial court, respondent, unqualifiedly and in plain language, is charged with qualified theft by abusing petitioner's trust and confidence and stealing cash in the amount of P1,534,135.50. The said Information makes no factual allegation that in some material way involves the checks subject of the testimonial and documentary evidence sought to be suppressed. Neither do the allegations in said Information make mention of the supposed bank account in which the funds represented by the checks have allegedly been kept. In other words, it can hardly be inferred from the indictment itself that the Security Bank account is the ostensible subject of the prosecution's inquiry. Without needlessly expanding the scope of what is plainly alleged in the Information, the subject matter of the action in this case is the money amounting to P1,534,135.50 alleged to have been stolen by respondent, and not the money equivalent of the checks which are sought to be admitted in evidence. Thus, it is that, which the prosecution is bound to prove with its evidence, and no other. It comes clear that the admission of testimonial and documentary evidence relative to respondent's Security Bank account serves no other purpose than to establish the existence of such account, its nature and the amount kept in it. It constitutes an attempt by the prosecution at an impermissible inquiry into a bank deposit account the privacy and confidentiality of which is protected by law. On this score alone, the objection posed by respondent in her motion to suppress should have indeed put an end to the controversy at the very first instance it was raised before the trial court. In sum, we hold that the testimony of Marasigan on the particulars of respondent's supposed bank account with Security Bank and the documentary

evidence represented by the checks adduced in support thereof, are not only incompetent for being excluded by operation of R.A. No. 1405. They are likewise irrelevant to the case, inasmuch as they do not appear to have any logical and reasonable connection to the prosecution of respondent for qualified theft. We find full merit in and affirm respondent's objection to the evidence of the prosecution. The Court of Appeals was, therefore, correct in reversing the assailed orders of the trial court.
cEHSIC

A final note. In any given jurisdiction where the right of privacy extends its scope to include an individual's financial privacy rights and personal financial matters, there is an intermediate or heightened scrutiny given by courts and legislators to laws infringing such rights. 52 Should there be doubts in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former. This attitude persists unless congress lifts its finger to reverse the general state policy respecting the absolutely confidential nature of bank deposits. 53 WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 87600 dated April 20, 2005, reversing the September 13, 2004 and November 5, 2004 Orders of the Regional Trial Court of Manila, Branch 36 in Criminal Case No. 02-202158, is AFFIRMED. SO ORDERED.

Corona, Velasco, Jr., Nachura and Mendoza, JJ., concur.

SECOND DIVISION
[G.R. No. 174629. February 14, 2008.] REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY LAUNDERING COUNCIL (AMLC), petitioner, vs. HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG, respondents. DECISION

TINGA, J :
p

The present petition for certiorari and prohibition under Rule 65 assails the orders and resolutions issued by two different courts in two different cases. The courts and cases in question are the Regional Trial Court of Manila, Branch 24, which heard SP Case No. 06-114200 1 and the Court of Appeals, Tenth Division, which heared CA-G.R. SP No. 95198. 2 Both cases arose as part of the aftermath of the ruling of this Court in Agan v. PIATCO 3 nullifying the concession agreement awarded to the Philippine International Airport Terminal Corporation (PIATCO) over the Ninoy Aquino International Airport International Passenger Terminal 3 (NAIA 3) Project.

I.
Following the promulgation of Agan, a series of investigations concerning the award of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman and the Compliance and Investigation Staff (CIS) of petitioner Anti-Money Laundering Council (AMLC). On 24 May 2005, the Office of the Solicitor General (OSG) wrote the AMLC requesting the latter's assistance "in obtaining more evidence to completely reveal the financial trail of corruption surrounding the [NAIA 3] Project," and also noting that petitioner Republic of the Philippines was presently defending itself in two international arbitration cases filed in relation to the NAIA 3 Project. 4 The CIS conducted an intelligence database search on the financial transactions of certain individuals involved in the award, including respondent Pantaleon Alvarez (Alvarez) who had been the Chairman of the PBAC Technical Committee, NAIA-IPT3 Project. 5 By this time, Alvarez had already been charged by the Ombudsman with violation of Section 3 (j) of R.A. No. 3019. 6 The search revealed that Alvarez maintained eight (8) bank accounts with six (6) different banks. 7 On 27 June 2005, the AMLC issued Resolution No. 75, Series of 2005, 8 whereby the Council resolved to authorize the Executive Director of the AMLC "to sign and verify an application to inquire into and/or examine the [deposits] or investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and Cheng Yong, and their related web of accounts wherever these may be found, as defined under Rule 10.4 of the Revised Implementing Rules and Regulations;" and to authorize the AMLC Secretariat "to conduct an inquiry into subject accounts once the Regional Trial Court grants the application to inquire into and/or examine the bank accounts" of those four individuals. 9 The resolution enumerated the particular bank accounts of Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong which were to be the subject of the

inquiry. 10 The rationale for the said resolution was founded on the cited findings of the CIS that amounts were transferred from a Hong Kong bank account owned by Jetstream Pacific Ltd. Account to bank accounts in the Philippines maintained by Liongson and Cheng Yong. 11 The Resolution also noted that "[b]y awarding the contract to PIATCO despite its lack of financial capacity, Pantaleon Alvarez caused undue injury to the government by giving PIATCO unwarranted benefits, advantage, or preference in the discharge of his official administrative functions through manifest partiality, evident bad faith, or gross inexcusable negligence, in violation of Section 3 (e) of Republic Act No. 3019." 12 Under the authority granted by the Resolution, the AMLC filed an application to inquire into or examine the deposits or investments of Alvarez, Trinidad, Liongson and Cheng Yong before the RTC of Makati, Branch 138, presided by Judge (now Court of Appeals Justice) Sixto Marella, Jr. The application was docketed as AMLC No. 05-005. 13 The Makati RTC heard the testimony of the Deputy Director of the AMLC, Richard David C. Funk II, and received the documentary evidence of the AMLC. 14Thereafter, on 4 July 2005, the Makati RTC rendered an Order (Makati RTC bank inquiry order) granting the AMLC the authority to inquire and examine the subject bank accounts of Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being satisfied that there existed "[p]robable cause [to] believe that the deposits in various bank accounts, details of which appear in paragraph 1 of the Application, are related to the offense of violation of Anti-Graft and Corrupt Practices Act now the subject of criminal prosecution before the Sandiganbayan as attested to by the Informations, Exhibits C, D, E, F, and G." 15 Pursuant to the Makati RTC bank inquiry order, the CIS proceeded to inquire and examine the deposits, investments and related web accounts of the four. 16 Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis VillaIgnacio, wrote a letter dated 2 November 2005, requesting the AMLC to investigate the accounts of Alvarez, PIATCO, and several other entities involved in the nullified contract. The letter adverted to probable cause to believe that the bank accounts "were used in the commission of unlawful activities that were committed" in relation to the criminal cases then pending before the Sandiganbayan. 17 Attached to the letter was a memorandum "on why the investigation of the [accounts] is necessary in the prosecution of the above criminal cases before the Sandiganbayan." 18 In response to the letter of the Special Prosecutor, the AMLC promulgated on 9 December 2005 Resolution No. 121 Series of 2005, 19 which authorized the executive director of the AMLC to inquire into and examine the accounts named

