Teofisto Guingona, Jr., Antonio Martin, and Teresita Santos vs. The City Fiscal of Manila, Hon. Jose Flaminiano, Asst. City Fiscal Felizardo Lota and

Facts:

From March 1979 to March 1981, Clement David made several investments with the National Savings and Loan Association. On March 21, 1981, the bank was placed under receivership by the Bangko Sentral. Upon David’s request, petitioners Guingona and Martin issued a joint promissory note, absorbing the obligations of the bank. On July 17, 1981, they divided the indebtedness. David filed a complaint for estafa and violation of Central Bank Circular No. 364 and related regulations regarding foreign exchange transactions before the Office of the City Fiscal of Manila. Petitioners filed the herein petition for prohibition and injunction with a prayer for immediate issuance of restraining order and/or writ of preliminary injunction to enjoin the public respondents to proceed with the preliminary investigation on the ground that the petitioners’ obligation is civil in nature.

Issue:

(1) Whether the contract between NSLA and David is a contract of depositor a contract of loan, which answer determines whether the City Fiscal has the jurisdiction to file a case for estafa

(2) Whether there was a violation of Central Bank Circular No. 364

Held:

(1) When private respondent David invested his money on nine. and savings deposits with the aforesaid bank, the contract that was perfected was a contract of simple loan or mutuum and not a contract of deposit. Hence, the relationship between the private respondent and the Nation Savings and Loan Association is that of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to the Bank upon the perfection of the contract and it can make use of the amount deposited for its banking operations, such as to pay interests on deposits and to pay withdrawals. While the Bank has the obligation to return theamount deposited, it has, however, no obligation to return or deliver the same money that was deposited. And, the failure of the Bank to return the amount deposited will not constitute estafa through misappropriation

punishable under Article 315, par. l(b) of the Revised Penal Code, but it will only give rise to civil liability over which the public respondents have no jurisdiction.

But even granting that the failure of the bank to pay the time and savings deposits of private respondent David would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code, nevertheless any incipient criminal liability was deemed avoided, because when the aforesaid bank was placed under receivership by the Central Bank, petitioners Guingona and Martin assumed the obligation of the bank to private respondent David, thereby resulting in the novation of the original contractual obligation arising from deposit into a contract of loan and converting the original trust relation between the bank and private respondent David into an ordinary debtor-creditor relation between the petitioners and private respondent. Consequently, the failure of the bank or petitioners Guingona and Martin to pay the deposits of private respondent would not constitute a breach of trust but would merely be a failure to pay the obligation as a debtor. Moreover, while it is true that novation does not extinguish criminal liability, it may however, prevent the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court. In the case at bar, there is no dispute that petitioners Guingona and Martin executed a promissory note on June 17, 1981 assuming the obligation of the bank to private respondent David; while the criminal complaint for estafa was filed on December 23, 1981 with the Office of the City Fiscal. Hence, it is clear that novation occurred long before the filing of the criminal complaint with the Office of the City Fiscal. Consequently, as aforestated, any incipient criminal liability would be avoided but there will still be a civil liability on the part of petitioners Guingona and Martin to pay the assumed obligation.

(2) Petitioner Guingona merely accommodated the request of the Nation Savings and loan Association in order to clear the bank draft through his dollar account because the bank did not have a dollar account. Immediately after the bank draft was cleared, petitioner Guingona authorized Nation Savings and Loan Association to withdraw the same in order to be utilized by the bank for its operations. It is safe to assume that the U.S. dollars were converted first into Philippine pesos before they were accepted and deposited in Nation Savings and Loan Association, because the bank is presumed to have followed the ordinary course of the business which is to accept deposits in

Philippine currency only, and that the transaction was regular and fair, in the absence of a clear and convincing evidence to the contrary.

In conclusion, considering that the liability of the petitioners is purely civil in nature and that there is no clear showing that they engaged in foreign exchange transactions, We hold that the public respondents acted without jurisdiction when they investigated the charges against the petitioners. Consequently, public respondents should be restrained from further proceeding with the criminal case for to allow the case to continue, even if the petitioners could have appealed to the Ministry of Justice, would work great injustice to petitioners and would render meaningless the proper administration of justice.

