Jemelyn C.

Pagantian
Final Digest in Banking Law 2022

Chapter IV – Philippine Deposit Insurance Bank Corporation

J. Concept of Deposits

(1) Philippine Deposit Insurance Corporation vs. Citibank G.R. No.

170290, April 11, 2012

FACTS:

MENDOZA, J. Doctrine: Foreign banks; A branch has no separate

legal personality from the parent bank. Facts: I Philippine Deposit Insurance
Corporation (PDIC), government instrumentality, a conducted an examination
of the books of account of Citibank and Bank of America (BA) which are both
duly organized and existing under the laws of the United States of America
and duly licensed to do business in the Philippines. During the examination of
the books, PDIC discovered that both banks received from their head offices
huge amount of dollars which were not reported to PDIC as deposit liabilities
subject to assessment for insurance. Believing that litigation would inevitably
arise from this dispute, Citibank and BA each filed a petition for declaratory
relief, stating that the money placements they received from their head office
and other foreign branches were not deposits and did not give rise to
insurable deposit liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC
Charter) and, as a consequence, the deficiency assessments made by PDIC
were improper and erroneous. The cases were then consolidated. RTC ruled
in favor of the Citibank and BA, which was affirmed by the Court of Appeals,
hence, the present case.

ISSUE:

Whether the funds placed in the Philippine branch by the head office
and foreign branches are insurable deposits under the PDIC Charter and, are
subject to assessment for insurance premiums.

RULING:

No. The Court explained the manner by which a foreign corporation

can establish its presence in the Philippines - it may choose to incorporate its
own subsidiary as a domestic corporation, in which case such subsidiary
would have its own separate and independent legal personality to conduct
business in the country. In the alternative, it may create a branch in
bthuesiPnheislsipipninthes,Pwhihlicphpiwneosu.ld not be a legally
independent unit, and simply obtain a license to do In the case of Citibank and
BA, it is apparent that they both did not incorporate a separate domestic
corporation to represent its business interests in the Philippines. Thus, being
one and the same entity, the funds placed by the respondents in their
respective branches in the Philippines should not be treated as deposits made
by third parties subject to deposit insurance under the PDIC Charter.

K. Insured Deposits

(1) PDIC vs. Abad, G.R. No. 126911, April 30, 2003

FACTS:

Respondents had 71 Golden Time Deposits(GTDs) in Manila Banking

Corporation(MBC). HOWEVER, Bangko Sentral of the Philippines issued a
memorandum prohibiting MBC to do business in the Philippines and placed its
assets under receivership. On the next banking day, respondent Jose Abad
pre-terminated his 71 GTDs and redeposited the fund into 28 GTDs in larger
denominations. Thereafter, respondent filed their claims for the payment of
the insured GTDs. Petitioner PDIC argued that the insured GTDs should not
be recognized since they were mere derivatives of respondents previous
account balances pre-terminated at the time the MBC was already in serious
financial distress. Under its charter, they contend that they are only liable for
deposits received in the usual course of business. Consequently, Petitioner
filed a petition for declaratory relief against respondents for a judicial
determination of the insurability of respondents. In turn, Jose Abad SET UP A
COUNTER-CLAIM against PDIC whereby they asked for payment of the
insured deposits. The SC later on ruled in favor of the respondents due to
petitioner having failed to overcome the presumption that it was issued in the
ordinary course of business. The trial court then ordered petitioner to pay the
balance of the deposit insurance to respondents.

ISSUE:

WON the trial court erred in ordering the payment of the deposit
insurance since a petition for declaratory relief does not essentially entail an
executory process- the only relief being granted is a declaration of the rights
and duties.