in the letter, including one maintained by Alvarez with DBS Bank and two other accounts in the name of Cheng Yong with Metrobank. The Resolution characterized the memorandum attached to the Special Prosecutor's letter as "extensively justif[ying] the existence of probable cause that the bank accounts of the persons and entities mentioned in the letter are related to the unlawful activity of violation of Sections 3 (g) and 3 (e) of Rep. Act No. 3019, as amended." 20 Following the December 2005 AMLC Resolution, the Republic, through the AMLC, filed an application 21 before the Manila RTC to inquire into and/or examine thirteen (13) accounts and two (2) related web of accounts alleged as having been used to facilitate corruption in the NAIA 3 Project. Among said accounts were the DBS Bank account of Alvarez and the Metrobank accounts of Cheng Yong. The case was raffled to Manila RTC, Branch 24, presided by respondent Judge Antonio Eugenio, Jr., and docketed as SP Case No. 06-114200. On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank inquiry order) granting theEx Parte Application expressing therein "[that] the allegations in said application to be impressed with merit, and in conformity with Section 11 of R.A. No. 9160, as amended, otherwise known as the Anti-Money Laundering Act (AMLA) of 2001 and Rules 11.1 and 11.2 of the Revised Implementing Rules and Regulations." 22 Authority was thus granted to the AMLC to inquire into the bank accounts listed therein. On 25 January 2006, Alvarez, through counsel, entered his appearance 23 before the Manila RTC in SP Case No. 06-114200 and filed an Urgent Motion to Stay Enforcement of Order of January 12, 2006. 24 Alvarez alleged that he fortuitously learned of the bank inquiry order, which was issued following an ex parteapplication, and he argued that nothing in R.A. No. 9160 authorized the AMLC to seek the authority to inquire into bank accounts ex parte. 25 The day after Alvarez filed his motion, 26 January 2006, the Manila RTC issued an Order 26 staying the enforcement of its bank inquiry order and giving the Republic five (5) days to respond to Alvarez's motion. The Republic filed an Omnibus Motion for Reconsideration 27 of the 26 January 2006 Manila RTC Order and likewise sought to strike out Alvarez's motion that led to the issuance of said order. For his part, Alvarez filed a Reply and Motion to Dismiss 28 the application for bank inquiry order. On 2 May 2006, the Manila RTC issued an Omnibus Order 29 granting the Republic's Motion for Reconsideration, denying Alvarez's motion to dismiss and reinstating "in full force and effect" the Order dated 12 January 2006. In the omnibus order, the Manila RTC reiterated

that the material allegations in the application for bank inquiry order filed by the Republic stood as "the probable cause for the investigation and examination of the bank accounts and investments of the respondents." 30 Alvarez filed on 10 May 2006 an Urgent Motion 31 expressing his apprehension that the AMLC would immediately enforce the omnibus order and would thereby render the motion for reconsideration he intended to file as moot and academic; thus he sought that the Republic be refrained from enforcing the omnibus order in the meantime. Acting on this motion, the Manila RTC, on 11 May 2006, issued an Order 32 requiring the OSG to file a comment/opposition and reminding the parties that judgments and orders become final and executory upon the expiration of fifteen (15) days from receipt thereof, as it is the period within which a motion for reconsideration could be filed. Alvarez filed his Motion for Reconsideration 33 of the omnibus order on 15 May 2006, but the motion was denied by the Manila RTC in an Order 34 dated 5 July 2006. On 11 July 2006, Alvarez filed an Urgent Motion and Manifestation 35 wherein he manifested having received reliable information that the AMLC was about to implement the Manila RTC bank inquiry order even though he was intending to appeal from it. On the premise that only a final and executory judgment or order could be executed or implemented, Alvarez sought that the AMLC be immediately ordered to refrain from enforcing the Manila RTC bank inquiry order.

On 12 July 2006, the Manila RTC, acting on Alvarez's latest motion, issued an Order 36 directing the AMLC "to refrain from enforcing the order dated January 12, 2006 until the expiration of the period to appeal, without any appeal having been filed." On the same day, Alvarez filed a Notice of Appeal 37 with the Manila RTC. On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for Clarification. 38 Therein, he alleged having learned that the AMLC had began to inquire into the bank accounts of the other persons mentioned in the application for bank inquiry order filed by the Republic. 39 Considering that the Manila RTC bank inquiry order was issued ex parte, without notice to those other persons, Alvarez prayed that the AMLC be ordered to refrain from inquiring into any of the other bank deposits and alleged web of accounts enumerated in AMLC's application with the RTC; and that the AMLC be directed to refrain from using, disclosing or publishing in any proceeding or venue any information or document obtained in violation of the 11 May 2006 RTC Order. 40

On 25 July 2006, or one day after Alvarez filed his motion, the Manila RTC issued an Order 41 wherein it clarified that "the Ex Parte Order of this Court dated January 12, 2006 can not be implemented against the deposits or accounts of any of the persons enumerated in the AMLC Application until the appeal of movant Alvarez is finally resolved, otherwise, the appeal would be rendered moot and academic or even nugatory." 42 In addition, the AMLC was ordered "not to disclose or publish any information or document found or obtained in [v]iolation of the May 11, 2006 Order of this Court." 43 The Manila RTC reasoned that the other persons mentioned in AMLC's application were not served with the court's 12 January 2006 Order. This 25 July 2006 Manila RTC Order is the first of the four rulings being assailed through this petition. In response, the Republic filed an Urgent Omnibus Motion for Reconsideration 44 dated 27 July 2006, urging that it be allowed to immediately enforce the bank inquiry order against Alvarez and that Alvarez's notice of appeal be expunged from the records since appeal from an order of inquiry is disallowed under the Anti money Laundering Act (AMLA). Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with Application for TRO and/or Writ of Preliminary Injunction 45 dated 10 July 2006, directed against the Republic of the Philippines through the AMLC, Manila RTC Judge Eugenio, Jr. and Makati RTC Judge Marella, Jr.. She identified herself as the wife of Cheng Yong 46 with whom she jointly owns a conjugal bank account with Citibank that is covered by the Makati RTC bank inquiry order, and two conjugal bank accounts with Metrobank that are covered by the Manila RTC bank inquiry order. Lilia Cheng imputed grave abuse of discretion on the part of the Makati and Manila RTCs in granting AMLC's ex parte applications for a bank inquiry order, arguing among others that the ex parteapplications violated her constitutional right to due process, that the bank inquiry order under the AMLA can only be granted in connection with violations of the AMLA and that the AMLA can not apply to bank accounts opened and transactions entered into prior to the effectivity of the AMLA or to bank accounts located outside the Philippines. 47 On 1 August 2006, the Court of Appeals, acting on Lilia Cheng's petition, issued a Temporary Restraining Order 48 enjoining the Manila and Makati trial courts from implementing, enforcing or executing the respective bank inquiry orders previously issued, and the AMLC from enforcing and implementing such orders. On even date, the Manila RTC issued an Order 49 resolving to hold in abeyance the resolution of the urgent omnibus motion for reconsideration then pending before it until the resolution of Lilia Cheng's petition for certiorari with the Court

of Appeals. The Court of Appeals Resolution directing the issuance of the temporary restraining order is the second of the four rulings assailed in the present petition. The third assailed ruling 50 was issued on 15 August 2006 by the Manila RTC, acting on the Urgent Motion for Clarification 51 dated 14 August 2006 filed by Alvarez. It appears that the 1 August 2006 Manila RTC Order had amended its previous 25 July 2006 Order by deleting the last paragraph which stated that the AMLC "should not disclose or publish any information or document found or obtained in violation of the May 11, 2006 Order of this Court." 52 In this new motion, Alvarez argued that the deletion of that paragraph would allow the AMLC to implement the bank inquiry orders and publish whatever information it might obtain thereupon even before the final orders of the Manila RTC could become final and executory. 53 In the 15 August 2006 Order, the Manila RTC reiterated that the bank inquiry order it had issued could not be implemented or enforced by the AMLC or any of its representatives until the appeal therefrom was finally resolved and that any enforcement thereof would be unauthorized. 54 The present Consolidated Petition 55 for certiorari and prohibition under Rule 65 was filed on 2 October 2006, assailing the two Orders of the Manila RTC dated 25 July and 15 August 2006 and the Temporary Restraining Order dated 1 August 2006 of the Court of Appeals. Through an Urgent Manifestation and Motion 56 dated 9 October 2006, petitioner informed the Court that on 22 September 2006, the Court of Appeals hearing Lilia Cheng's petition had granted a writ of preliminary injunction in her favor. 57 Thereafter, petitioner sought as well the nullification of the 22 September 2006 Resolution of the Court of Appeals, thereby constituting the fourth ruling assailed in the instant petition. 58 The Court had initially granted a Temporary Restraining Order 59 dated 6 October 2006 and later on a Supplemental Temporary Restraining Order 60 dated 13 October 2006 in petitioner's favor, enjoining the implementation of the assailed rulings of the Manila RTC and the Court of Appeals. However, on respondents' motion, the Court, through a Resolution 61 dated 11 December 2006, suspended the implementation of the restraining orders it had earlier issued. Oral arguments were held on 17 January 2007. The Court consolidated the issues for argument as follows:
1.Did the RTC-Manila, in issuing the Orders dated 25 July 2006 and 15 August 2006 which deferred the implementation of its Order dated 12 January 2006, and the Court of Appeals, in issuing its Resolution dated 1

August 2006, which ordered the status quo in relation to the 1 July 2005 Order of the RTC-Makati and the 12 January 2006 Order of the RTCManila, both of which authorized the examination of bank accounts under Section 11 of Rep. Act No. 9160 (AMLA), commit grave abuse of discretion? (a)Is an application for an order authorizing inquiry into or examination of bank accounts or investments under Section 11 of the AMLA ex-parte in nature or one which requires notice and hearing? (b)What legal procedures and standards should be observed in the conduct of the proceedings for the issuance of said order? (c)Is such order susceptible to legal challenges and judicial review? 2.Is it proper for this Court at this time and in this case to inquire into and pass upon the validity of the 1 July 2005 Order of the RTC-Makati and the 12 January 2006 Order of the RTC-Manila, considering the pendency of CA G.R. SP No. 95-198 (Lilia Cheng v. Republic) wherein the validity of both orders was challenged? 62

After the oral arguments, the parties were directed to file their respective memoranda, which they did, 63 and the petition was thereafter deemed submitted for resolution.

II.
Petitioner's general advocacy is that the bank inquiry orders issued by the Manila and Makati RTCs are valid and immediately enforceable whereas the assailed rulings, which effectively stayed the enforcement of the Manila and Makati RTCs bank inquiry orders, are sullied with grave abuse of discretion. These conclusions flow from the posture that a bank inquiry order, issued upon a finding of probable cause, may be issued ex parte and, once issued, is immediately executory. Petitioner further argues that the information obtained following the bank inquiry is necessarily beneficial, if not indispensable, to the AMLC in discharging its awesome responsibility regarding the effective implementation of the AMLA and that any restraint in the disclosure of such information to appropriate agencies or other judicial fora would render meaningless the relief supplied by the bank inquiry order.

Petitioner raises particular arguments questioning Lilia Cheng's right to seek injunctive relief before the Court of Appeals, noting that not one of the bank inquiry orders is directed against her. Her "cryptic assertion" that she is the wife of Cheng Yong cannot, according to petitioner, "metamorphose into the requisite legal standing to seek redress for an imagined injury or to maintain an action in behalf of another." In the same breath, petitioner argues that Alvarez cannot assert any violation of the right to financial privacy in behalf of other persons whose bank accounts are being inquired into, particularly those other persons named in the Makati RTC bank inquiry order who did not take any step to oppose such orders before the courts. Ostensibly, the proximate question before the Court is whether a bank inquiry order issued in accordance with Section 10 of the AMLA may be stayed by injunction. Yet in arguing that it does, petitioner relies on what it posits as the final and immediately executory character of the bank inquiry orders issued by the Manila and Makati RTCs. Implicit in that position is the notion that the inquiry orders are valid, and such notion is susceptible to review and validation based on what appears on the face of the orders and the applications which triggered their issuance, as well as the provisions of the AMLA governing the issuance of such orders. Indeed, to test the viability of petitioner's argument, the Court will have to be satisfied that the subject inquiry orders are valid in the first place. However, even from a cursory examination of the applications for inquiry order and the orders themselves, it is evident that the orders are inconsistent with the AMLA and the Constitution.

III.
A brief overview of the AMLA is called for. Money laundering has been generally defined by the International Criminal Police Organization (Interpol) as "any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources." 64 Even before the passage of the AMLA, the problem was addressed by the Philippine government through the issuance of various circulars by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative proscription was necessary, especially with the inclusion of the Philippines in the Financial Action Task Force's list of non-cooperative countries and territories in the fight against money laundering. 65 The original AMLA, Republic Act (R.A.) No. 9160, was passed in 2001. It was amended by R.A. No. 9194 in 2003.

Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the proceeds of an unlawful activity as [defined in the law] are transacted, thereby making them appear to have originated from legitimate sources." 66 The section further provides the three modes through which the crime of money laundering is committed. Section 7 creates the AMLC and defines its powers, which generally relate to the enforcement of the AMLA provisions and the initiation of legal actions authorized in the AMLA such as civil forefeiture proceedings and complaints for the prosecution of money laundering offenses. 67 In addition to providing for the definition and penalties for the crime of money laundering, the AMLA also authorizes certain provisional remedies that would aid the AMLC in the enforcement of the AMLA. These are the "freeze order" authorized under Section 10, and the "bank inquiry order" authorized under Section 11. Respondents posit that a bank inquiry order under Section 11 may be obtained only upon the pre-existence of a money laundering offense case already filed before the courts. 68 The conclusion is based on the phrase "upon order of any competent court in cases of violation of this Act," the word "cases" generally understood as referring to actual cases pending with the courts. We are unconvinced by this proposition, and agree instead with the then Solicitor General who conceded that the use of the phrase "in cases of" was unfortunate, yet submitted that it should be interpreted to mean "in the event there are violations" of the AMLA, and not that there are already cases pending in court concerning such violations. 69 If the contrary position is adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the government to ascertain whether there is sufficient evidence to sustain an intended prosecution of the account holder for violation of the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders. After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing of complaints under the AMLA with the hope or expectation that the evidence of money laundering would somehow surface during the trial. Since the AMLC could not make use of the bank inquiry order to determine whether there is evidentiary basis to prosecute the suspected malefactors, not filing any case at all would not be an alternative. Such unwholesome set-up should not come to pass. Thus Section 11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the unfounded initiation of complaints for money laundering.

Still, even if the bank inquiry order may be availed of without need of a preexisting case under the AMLA, it does not follow that such order may be availed of ex parte. There are several reasons why the AMLA does not generally sanction ex parte applications and issuances of the bank inquiry order.