HELD:

NO, the RTC’s action was proper. Without doubt, a petition for
declaratory relief does not essentially entail an executory process.
HOWEVER, there is nothing in its nature that prohibits a counterclaim from
being set-up in the same action. A special civil action is not essentially
different from an ordinary civil action, which is generally governed by Rules 1
to 56 of the Rules of Court, except that the former deals with a special subject
matter which makes necessary some special regulation. But the identity
between their fundamental nature is such that the same rules governing
ordinary civil suits may and do apply to special civil actions if not inconsistent
with or if they may serve to supplement the provisions of the peculiar rules
governing special civil actions. Petitioner additionally submits that the issue of
determining the amount of deposit insurance due respondents was never tried
on the merits since the trial dwelt only on the determination of the viability or
validity of the deposits and no evidence on record sustains the holding that
the amount of deposit due respondents had been finally determined. This
issue was not raised in the court a quo, however, hence, it cannot be raised
for the first time in the petition at bar.

(2) PDIC vs. Aquero, G.R. No. 118917, December 22, 1997

Petitioner Philippine Deposit Insurance Corporation (PDIC) seeks the

reversal of the decision of the Court of Appeals affirming with modification the
decision of the Regional Trial Court holding petitioner liable for the value of
thirteen (13) certificates of time deposit (CTDs) in the possession of private
respondents.

FACTS:

Plaintiffs-appellees invested in money market placements with the

Premiere Financing Corporation (PFC) in the sum of P10,000.00 each for
which they were issued by the PFC corresponding promissory notes and
checks. On the same date John Francis Cotaoco, for and in behalf of
plaintiffs-appellees, went to the PFC to encash the promissory notes and
checks, but the PFC referred him to the Regent Saving Bank (RSB). Instead
of paying the promissory notes and checks, the RSB, upon agreement of
Cotaoco, issued the subject 13 certificates of time deposit each stating,
among others, that the same certifies that the bearer thereof has deposited
with the RSB the sum of P10,000.00; that the certificate shall bear 14%
interest per annum; that the certificate is insured up to P15,000.00 with the
PDIC; and that the maturity date thereof is on November 3, 1983. On the
aforesaid maturity dated (November 3, 1983), Cotaoco went to the RSB to
encash the said certificates. Thereat, RSB Executive Vice President Jose M.
Damian requested Cotaoco for a deferment or an extension of a few days to
enable the RSB to raise the amount to pay for the same. Cotaoco agreed.
Despite said extension, the RSB still failed to pay the value of the certificates.
Instead, RSB advised Cotaoco to file a claim with the PDIC. Consequently,
private respondents filed an action for collection against PDIC, RSB and the
Central Bank. The trial court rendered its decision ordering the PDIC to pay
plaintiffs, jointly and severally, the amount corresponding to the latter's
certificates of time deposit. Both PDIC and RSB appealed. It was dismissed
by CA.

ISSUE:
Whether or not PDIC is liable for the Certificate of Time Deposits held
by private respondents.

RULING.

No. In order that a claim for deposit insurance with the PDIC may
prosper, the law requires that a corresponding deposit be placed in the
insured bank. A deposit as defined in Section 3(f) of R.A. No. 3591, may be
constituted only if money or the equivalent of money is received by a bank:
Sec. 3. As used in this Act — (f) The term "deposit" means the unpaid
balance of money or its equivalent received by a bank in the usual course of
business and for which it has given or is obliged to give credit to a
commercial, checking, savings, time or thrift account or which is evidenced by
passbook, check and/or certificate of deposit printed or issued in accordance
with Central Bank rules and regulations and other applicable laws, together
with such other obligations of a bank which, consistent with banking usage
and practices, the Board of Directors shall determine and prescribe by
regulations to be deposit liabilities of the Bank . . . . (Emphasis ours.)