IV.
It is evident that Section 11 does not specifically authorize, as a general rule, the issuance ex parte of the bank inquiry order. We quote the provision in full:
SEC. 11.Authority to Inquire into Bank Deposits.
Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(i)1, (2) and (12). To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP. 70 (Emphasis supplied)

Of course, Section 11 also allows the AMLC to inquire into bank accounts without having to obtain a judicial order in cases where there is probable cause that the deposits or investments are related to kidnapping for ransom, 71 certain violations of the Comprehensive Dangerous Drugs Act of 2002, 72 hijacking and other violations under R.A. No. 6235, destructive arson and murder. Since such special circumstances do not apply in this case, there is no need for us to pass comment on this proviso. Suffice it to say, the proviso contemplates a situation distinct from that which presently confronts us, and for purposes of the succeeding discussion, our reference to Section 11 of the AMLA excludes said proviso. In the instances where a court order is required for the issuance of the bank inquiry order, nothing in Section 11 specifically authorizes that such court order

may be issued ex parte. It might be argued that this silence does not preclude the ex parte issuance of the bank inquiry order since the same is not prohibited under Section 11. Yet this argument falls when the immediately preceding provision, Section 10, is examined.
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 Section 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. 73

Although oriented towards different purposes, the freeze order under Section 10 and the bank inquiry order under Section 11 are similar in that they are extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute money laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the provisional relief therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize ex parteproceedings for the issuance of the bank inquiry order, then it could have easily expressed such intent in the law, as it did with the freeze order under Section 10. Even more tellingly, the current language of Sections 10 and 11 of the AMLA was crafted at the same time, through the passage of R.A. No. 9194. Prior to the amendatory law, it was the AMLC, not the Court of Appeals, which had authority to issue a freeze order, whereas a bank inquiry order always then required, without exception, an order from a competent court. 74 It was through the same enactment that ex parte proceedings were introduced for the first time into the AMLA, in the case of the freeze order which now can only be issued by the Court of Appeals. It certainly would have been convenient, through the same amendatory law, to allow a similar ex parte procedure in the case of a bank inquiry order had Congress been so minded. Yet nothing in the provision itself, or even the available legislative record, explicitly points to an ex parte judicial procedure in the application for a bank inquiry order, unlike in the case of the freeze order. That the AMLA does not contemplate ex parte proceedings in applications for bank inquiry orders is confirmed by the present implementing rules and regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With respect to freeze orders under Section 10, the implementing rules do expressly provide that the applications for freeze orders be filed ex parte, 75 but no similar

clearance is granted in the case of inquiry orders under Section 11. 76 These implementing rules were promulgated by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission, 77 and if it was the true belief of these institutions that inquiry orders could be issued ex parte similar to freeze orders, language to that effect would have been incorporated in the said Rules. This is stressed not because the implementing rules could authorize ex parte applications for inquiry orders despite the absence of statutory basis, but rather because the framers of the law had no intention to allow such ex parte applications. Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC 78 to enforce the provisions of the AMLA specifically authorize ex parte applications with respect to freeze orders under Section 10 79 but make no similar authorization with respect to bank inquiry orders under Section 11. The Court could divine the sense in allowing ex parte proceedings under Section 10 and in proscribing the same under Section 11. A freeze order under Section 10 on the one hand is aimed at preserving monetary instruments or property in any way deemed related to unlawful activities as defined in Section 3 (i) of the AMLA. The owner of such monetary instruments or property would thus be inhibited from utilizing the same for the duration of the freeze order. To make such freeze order anteceded by a judicial proceeding with notice to the account holder would allow for or lead to the dissipation of such funds even before the order could be issued.

On the other hand, a bank inquiry order under Section 11 does not necessitate any form of physical seizure of property of the account holder. What the bank inquiry order authorizes is the examination of the particular deposits or investments in banking institutions or non-bank financial institutions. The monetary instruments or property deposited with such banks or financial institutions are not seized in a physical sense, but are examined on particular details such as the account holder's record of deposits and transactions. Unlike the assets subject of the freeze order, the records to be inspected under a bank inquiry order cannot be physically seized or hidden by the account holder. Said records are in the possession of the bank and therefore cannot be destroyed at the instance of the account holder alone as that would require the extraordinary cooperation and devotion of the bank.

Interestingly, petitioner's memorandum does not attempt to demonstrate before the Court that the bank inquiry order under Section 11 may be issued ex parte, although the petition itself did devote some space for that argument. The petition argues that the bank inquiry order is "a special and peculiar remedy, drastic in its name, and made necessary because of a public necessity . . . [t]hus, by its very nature, the application for an order or inquiry must necessarily, be ex parte." This argument is insufficient justification in light of the clear disinclination of Congress to allow the issuance ex parte of bank inquiry orders under Section 11, in contrast to the legislature's clear inclination to allow the ex parte grant of freeze orders under Section 10. Without doubt, a requirement that the application for a bank inquiry order be done with notice to the account holder will alert the latter that there is a plan to inspect his bank account on the belief that the funds therein are involved in an unlawful activity or money laundering offense. 80 Still, the account holder so alerted will in fact be unable to do anything to conceal or cleanse his bank account records of suspicious or anomalous transactions, at least not without the whole-hearted cooperation of the bank, which inherently has no vested interest to aid the account holder in such manner.

V.
The necessary implication of this finding that Section 11 of the AMLA does not generally authorize the issuance ex parte of the bank inquiry order would be that such orders cannot be issued unless notice is given to the owners of the account, allowing them the opportunity to contest the issuance of the order. Without such a consequence, the legislated distinction between ex parte proceedings under Section 10 and those which are not ex parte under Section 11 would be lost and rendered useless. There certainly is fertile ground to contest the issuance of an ex parte order. Section 11 itself requires that it be established that "there is probable cause that the deposits or investments are related to unlawful activities," and it obviously is the court which stands as arbiter whether there is indeed such probable cause. The process of inquiring into the existence of probable cause would involve the function of determination reposed on the trial court. Determination clearly implies a function of adjudication on the part of the trial court, and not a mechanical application of a standard pre-determination by some other body. The word "determination" implies deliberation and is, in normal legal contemplation, equivalent to "the decision of a court of justice." 81

The court receiving the application for inquiry order cannot simply take the AMLC's word that probable cause exists that the deposits or investments are related to an unlawful activity. It will have to exercise its own determinative function in order to be convinced of such fact. The account holder would be certainly capable of contesting such probable cause if given the opportunity to be apprised of the pending application to inquire into his account; hence a notice requirement would not be an empty spectacle. It may be so that the process of obtaining the inquiry order may become more cumbersome or prolonged because of the notice requirement, yet we fail to see any unreasonable burden cast by such circumstance. After all, as earlier stated, requiring notice to the account holder should not, in any way, compromise the integrity of the bank records subject of the inquiry which remain in the possession and control of the bank. Petitioner argues that a bank inquiry order necessitates a finding of probable cause, a characteristic similar to a search warrant which is applied to and heard ex parte. We have examined the supposed analogy between a search warrant and a bank inquiry order yet we remain to be unconvinced by petitioner. The Constitution and the Rules of Court prescribe particular requirements attaching to search warrants that are not imposed by the AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge personally examine under oath or affirmation the complainant and the witnesses he may produce, 82such examination being in the form of searching questions and answers. 83 Those are impositions which the legislative did not specifically prescribe as to the bank inquiry order under the AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest as it contemplates a direct object but not the seizure of persons or property. Even as the Constitution and the Rules of Court impose a high procedural standard for the determination of probable cause for the issuance of search warrants which Congress chose not to prescribe for the bank inquiry order under the AMLA, Congress nonetheless disallowed ex parte applications for the inquiry order. We can discern that in exchange for these procedural standards normally applied to search warrants, Congress chose instead to legislate a right to notice and a right to be heard characteristics of judicial proceedings which are not ex parte. Absent any demonstrable constitutional infirmity, there is no reason for us to dispute such legislative policy choices.

VI.

The Court's construction of Section 11 of the AMLA is undoubtedly influenced by right to privacy considerations. If sustained, petitioner's argument that a bank account may be inspected by the government following an ex parte proceeding about which the depositor would know nothing would have significant implications on the right to privacy, a right innately cherished by all notwithstanding the legally recognized exceptions thereto. The notion that the government could be so empowered is cause for concern of any individual who values the right to privacy which, after all, embodies even the right to be "let alone," the most comprehensive of rights and the right most valued by civilized people. 84 One might assume that the constitutional dimension of the right to privacy, as applied to bank deposits, warrants our present inquiry. We decline to do so. Admittedly, that question has proved controversial in American jurisprudence. Notably, the United States Supreme Court in U.S. v. Miller 85 held that there was no legitimate expectation of privacy as to the bank records of a depositor. 86 Moreover, the text of our Constitution has not bothered with the triviality of allocating specific rights peculiar to bank deposits. However, sufficient for our purposes, we can assert there is a right to privacy governing bank accounts in the Philippines, and that such right finds application to the case at bar. The source of such right is statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy is enshrined in Section 2 of that law, to wit:
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. (Emphasis supplied)

Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in the Philippines. 87 Subsequent laws, including the AMLA, may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the general rule. It falls within the zones of privacy recognized by our laws. 88 The framers of the 1987 Constitution likewise

recognized that bank accounts are not covered by either the right to information 89 under Section 7, Article III or under the requirement of full public disclosure 90 under Section 28, Article II. 91 Unless the Bank Secrecy Act is repealed or amended, the legal order is obliged to conserve the absolutely confidential nature of Philippine bank deposits. Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby these bank accounts may be examined by "any person, government official, bureau or office"; namely when: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) the money deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this Court as constituting an additional exception to the rule of absolute confidentiality, 92 A subsequent law, the Ombudsman Act of 1989, contains a provision relating to "access to bank accounts and records." 93

The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may inquire into a bank account upon order of any competent court in cases of violation of the AMLA, it having been established that there is probable cause that the deposits or investments are related to unlawful activities as defined in Section 3 (i) of the law, or a money laundering offense under Section 4 thereof. Further, in instances where there is probable cause that the deposits or investments are related to kidnapping for ransom, 94 certain violations of the Comprehensive Dangerous Drugs Act of 2002, 95 hijacking and other violations under R.A. No. 6235, destructive arson and murder, then there is no need for the AMLC to obtain a court order before it could inquire into such accounts. It cannot be successfully argued the proceedings relating to the bank inquiry order under Section 11 of the AMLA is a "litigation" encompassed in one of the exceptions to the Bank Secrecy Act which is when "the money deposited or invested is the subject matter of the litigation." The orientation of the bank inquiry order is simply to serve as a provisional relief or remedy. As earlier stated, the application for such does not entail a full-blown trial. Nevertheless, just because the AMLA establishes additional exceptions to the Bank Secrecy Act it does not mean that the later law has dispensed with the general principle established in the older law that "[a]ll deposits of whatever

nature with banks or banking institutions in the Philippines . . . are hereby considered as of an absolutely confidential nature." 96 Indeed, by force of statute, all bank deposits are absolutely confidential, and that nature is unaltered even by the legislated exceptions referred to above. There is disfavor towards construing these exceptions in such a manner that would authorize unlimited discretion on the part of the government or of any party seeking to enforce those exceptions and inquire into bank deposits. If there are doubts in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former. Such a stance would persist unless Congress passes a law reversing the general state policy of preserving the absolutely confidential nature of Philippine bank accounts. The presence of this statutory right to privacy addresses at least one of the arguments raised by petitioner, that Lilia Cheng had no personality to assail the inquiry orders before the Court of Appeals because she was not the subject of said orders. AMLC Resolution No. 75, which served as the basis in the successful application for the Makati inquiry order, expressly adverts to Citibank Account No. 88576248 "owned by Cheng Yong and/or Lilia G. Cheng with Citibank N.A.," 97 whereas Lilia Cheng's petition before the Court of Appeals is accompanied by a certification from Metrobank that Account Nos. 300852436-0 and 700149801-7, both of which are among the subjects of the Manila inquiry order, are accounts in the name of "Yong Cheng or Lilia Cheng." 98 Petitioner does not specifically deny that Lilia Cheng holds rights of ownership over the three said accounts, laying focus instead on the fact that she was not named as a subject of either the Makati or Manila RTC inquiry orders. We are reasonably convinced that Lilia Cheng has sufficiently demonstrated her joint ownership of the three accounts, and such conclusion leads us to acknowledge that she has the standing to assail via certiorari the inquiry orders authorizing the examination of her bank accounts as the orders interfere with her statutory right to maintain the secrecy of said accounts. While petitioner would premise that the inquiry into Lilia Cheng's accounts finds root in Section 11 of the AMLA, it cannot be denied that the authority to inquire under Section 11 is only exceptional in character, contrary as it is to the general rule preserving the secrecy of bank deposits. Even though she may not have been the subject of the inquiry orders, her bank accounts nevertheless were, and she thus has the standing to vindicate the right to secrecy that attaches to said accounts and their owners. This statutory right to privacy will not prevent the courts from authorizing the inquiry anyway upon the fulfillment of the requirements set forth under Section 11 of the AMLA or Section 2 of the Bank

Secrecy Act; at the same time, the owner of the accounts have the right to challenge whether the requirements were indeed complied with.

VII.
There is a final point of concern which needs to be addressed. Lilia Cheng argues that the AMLA, being a substantive penal statute, has no retroactive effect and the bank inquiry order could not apply to deposits or investments opened prior to the effectivity of Rep. Act No. 9164, or on 17 October 2001. Thus, she concludes, her subject bank accounts, opened between 1989 to 1990, could not be the subject of the bank inquiry order lest there be a violation of the constitutional prohibition against ex post facto laws. No ex post facto law may be enacted, 99 and no law may be construed in such fashion as to permit a criminal prosecution offensive to the ex post facto clause. As applied to the AMLA, it is plain that no person may be prosecuted under the penal provisions of the AMLA for acts committed prior to the enactment of the law on 17 October 2001. As much was understood by the lawmakers since they deliberated upon the AMLA, and indeed there is no serious dispute on that point. Does the proscription against ex post facto laws apply to the interpretation of Section 11, a provision which does not provide for a penal sanction but which merely authorizes the inspection of suspect accounts and deposits? The answer is in the affirmative. In this jurisdiction, we have defined an ex post facto law as one which either:
(1)makes criminal an act done before the passage of the law and which was innocent when done, and punishes such an act; (2)aggravates a crime, or makes it greater than it was, when committed; (3)changes the punishment and inflicts a greater punishment than the law annexed to the crime when committed; (4)alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense; (5)assuming to regulate civil rights and remedies only, in effect imposes penalty or deprivation of a right for something which when done was lawful; and

(6)deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection of a former conviction or acquittal, or a proclamation of amnesty. (Emphasis supplied) 100