RSB Deputy Liquidator, testified that RSB received three (3) checks in
consideration for the issuance of several CTDs, including the ones in dispute.
The first two checks "made good in the clearing" while the third was returned
for being "drawn against insufficient funds." At the back of said check are the
words "Refer to Drawer," 17 indicating that the drawee bank (Traders Royal
Bank) refused to pay the value represented by said check. By reason of the
check's dishonor, RSB cancelled the corresponding as evidence by an RSB
"ticket". These pieces of evidence convincingly show that the subject CTDs
were indeed issued without RSB receiving any money therefor. No deposit, as
defined in Section 3 (f) of R.A. No. 3591, therefore came into existence.
Accordingly, petitioner PDIC cannot be held liable for value of the certificates
of time deposit held by private respondents. The petition is hereby GRANTED
and the decision of the Court of Appeals REVERSED. PDIC is absolved from
any liability to private respondents.

L. As co-regulator of BSP

(1) PDIC vs. Philippines Countryside Rural Bank, G.R. No. 176438, Jan.
24, 2011

FACTS:

On May 25, 2005, the PDIC Board adopted another resolution, Resolution No.
2005-05-056, approving the conduct of an investigation on PCRBI based on a
Complaint-Affidavit filed by a corporate depositor, the Philippine School of
Entrepreneurship and Management. On June 3, 2005, in accordance with the
two PDIC Board resolutions, then PDIC President and Chief Executive Officer
Ricardo M. Tan issued the Notice of Investigation to the President or The
Highest Ranking Officer of PCRBI. In the course of its investigation, PCRBI
was found to have granted loans to certain individuals, which were settled by
way of dacion of properties. These properties, however, had already been
previously foreclosed and consolidated under the names of PRBI, BEAI and
RBCI. On June 15, 2005, PDIC issued similar notices of investigation to PRBI
and BEAI. The notices stated that the
On June 15, 2005, PDIC issued similar notices of investigation to PRBI and
BEAI. The notices stated that the of the PDIC Charter and upon authority of P
Board Resolution No. 2005-03-032 authorizing the twelve (12) named
representatives of PDIC to conduct the investigation. The notice of
investigation was served on PRBI the next day, June 16, 2005. PRBI and
BEAI refused entry to their bank premises and access to their records and
documents by the PDIC Investigation Team, upon advice of their respective
counsels. On June 16 and 17, 2005, Atty. Victoria G. Noel sent letters to the
PDIC informing it of her legal advice to PCRBI and BEAI not to submit to
PDIC investigation on the ground that its investigatory power pursuant to
Section 9(b 1) of R.A. No. 3591, as amended, cannot be differentiated from
the examination powers accorded to PDIC under Section 8, paragraph 8 of
the same law, under which, prior approval from the Monetary Board is
required. On June 17, 1/2 2005, PDIC General Counsel Romeo M. approval
from the Monetary Board is required. On June 17, 2005, PDIC General
Counsel Romeo M. Mendoza sent a reply to Atty. Noel stating that "PDIC's
investigation power, as distinguished from the examination power of the PDIC
under Section 8 of the same law, does not need prior approval of the
Monetary Board." PDIC then urged PRBI and BEAI "not to impede the
conduct of PDIC's investigation" as the same "constitutes a violation of the
PDIC Charter for which PRBI and BEAI may be held criminally and/or
administratively liable. The Banks, through counsel, sought further clarification
from PDIC on its source of authority to conduct the impending investigations
and requested that PDIC refrain from proceeding with the investigations. The
Banks wrote to the Monetary Board requesting a clarification on the
parameters of PDIC's power of investigation/examination over the Banks and
for an issuance of a directive to PDIC not to pursue the investigations pending
the requested clarification. On June 28, 2005, PRBI and BEAI again received
letters from PDIC, which appeared to be final demands on them to allow its
investigation. The PDIC General Counsel reiterates its position that prior
Monetary Board approval was not a pre-requisite to PDIC's exercise of its
investigative power. The Banks then filed a Petition for Declaratory Relief with
a Prayer for the Issuance of a TRO and/or Writ of Preliminary Injunction (RTC
Petition) before the Regional Trial Court of Makati. In the RTC Petition, the
Banks prayed for a judgment interpreting Section 9(b-1) of the PDIC Charter,
as amended, to require prior Monetary Board approval before PDIC could
exercise its investigation/examination power over the Banks.