Prior to the enactment of the AMLA, the fact that bank accounts or deposits were involved in activities later on enumerated in Section 3 of the law did not, by itself, remove such accounts from the shelter of absolute confidentiality. Prior to the AMLA, in order that bank accounts could be examined, there was need to secure either the written permission of the depositor or a court order authorizing such examination, assuming that they were involved in cases of bribery or dereliction of duty of public officials, or in a case where the money deposited or invested was itself the subject matter of the litigation. The passage of the AMLA stripped another layer off the rule on absolute confidentiality that provided a measure of lawful protection to the account holder. For that reason, the application of the bank inquiry order as a means of inquiring into records of transactions entered into prior to the passage of the AMLA would be constitutionally infirm, offensive as it is to the ex post factoclause. Still, we must note that the position submitted by Lilia Cheng is much broader than what we are willing to affirm. She argues that the proscription against ex post facto laws goes as far as to prohibit any inquiry into deposits or investments included in bank accounts opened prior to the effectivity of the AMLA even if the suspect transactions were entered into when the law had already taken effect. The Court recognizes that if this argument were to be affirmed, it would create a horrible loophole in the AMLA that would in turn supply the means to fearlessly engage in money laundering in the Philippines; all that the criminal has to do is to make sure that the money laundering activity is facilitated through a bank account opened prior to 2001. Lilia Cheng admits that "actual money launderers could utilize the ex post facto provision of the Constitution as a shield" but that the remedy lay with Congress to amend the law. We can hardly presume that Congress intended to enact a self-defeating law in the first place, and the courts are inhibited from such a construction by the cardinal rule that "a law should be interpreted with a view to upholding rather than destroying it." 101 Besides, nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt from the bank inquiry order all bank accounts opened prior to the passage of the AMLA. There is a cited exchange between Representatives Ronaldo Zamora and Jaime Lopez where the latter confirmed to the former that "deposits are supposed to be exempted from scrutiny or monitoring if they are already in place as of the time the law is

enacted." 102 That statement does indicate that transactions already in place when the AMLA was passed are indeed exempt from scrutiny through a bank inquiry order, but it cannot yield any interpretation that records of transactions undertaken after the enactment of the AMLA are similarly exempt. Due to the absence of cited authority from the legislative record that unqualifiedly supports respondent Lilia Cheng's thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal as it is to theanima of that law.

IX.
We are well aware that Lilia Cheng's petition presently pending before the Court of Appeals likewise assails the validity of the subject bank inquiry orders and precisely seeks the annulment of said orders. Our current declarations may indeed have the effect of preempting that petition. Still, in order for this Court to rule on the petition at bar which insists on the enforceability of the said bank inquiry orders, it is necessary for us to consider and rule on the same question which after all is a pure question of law. WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs. SO ORDERED.

FIRST DIVISION
[G.R. No. 189206. June 8, 2011.] 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. DECISION

PEREZ, J :
p

The subject of this petition for certiorari is the Decision 1 of the Court of Appeals in CA-G.R. SP No. 82647 allowing the quashal by the Regional Trial Court (RTC) of Makati of a subpoena for the production of bank ledger. This case is incident to Civil Case No. 99-1853, which is the main case for collection of sum of money with damages filed by Industrial Bank of Korea, Tong Yang Merchant Bank, First Merchant Banking Corporation, Land Bank of the Philippines, and Westmont Bank (now United Overseas Bank), collectively known as "the Banks" against Domsat Holdings, Inc. (Domsat) and the Government Service Insurance System (GSIS). Said case stemmed from a Loan Agreement, 2 whereby the Banks agreed to lend United States (U.S.) $11 Million to Domsat for the purpose of financing the lease and/or purchase of a Gorizon Satellite from the International Organization of Space Communications (Intersputnik). 3 The controversy originated from a surety agreement by which Domsat obtained a surety bond from GSIS to secure the payment of the loan from the Banks. We quote the terms of the Surety Bond in its entirety. 4
Republic of the Philippines GOVERNMENT SERVICE INSURANCE SYSTEM GENERAL INSURANCE FUND GSIS Headquarters, Financial Center Roxas Boulevard, Pasay City G(16) GIF Bond 027461 SURETY BOND KNOW ALL MEN BY THESE PRESENTS:
HICcSA

That we, DOMSAT HOLDINGS, INC., represented by its President as PRINCIPAL, and the GOVERNMENT SERVICE INSURANCE SYSTEM, as Administrator of the GENERAL INSURANCE FUND, a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office in the City of Pasay, Metro Manila, Philippines as SURETY, are held and firmly bound unto the OBLIGEES: LAND BANK OF THE PHILIPPINES, 7th Floor, Land Bank Bldg. IV. 313 Sen. Gil J. Puyat Avenue, Makati City; WESTMONT BANK, 411 Quintin Paredes St., Binondo, Manila: TONG YANG MERCHANT BANK, 185, 2-Ka, Ulchi-ro, Chungk-ku, Seoul, Korea; INDUSTRIAL BANK OF KOREA, 50, 2Ga, Ulchi-ro, Chung-gu, Seoul, Korea; and FIRST MERCHANT BANKING CORPORATION, 199-40, 2-Ga, Euliji-ro, Jung-gu, Seoul, Korea, in the

sum, of US $ ELEVEN MILLION DOLLARS ($11,000,000.00) for the payment of which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS: WHEREAS, the above bounden PRINCIPAL, on the 12th day of December, 1996 entered into a contract agreement with the aforementioned OBLIGEES to fully and faithfully Guarantee the repayment of the principal and interest on the loan granted the PRINCIPAL to be used for the financing of the two (2) year lease of a Russian Satellite from INTERSPUTNIK, in accordance with the terms and conditions of the credit package entered into by the parties. This bond shall remain valid and effective until the loan including interest has been fully paid and liquidated, a copy of which contract/agreement is hereto attached and made part hereof;
DACTSH

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

When Domsat failed to pay the loan, GSIS refused to comply with its obligation reasoning that Domsat did not use the loan proceeds for the payment of rental for the satellite. GSIS alleged that Domsat, with Westmont Bank as the conduit, transferred the U.S. $11 Million loan proceeds from the Industrial Bank of Korea

to Citibank New York account of Westmont Bank and from there to the Binondo Branch of Westmont Bank. 5 The Banks filed a complaint before the RTC of Makati against Domsat and GSIS.
aHATDI

In the course of the hearing, GSIS requested for the issuance of a subpoena duces tecum to the custodian of records of Westmont Bank to produce the following documents:
1.Ledger covering the account of DOMSAT Holdings, Inc. with Westmont Bank (now United Overseas Bank), any and all documents, records, files, books, deeds, papers, notes and other data and materials relating to the account or transactions of DOMSAT Holdings, Inc. with or through the Westmont Bank (now United Overseas Bank) for the period January 1997 to December 2002, in his/her direct or indirect possession, custody or control (whether actual or constructive), whether in his/her capacity as Custodian of Records or otherwise; 2.All applications for cashier's/manager's checks and bank transfers funded by the account of DOMSAT Holdings, Inc. with or through the Westmont Bank (now United Overseas Bank) for the period January 1997 to December 2002, and all other data and materials covering said applications, in his/her direct or indirect possession, custody or control (whether actual or constructive), whether in his/her capacity as Custodian of Records or otherwise; 3.Ledger covering the account of Philippine Agila Satellite, Inc. with Westmont Bank (now United Overseas Bank), any and all documents, records, files, books, deeds, papers, notes and other data and materials relating to the account or transactions of Philippine Agila Satellite, Inc. with or through the Westmont bank (now United Overseas Bank) for the period January 1997 to December 2002, in his/her direct or indirect possession, custody or control (whether actual or constructive), whether in his/her capacity as Custodian of Records or otherwise; 4.All applications for cashier's/manager's checks funded by the account of Philippine Agila Satellite, Inc. with or through the Westmont Bank (now United Overseas Bank) for the period January 1997 to December 2002, and all other data and materials covering said applications, in his/her direct or indirect possession, custody or control (whether actual or constructive), whether in his/her capacity as Custodian of Records or otherwise. 6
DHIcET