The Banks withdrew their application for a temporary restraining order

(TRO). Thus, the Banks instituted a petition for injunction with application for
TRO and/or Preliminary Injunction (CA-Manila petition) before the Court of
Appeals-Manila. RTC Makati and CA-Manila both dismissed the petitions filed
by the Banks. On March 14, 2006, the Banks filed, their Petition for Injunction
with Prayer for Preliminary Injunction (CA-Cebu Petition) with the Court of
Appeals-Cebu (CA-Cebu). On March 15, 2006, the CA-Cebu issued a
resolution granting the Bank's application for a TRO. This enjoined the PDIC,
its representatives or agents or any other persons or agency assisting them or
acting for and in their behalf from conducting examinations/investigations on
the Banks' head and branch offices without securing the requisite approval
from the Monetary Board of BSP.
 On September 18, 2006, after both parties had submitted their
respective memoranda, the CA-Cebu rendered a decision granting the writ of
preliminary injuction. PDIC moved for reconsideration but it was denied in a
resolution dated January 25, 2007. Hence, this petition.

ISSUES:
Whether prior approval of the Monetary Board of the Bangko Sentral
ng Pilipinas is necessary before the PDIC may conduct an investigation of
respondent banks. Whether the power of the PDIC to conduct investigation
the same as its power of examination.

RULING:

The Court is of the view that the Monetary Board approval is not
required for PDIC to conduct an investigation on the Banks.

Section 9(b-1) of the PDIC Charter provides that the PDIC Board shall have
the power to:
(b-1) The investigators appointed by the Board of Directors shall have the
power on behalf of the Corporation to conduct investigations on frauds,
irregularities and anomalies committed in banks, based on reports of
examination conducted by the Corporation and Bangko Sentral ng Pilipinas or
complaints from depositors or from other government agency. Each such
investigator shall have the power to administer oaths, and to examine and
take and preserve the testimony of any person relating to the subject of
investigation. (As added by R.A. 9302, 12 August 2004) As stated above, the
charter empowers the PDIC to conduct an investigation of a bank and to
appoint examiners who shall have the power to examine any insured bank.
Such investigators are authorized to conduct investigations on frauds,
irregularities and anomalies committed in banks, based on an examination
conducted by the PDIC and the BSP or on complaints from depositors or from
other government agencies. The distinction between the power to investigate
and the power to examine is emphasized by the existence of two separate
sets of rules goveming the procedure in the conduct of investigation and
examination. Regulatory Issuance (RI) No. 2005-02 or the PDIC Rules on
Fact Finding Investigation of Fraud, Irregularities and Anomalies Committed in
Banks covers the procedural requirements of the exercise of the PBC power
of investigation. On the other hand, RI No. 2009-05 sets forth the guidelines
for the conduct of the power of examination. The definitions provided under
the two aforementioned regulatory issuances elucidate on the distinction
between the power of examination and the power of investigation. Section 2
of RI No. 2005-02 states that its coverage shall be applicable to "all fact-
finding investigations on fraud, irregularities and/or anomalies committed in
banks that are conducted by PDIC based on: [a] complaints from depositors
or other government agencies; and/or [b] final reports of examinations of
banks conducted by the Bangko Sentral ng Pilipinas and/or PDIC."

The same issuance states that the Final Report of Examination is one
of the three pre-requisites to the conduct of an investigation, in addition to the
authorization of the PDIC Board and a complaint. Juxtaposing this provision
with Section 9(b-1) of the PDIC Charter, since an examination is explicitly
made the basis of a fact-finding examination, then clearly examination and
investigation are two different proceedings. It would obviously defy logic to
make the result of an "investigation" the basis of the same proceeding. Thus,
RI No. 2005-02 defines an "investigation" as a "fact-finding examination, study
or inquiry for determining whether the allegations in a complaint or findings in
a final report of examination may properly be the subject of an administrative,
criminal or civil action." Examination involves an evaluation of the current
status anes als compliance went of standards regarding solvency, liquidity,
asset valuation, operations, systems, management, and compliance with
banking laws, rules and regulations.

Investigation, on the other hand, is conducted based on specific

findings of certain acts or omissions which are subject of a complaint or a
Final Report of Examination. Clearly, investigation does not involve a general
evaluation of the status of a bank. An investigation zeroes in on specific acts
and omissions uncovered via an examination, or which are cited in a
complaint. An examination entails a review of essentially all the functions and
facets of a bank and its operation. It necessitates poring through voluminous
documents, and requires a detailed evaluation thereof. Such a process then
involves an intrusion into a bank's records. In contrast, although it also
involves a detailed evaluation, an investigation centers on specific acts of
omissions and, thus, requires a less invasive assessment. The practical
justification for not requiring the Monetary Board approval to conduct an
investigation of banks is the administrative hurdles and paperwork it entails,
and the correspondent time to complete those additional steps or
correspondent time to complete those additional steps or requirements. As in
other types of investigation, time is always of essence, and it is prudent to
expedite the proceedings if an accurate conclusion is to be arrived at, as an
investigation is only as precise as the evidence on which it is based. The
promptness with which such evidence is gathered is always of utmost
importance because evidence, documentary evidence in particular, is
remarkably fungible. A PDIC investigation is conducted to "determine[e]
whether the allegations in a complaint or findings in a final report of
examination may properly be the subject of an administrative, criminal or civil
action." In other words, an investigation is based on reports of examination
and an examination is conducted with prior Monetary Board approval.
Therefore, it would be unnecessary to secure a separate approval for the
conduct of an investigation. Such would merely prolong the process and
provide unscrupulous individuals the opportunity to cover their tracks. Indeed,
while in a literary sense, the two terms may be used interchangeably, under
the PDIC Charter, examination and investigation refer to two different
processes. To reiterate, an examination of banks requires the prior consent of
the Monetary Board, whereas an investigation based on an examination
report, does not.

Chapter V – Bank Secrecy Laws

M. Bank Secrecy Law

(1) BSB Group vs. Sally Go, G.R. No. 168644, Feb. 16, 2010

FACTS:

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 Bangayans 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 Prosecutors Office a complaint

for estafa and/or qualified theft against respondent, alleging that several
checks representing the aggregate amount of P1,534,135.50 issued by the
companys customers in payment of their obligation were, instead of being
turned over to the companys 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. Respondent
entered a negative plea when arraigned. 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 Banks Divisoria Branch, as well as of the Asian
Savings Bank (now Metropolitan Bank & Trust Co. [Metrobank]), in Jose Abad
Santos, Tondo, Manila Branch

Petitioner’s Argument [ Invoking money is a subject of a pending

litigation. 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

Respondent Invoking Bank Secrecy 6. 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 7.

Petitioner, opposing respondents move, argued for the relevancy of the

Metrobank account on the ground that the complaintaffidavit showed that
there were two checks which respondent allegedly deposited in an account
with the said bank. Presentation of Security Bank representative testimony as
deposit account of Sally 8. Meanwhile, the prosecution was able to present in
court the testimony of Elenita Marasigan (Marasigan), the representative of
Security Bank. In a nutshell, Marasigans 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

Motion to exclude invoking bank secrecy 9. But before the testimony

could be completed, respondent filed a Motion to Suppress, seeking the
exclusion of Marasigans 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.

ISSUE:

Whether or not Sally can invoke R.A. 1405 (bank secrecy) to prohibit
Security Bank from disclosing her deposit records.