The RTC issued a subpoena decus tecum on 21 November 2002. 7 A motion to quash was filed by the banks on three grounds: 1) the subpoena is

unreasonable, oppressive and does not establish the relevance of the documents sought; 2) request for the documents will violate the Law on Secrecy of Bank Deposits; and 3) GSIS failed to advance the reasonable cost of production of the documents. 8 Domsat also joined the banks' motion to quash through its Manifestation/Comment. 9On 9 April 2003, the RTC issued an Order denying the motion to quash for lack of merit. We quote the pertinent portion of the Order, thus:
After a careful consideration of the arguments of the parties, the Court did not find merit in the motion. The serious objection appears to be that the subpoena is violative of the Law on Secrecy of Bank Deposit, as amended. The law declares bank deposits to be "absolutely confidential" except: . . . (6) In cases where the money deposited or invested is the subject matter of the litigation. The case at bench is for the collection of a sum of money from defendants that obtained a loan from the plaintiff. The loan was secured by defendant GSIS which was the surety. It is the contention of defendant GSIS that the proceeds of the loan was deviated to purposes other than to what the loan was extended. The quashal of the subpoena would deny defendant GSIS its right to prove its defenses. WHEREFORE, for lack of merit the motion is DENIED.
10

On 26 June 2003, another Order was issued by the RTC denying the motion for reconsideration filed by the banks. 11 On 1 September 2003 however, the trial court granted the second motion for reconsideration filed by the banks. The previous subpoenas issued were consequently quashed. 12 The trial court invoked the ruling in Intengan v. Court of Appeals, 13 where it was ruled that foreign currency deposits are absolutely confidential and may be examined only when there is a written permission from the depositor. The motion for reconsideration filed by GSIS was denied on 30 December 2003.
EACIaT

Hence, these assailed orders are the subject of the petition for certiorari before the Court of Appeals. GSIS raised the following arguments in support of its petition:
I. Respondent Judge acted with grave abuse of discretion when it favorably considered respondent banks' (second) Motion for

Reconsideration dated July 9, 2003 despite the fact that it did not contain a notice of hearing and was therefore a mere scrap of paper. II. Respondent judge capriciously and arbitrarily ignored Section 2 of the Foreign Currency Deposit Act (RA 6426) in ruling in his Orders dated September 1 and December 30, 2003 that the US$11,000,000.00 deposit in the account of respondent Domsat in Westmont Bank is covered by the secrecy of bank deposit. III. Since both respondent banks and respondent Domsat have disclosed during the trial the US$11,000,000.00 deposit, it is no longer secret and confidential, and petitioner GSIS' right to inquire into what happened to such deposit can not be suppressed. 14

The Court of Appeals addressed these issues in seriatim. The Court of Appeals resorted to a liberal interpretation of the rules to avoid miscarriage of justice when it allowed the filing and acceptance of the second motion for reconsideration. The appellate court also underscored the fact that GSIS did not raise the defect of lack of notice in its opposition to the second motion for reconsideration. The appellate court held that failure to timely object to the admission of a defective motion is considered a waiver of its right to do so. The Court of Appeals declared that Domsat's deposit in Westmont Bank is covered by Republic Act No. 6426 or the Bank Secrecy Law. We quote the pertinent portion of the Decision:
cSIADa

It is our considered opinion that Domsat's deposit of $11,000,000.00 in Westmont Bank is covered by the Bank Secrecy Law, as such it cannot be examined, inquired or looked into without the written consent of its owner. The ruling in Van Twest vs. Court of Appeals was rendered during the effectivity of CB Circular No. 960, Series of 1983, under Sec. 102 thereof, transfer to foreign currency deposit account or receipt from another foreign currency deposit account, whether for payment of legitimate obligation or otherwise, are not eligible for deposit under the System. CB Circular No. 960 has since been superseded by CB Circular 1318 and later by CB Circular 1389. Section 102 of Circular 960 has not been re-

enacted in the later Circulars. What is applicable now is the decision in Intengan vs. Court of Appeals where the Supreme Court has ruled that the under R.A. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is allowed only upon the written permission of the depositor. Petitioner, therefore, had inappropriately invoked the provisions of Central Bank (CB) Circular No. 343 which has already been superseded by more recently issued CB Circulars. CB Circular 343 requires the surrender to the banking system of foreign exchange, including proceeds of foreign borrowings. This requirement, however, can no longer be found in later circulars. In its Reply to respondent banks' comment, petitioner appears to have conceded that what is applicable in this case is CB Circular 1389. Obviously, under CB 1389, proceeds of foreign borrowings are no longer required to be surrendered to the banking system. Undaunted, petitioner now argues that paragraph 2, Section 27 of CB Circular 1389 is applicable because Domsat's $11,000,000.00 loan from respondent banks was intended to be paid to a foreign supplier Intersputnik and, therefore, should have been paid directly to Intersputnik and not deposited into Westmont Bank. The fact that it was deposited to the local bank Westmont Bank, petitioner claims violates the circular and makes the deposit lose its confidentiality status under R.A. 6426. However, a reading of the entire Section 27 of CB Circular 1389 reveals that the portion quoted by the petitioner refers only to the procedure/conditions of drawdown for service of debts using foreign exchange. The above-said provision relied upon by the petitioner does not in any manner prescribe the conditions before any foreign currency deposit can be entitled to the confidentiality provisions of R.A. 6426. 15
ISDHEa

Anent the third issue, the Court of Appeals ruled that the testimony of the incumbent president of Westmont Bank is not the written consent contemplated by Republic Act No. 6426. The Court of Appeals however upheld the issuance of subpoena praying for the production of applications for cashier's or manager's checks by Domsat through Westmont Bank, as well as a copy of an Agreement and/or Contract and/or Memorandum between Domsat and/or Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon Satellite. The appellate court believed that the production of these documents does not involve the examination of Domsat's account since it will never be known how much money was deposited into it or withdrawn therefrom and how much remains therein.

On 29 February 2008, the Court of Appeals rendered the assailed Decision, the decretal portion of which reads:
WHEREFORE, the petition is partially GRANTED. Accordingly, the assailed Order dated December 30, 2003 is hereby modified in that the quashal of the subpoena for the production of Domsat's bank ledger in Westmont Bank is upheld while respondent court is hereby ordered to issue subpoena duces tecum ad testificandum directing the records custodian of Westmont Bank to bring to court the following documents: a)applications for cashier's or manager's checks by respondent Domsat through Westmont Bank from January 1997 to December 2002; b)bank transfers by respondent Domsat through Westmont Bank from January 1997 to December 2002; and c)copy of an agreement and/or contract and/or memorandum between respondent Domsat and/or Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon satellite.
aTIAES

No pronouncement as to costs.

16

GSIS filed a motion for reconsideration which the Court of Appeals denied on 19 June 2009. Thus, the instant petition ascribing grave abuse of discretion on the part of the Court of Appeals in ruling that Domsat's deposit with Westmont Bank cannot be examined and in finding that the banks' second motion for reconsideration in Civil Case No. 99-1853 is procedurally acceptable. 17 This Court notes that GSIS filed a petition for certiorari under Rule 65 of the Rules of Court to assail the Decision and Resolution of the Court of Appeals. Petitioner availed of the improper remedy as the appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special civil action under Rule 65. 18 Certiorari under Rule 65 lies only when there is no appeal, nor plain, speedy and adequate remedy in the ordinary course of law. That action is not a substitute for a lost appeal in general; it is not allowed when a party to a case fails to appeal a judgment to the proper forum. 19 Where an appeal is available,certiorari will not prosper even if the ground therefor is grave abuse of discretion. Accordingly, when a party adopts an improper remedy, his petition may be dismissed outright. 20 Yet, even if this procedural infirmity is discarded for the broader interest of justice, the petition sorely lacks merit.

GSIS insists that Domsat's deposit with Westmont Bank can be examined and inquired into. It anchored its argument on Republic Act No. 1405 or the "Law on Secrecy of Bank Deposits," which allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. GSIS asserts that the subject matter of the litigation is the U.S. $11 Million obtained by Domsat from the Banks to supposedly finance the lease of a Russian satellite from Intersputnik. Whether or not it should be held liable as a surety for the principal amount of U.S. $11 Million, GSIS contends, is contingent upon whether Domsat indeed utilized the amount to lease a Russian satellite as agreed in the Surety Bond Agreement. Hence, GSIS argues that the whereabouts of the U.S. $11 Million is the subject matter of the case and the disclosure of bank deposits relating to the U.S. $11 Million should be allowed.
ATCaDE

GSIS also contends that the concerted refusal of Domsat and the banks to divulge the whereabouts of the U.S. $11 Million will greatly prejudice and burden the GSIS pension fund considering that a substantial portion of this fund is earmarked every year to cover the surety bond issued. Lastly, GSIS defends the acceptance by the trial court of the second motion for reconsideration filed by the banks on the grounds that it is pro forma and did not conform to the notice requirements of Section 4, Rule 15 of the Rules of Civil Procedure. 21 Domsat denies the allegations of GSIS and reiterates that it did not give a categorical or affirmative written consent or permission to GSIS to examine its bank statements with Westmont Bank. The Banks maintain that Republic Act No. 1405 is not the applicable law in the instant case because the Domsat deposit is a foreign currency deposit, thus covered by Republic Act No. 6426. Under said law, only the consent of the depositor shall serve as the exception for the disclosure of his/her deposit. The Banks counter the arguments of GSIS as a mere rehash of its previous arguments before the Court of Appeals. They justify the issuance of the subpoena as an interlocutory matter which may be reconsidered anytime and that the pro forma rule has no application to interlocutory orders. It appears that only GSIS appealed the ruling of the Court of Appeals pertaining to the quashal of the subpoena for the production of Domsat's bank ledger with Westmont Bank. Since neither Domsat nor the Banks interposed an appeal from the other portions of the decision, particularly for the production of applications

for cashier's or manager's checks by Domsat through Westmont Bank, as well as a copy of an agreement and/or contract and/or memorandum between Domsat and/or Philippine Agila Satellite and Intersputnik for the acquisition and/or lease of a Gorizon satellite, the latter became final and executory. GSIS invokes Republic Act No. 1405 to justify the issuance of the subpoena while the banks cite Republic Act No. 6426 to oppose it. The core issue is which of the two laws should apply in the instant case.
EHDCAI

Republic Act No. 1405 was enacted in 1955. Section 2 thereof was first amended by Presidential Decree No. 1792 in 1981 and further amended by Republic Act No. 7653 in 1993. It now reads:
Section 2.All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

Section 8 of Republic Act No. 6426, which was enacted in 1974, and amended by Presidential Decree No. 1035 and later by Presidential Decree No. 1246, provides:
Section 8.Secrecy of Foreign Currency Deposits. All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private; Provided, however, That said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)

On the one hand, Republic Act No. 1405 provides for four (4) exceptions when records of deposits may be disclosed. These are under any of the following instances: a) upon written permission of the depositor, (b) in cases of impeachment, (c) upon order of a competent court in the case of bribery or dereliction of duty of public officials or, (d) when the money deposited or invested is the subject matter of the litigation, and e) in cases of violation of the Anti-Money Laundering Act (AMLA), the Anti-Money Laundering Council (AMLC) may inquire into a bank account upon order of any competent court. 22 On the other hand, the lone exception to the non-disclosure of foreign currency deposits, under Republic Act No. 6426, is disclosure upon the written permission of the depositor.
DEcSaI

These two laws both support the confidentiality of bank deposits. There is no conflict between them. Republic Act No. 1405 was enacted for the purpose of giving encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. 23 It covers all bank deposits in the Philippines and no distinction was made between domestic and foreign deposits. Thus, Republic Act No. 1405 is considered a law of general application. On the other hand, Republic Act No. 6426 was intended to encourage deposits from foreign lenders and investors. 24 It is a special law designed especially for foreign currency deposits in the Philippines. A general law does not nullify a specific or special law. Generalia specialibus non derogant. 25 Therefore, it is beyond cavil that Republic Act No. 6426 applies in this case.

Intengan v. Court of Appeals affirmed the above-cited principle and categorically


declared that for foreign currency deposits, such as U.S. dollar deposits, the applicable law is Republic Act No. 6426. In said case, Citibank filed an action against its officers for persuading their clients to transfer their dollar deposits to competitor banks. Bank records, including dollar deposits of petitioners, purporting to establish the deception practiced by the officers, were annexed to the complaint. Petitioners now complained that Citibank violated Republic Act No. 1405. This Court ruled that since the accounts in question are U.S. dollar deposits, the applicable law therefore is not Republic Act No. 1405 but Republic Act No. 6426. The above pronouncement was reiterated in China Banking Corporation v. Court of Appeals, 26 where respondent accused his daughter of stealing his dollar deposits with Citibank. The latter allegedly received the checks from Citibank and

deposited them to her account in China Bank. The subject checks were presented in evidence. A subpoena was issued to employees of China Bank to testify on these checks. China Bank argued that the Citibank dollar checks with both respondent and/or her daughter as payees, deposited with China Bank, may not be looked into under the law on secrecy of foreign currency deposits. This Court highlighted the exception to the non-disclosure of foreign currency deposits, i.e., in the case of a written permission of the depositor, and ruled that respondent, as owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, he has the right to inquire into the said deposits.
CAIaHS

Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might expose itself to criminal liability under the same act. 27 The basis for the application of subpoena is to prove that the loan intended for Domsat by the Banks and guaranteed by GSIS, was diverted to a purpose other than that stated in the surety bond. The Banks, however, argue that GSIS is in fact liable to them for the proper applications of the loan proceeds and not viceversa. We are however not prepared to rule on the merits of this case lest we pre-empt the findings of the lower courts on the matter. The third issue raised by GSIS was properly addressed by the appellate court. The appellate court maintained that the judge may, in the exercise of his sound discretion, grant the second motion for reconsideration despite its being pro forma. The appellate court correctly relied on precedents where this Court set aside technicality in favor of substantive justice. Furthermore, the appellate court accurately pointed out that petitioner did not assail the defect of lack of notice in its opposition to the second motion of reconsideration, thus it can be considered a waiver of the defect. WHEREFORE, the petition for certiorari is DISMISSED. The Decision dated 29 February 2008 and 19 June 2009 Resolution of the Court of Appeals are herebyAFFIRMED. SO ORDERED.

Corona, C.J., Velasco, Jr., Leonardo-de Castro and Del Castillo, JJ., concur.