HELD:

NO – deposit with SB cannot be disclosed – Not under the list of

exemptions under the law. [ the fund deposited is not subject of a pending
litigation ]

RATIO: Bank Secrecy Provision [ Highlighted exceptions ] 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.
(2) GSIS vs. Industrial Bank of Korea, G.R. No. 189206, June 8, 2011

FACTS:

On December 13, 1996, a surety bond was agreed with DOMSAT

HOLDINGS, INC. as the principal and the GSIS as administrator and the
obligees are Land Bank of the Philippines, Tong Yang Merchant Bank,
Industrial Bank of Korea and First Merchant Banking Corporation collectively
known as “The Banks” with the loan granted to DOMSAT of US $
11,000,000.00 to be used for the financing of the two-year lease of a Russian
Satellite from INTERSPUTNIK. Domsat failed to pay the loan and 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.
The Banks filed a complaint before the RTC of Makati against Domsat and
GSIS. GSIS requested for the issuance of a subpoena duces tecum to the
custodian of records of Westmont Bank to produce bank ledger covering the
account of Domsat with the Westmont Bank (now United Overseas Bank) and
other pertinent documents. The RTC issued the subpoena but nonetheless,
the RTC then granted the second motion for reconsideration by “The Banks”
to quash the subpoena granted to GSIS. GSIS assailed its case to the CA and
CA partially granted it’s petition allowing it to look into documents but not the
bank ledger because the US $ 11,000,000.00 deposited by Domsat to
Westmont Bank is covered by R.A. 6426 or the Bank Secrecy Law. GSIS now
filed a petition for certiorari in the Supreme Court for the decision of CA
allowing the quashal by the RTC of a subpoena for the production of bank
ledger.

ISSUE:
Whether or not the deposited US $ 11,000,000.00 by Domsat, Inc. to
Westmont Bank is covered by R.A. 6426 as what “The Banks” contend or it is
covered by R.A. 1405 as what GSIS contends.

RULING:

The Supreme Court ruled in favor of R.A. 6426 and thereby

AFFIRMING the decision of Court of Appeals. R.A. 1405 was enacted on
1955 while R.A. 6426 was enacted on 1974. 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. 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. 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. 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. Supreme 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.

(3) JV Ejercito vs. Sandiganbayan, G.R. Nos. 157294-95, November 30,

2006

FACTS:

The Special Prosecution Panel filed before the Sandiganbayan a

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

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

ISSUE/S:
1. Is the Trust Account covered by the term “deposit”under the Bank Secrecy
Law?
2. Are the Trust and Savings Accounts of Estrada excepted from the
protection of the Bank Secrecy Law?
3. Does the fruit of poisonous tree principle apply?

RULING:

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

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

The phrase “of whatever nature”proscribes any restrictive interpretation

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

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

Estrada contends that since plunder is neither bribery nor dereliction of

duty, his accounts are not excepted from the protection of R.A. 1405. He is
wrong. Cases of unexplained wealth are similar to cases of bribery or
dereliction of duty and no reason is seen why these two classes of cases
cannot be excepted from the rule making bank deposits confidential. The
policy as to one cannot be different from the policy as to the other. This policy
expresses the notion that a public office is a public trust and any person who
enters upon its discharge does so with the full knowledge that his life, so far
as relevant to his duty, is open to public scrutiny. An examination of the “overt
or criminal acts as described in Section 1(d)”of R.A. No. 7080 would make the
similarity between plunder and bribery even more pronounced since bribery is
essentially included among these criminal acts. Plunder being thus analogous
to bribery, the exception to R.A. 1405 applicable in cases of bribery must also
apply to cases of plunder.

The plunder case now pending with the SB necessarily involves an

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

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

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

Chapter VI – Anti-Money Laundering Act

Anti-Money Laundering Act

(1) Republic vs. Glasgow Credit, G.R. No. 170281, Jan. 18, 2008

FACTS:

On July 18, 2003, petitioner filed a complaint for civil forfeiture of

assets with the RTC of Manila against the bank deposits in account number
CS – 005-10-0001215 maintained by GLASGOW in CSBI. The case was filed
pursuant to RA 9160 or the Anti-Money Laundering Act of 2001.

On July 21, 2003, the RTC of Manila issued a 72-hour TRO. And on
August 8, 2003 a writ of preliminary injunction was issued. Meanwhile,
summons to GLASGOW was returned “unserved” as it could no longer be
found at its last known address.

On October 8, 2003, petitioner filed a verified omnibus motion for a)

issuance of alias summons and b) leave of court to serve summons by
publication. On October 15, 2003, the trial court directed the issuance of alias
summons. No mention was made of the motion for leave of court to serve
summons by publication.
 On January 30, 2004, the trial court archived the case for failure of the
Republic to serve alias summons. The Republic filed an ex parte omnibus
motion to reinstate the case and resolve the motion for leave of court to serve
summons by publication. On May 31, 2004, the trial court ordered the
reinstatement of the case directing the Republic to serve the alias summons
to Glasgow and CSBI within 15 days. On July 12, 2004, petitioner received a
copy of the sheriff’s return stating that the alias summons was returned
“unserved” as GLASGOW was no longer holding office at the given address
since July 2002.

On August 11, 2005, petitioner filed a manifestation and ex parte

motion to resolve its motion for leave of court to serve summons by
publication. On August 12, 2005, the OSG received a copy of GLASGOW’s
motion to dismiss by way of special appearance alleging that 1) the court had
no jurisdiction over its person as summons had not yet been served on it 2)
the complaint was premature and stated no cause of action and 3) there was
failure to prosecute on the part of the Republic. On October 17, 2005, the trial
court dismissed the case on the grounds of 1) improper venue 2) insufficiency
of the complaint in form and substance and 3) failure to prosecute and lifted
the writ of preliminary injunction.

Petitioner filed a petition for review.

ISSUE:
Whether or not the complaint for civil forfeiture was properly instituted.

RULING:

Sec. 12 (a) of RA 9160 provides two conditions when applying for civil
forfeiture: 1. when there is suspicious transaction report or a covered
transaction report deemed suspicious after investigation by the AMLC; 2. the
court has, in a petition filed for the purpose; ordered the seizure of any
monetary instrument or property, in whole or in part, directly or indirectly,
related to said report.

The writ of preliminary injuction issued on August 8, 2003 removed

account no. CA-005-10-000121-5 from the effective control of either
GLASGOW or CSBI or their representatives or agents and subjected it to the
process of the court. Since this account was covered by several suspicious
reports and placed under the control of the trial court upon the issuance of the
writ, the conditions provided in Section 12 (a) of RA 9160 were satisfied. The
petitioner properly instituted the complaint for civil forfeiture.

(2) Republic vs. Hon. Eugenio, G.R. No. 174629, February 14, 2008

FACTS:
 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. 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.[14] Thereafter, 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 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 Villa-Ignacio, 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 a in relation to the criminal cases then pending
before the Sandiganbayan. 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. 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 Prosecutors 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.

ISSUE:
Whether or not the bank accounts of respondents can be examined.

HELD:

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 offial; 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, and there have been other
similar recognitions as well.
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,[certain
violations of the Comprehensive Dangerous Drugs Act of 2002,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
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 all deposits of
whatever nature with banks or banking institutions in the Philippines x x x are
hereby considered as of an absolutely confidential nature. Indeed, by force of
statute, all bank deposits are absolutely confidential, and that nature is
unaltered even by the legislated exceptions referred to above.

(3) People vs. Estrada, G.R. No. 164368-69, April 2, 2009

FACTS:

On April 4, 2001, information for plunder was filed with the

Sandiganbayan against respondent Estrada, among other accused. Separate
information for illegal use of alias, was likewise filed against him. In the
information, it was alleged that on or about February 4, 2000, in the city of
Manila, then President Estrada without having been duly authorized, judicially,
administratively, taking advantage of his position and committing the offense
in relation to office i.e in order to conceal the ill-gotten wealth he acquired
during his tenure and his true identity as the president of the Philippines, did
then and there, willfully, unlawfully and criminally represented himself as
“Jose Velarde” in several transactions and use and employ the said alias
“Jose Velarde” which is neither his registered name at birth nor his baptismal
name, in signing documents with Equitable PCI Bank abd/or other corporate
entities. At the trial, the People presented testimonial and documentary
evidence to prove the allegations of the Information for plunder, illegal use of
alias, and perjury.

ISSUE:

Whether  the transaction on which the indictment rests, affords Estrada

a reasonable expectation of privacy, as the alleged criminal act related to the
opening of a trust account – a transaction that R.A. No. 1405 considers
absolutely confidential in nature.

HELD:

The contention that trust accounts are not covered by the term
"deposits," as used in R.A. 1405, by the mere fact that they do not entail a
creditor-debtor relationship between the trustor and the bank, does not lie. An
examination of the law shows that the term "deposits" used therein is to be
understood broadly and not limited only to accounts which give rise to a
creditor-debtor relationship between the depositor and the bank.
The policy behind the law is laid down in Section 1:
SECTION 1. It is hereby declared to be the policy of the Government to give
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. (Underscoring supplied)
If the money deposited under an account may be used by bank for authorized
loans to third persons, then such account, regardless of whether it creates a
creditor-debtor relationship between the depositor and the bank, falls under
the category of accounts which the law precisely seeks to protect for the
purpose of boosting the economic development of the country.
Section 2 of the same law in fact even more clearly shows that the term
"deposits" was intended to be understood broadly.

The phrase "of whatever nature" proscribes any restrictive

interpretation of "deposits." Moreover, it is clear from the immediately quoted
provision that, generally, the law applies not only to money which is deposited
but also to those which are invested. This further shows that the law was not
intended to apply only to "deposits" in the strict sense of the
word.lawphil.net Otherwise, there would have been no need to add the phrase
"or invested.
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No.
858.36
We have consistently ruled that bank deposits under R.A. No. 1405 (the
Secrecy of Bank Deposits Law) are statutorily protected or recognized zones
of privacy.37 Given the private nature of Estrada’s act of signing the
documents as "Jose Velarde" related to the opening of the trust account, the
People cannot claim that there was already a public use of alias when
Ocampo and Curato witnessed the signing. We need not even consider here
the impact of the obligations imposed by R.A. No.1405 on the bank officers;
what is essentially significant is the privacy situation that is necessarily implied
in these kinds of transactions. This statutorily guaranteed privacy and secrecy
effectively negate a conclusion that the transaction was done publicly or with
the intent to use the alias publicly.
The enactment of R.A. No.9160, on the other hand, is a significant
development only because it clearly manifests that prior to its enactment,
numbered accounts or anonymous accounts were permitted banking
transactions, whether they be allowed by law or by a mere banking regulation.
To be sure, an indictment against Estrada using this relatively recent law
cannot be maintained without violating the constitutional prohibition on the
enactment and use of ex post facto laws.38

We hasten to add that this holistic application and interpretation of

these various laws is not an attempt to harmonize these laws. A finding of
commission of the offense punished under CA No. 142 must necessarily rest
on the evidence of the requisites for culpability, as amplified in Ursua. The
application of R.A. No. 1405 is significant only because Estrada’s use of the
alias was pursuant to a transaction that the law considers private or, at the
very least, where the law guarantees a reasonable expectation of privacy to
the parties to the transactions; it is at this point that R.A. No. 1405 tangentially
interfaces with an indictment under CA 142. In this light, there is no actual
frontal clash between CA No. 142 and R.A. No. 1405 that requires
harmonization. Each operates within its own sphere, but must necessarily be
read together when these spheres interface with one another. Finally, R.A.
No. 9160, as a law of recent vintage in relation to the indictment against
Estrada, cannot be a source or an influencing factor in his indictment.