THIRD DIVISION 

[G.R. No. 173654-765, August 28, 2008] 

PEOPLE OF THE PHILIPPINES, PETITIONERS, VS. TERESITA PUIG AND

ROMEO PORRAS, RESPONDENT.

D E C I S I O N 

CHICO-NAZARIO, J.:

This is a Petition for Review under Rule 45 of the Revised Rules of Court with petitioner People of the Philippines, represented by the Office of the Solicitor General, praying for the reversal of the Orders dated 30 January 2006 and 9 June 2006 of the Regional Trial Court (RTC) of the 6th Judicial Region, Branch 68, Dumangas, Iloilo, dismissing the 112 cases of Qualified Theft filed against respondents Teresita Puig and Romeo Porras, and denying petitioner's Motion for Reconsideration, in Criminal Cases No. 05-3054 to 05-3165.

The following are the factual antecedents:

On 7 November 2005, the Iloilo Provincial Prosecutor's Office filed before Branch 68 of the RTC in Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig (Puig) and Romeo Porras (Porras) who were the Cashier and Bookkeeper, respectively, of private complainant Rural Bank of Pototan, Inc. The cases were docketed as Criminal Cases No. 05-3054 to 05-3165.

The allegations in the Informations[1] filed before the RTC were uniform and pro-forma, except for

the amounts, date and time of commission, to wit:

INFORMATIONThat on or about the 1st day of August, 2002, in the Municipality of Pototan, Province of Iloilo, Philippines, and within the jurisdiction of this Honorable Court, above-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank and with intent of gain, did then and there willfully, unlawfully and feloniously take, steal and carry away the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency, to the damage and prejudice of the said bank in the aforesaid amount.After perusing the Informations in these cases, the trial court did not find the existence of probable cause that would have necessitated the issuance of a warrant of arrest based on the following grounds:(1) the element of `taking without the

consent of the owners' was missing on the ground that it is the depositors-clients, and not the Bank, which filed the complaint in these cases, who are the owners of the money allegedly taken by respondents and hence, are the real parties-in-interest; and

(2) the Informations are bereft of the phrase alleging "dependence, guardianship or vigilance between the respondents and the offended party that would have created a high degree of confidence between them which the respondents could have abused."

It added that allowing the 112 cases for Qualified Theft filed against the respondents to push through would be violative of the right of the respondents under Section 14(2), Article III of the 1987 Constitution which states that in all criminal prosecutions, the accused shall enjoy the right to be informed of the nature and cause of the accusation against him. Following Section 6, Rule 112 of the Revised Rules of Criminal Procedure, the RTC dismissed the cases on 30 January 2006 and refused to issue a warrant of arrest against Puig and Porras.

A Motion for Reconsideration[2] was filed on 17 April 2006, by the petitioner.

On 9 June 2006, an Order[3] denying petitioner's

Motion for Reconsideration was issued by the RTC, finding as follows:Accordingly, the prosecution's Motion for Reconsideration should be, as it hereby, DENIED. The Order dated January 30, 2006 STANDS in all respects.Petitioner went directly to this Court via Petition for Review on Certiorari under Rule 45, raising the sole legal issue of:WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED THEFT SUFFICIENTLY ALLEGE THE ELEMENT OF TAKING WITHOUT THE CONSENT OF THE OWNER, AND THE QUALIFYING CIRCUMSTANCE OF GRAVE ABUSE OF CONFIDENCE.Petitioner prays that judgment be rendered annulling and setting aside the Orders dated 30 January 2006 and 9 June 2006 issued by the trial court, and that it be directed to proceed with Criminal Cases No. 05-3054 to 05-3165.

Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans." Corollary thereto, Article 1953 of the same Code provides that "a person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality." Thus, it posits that the depositors who place their money with the bank are considered creditors of the bank. The bank acquires ownership of the money deposited by its clients, making the money taken by respondents as belonging to the bank.

Petitioner also insists that the Informations sufficiently allege all the elements of the crime of qualified theft, citing that a perusal of the Informations will show that they specifically allege that the respondents were the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., respectively, and that they took various amounts of money with grave abuse of confidence, and without the knowledge and consent of the bank, to the damage and prejudice of the bank.

Parenthetically, respondents raise procedural issues. They challenge the petition on the ground that a Petition for Review on Certiorari via Rule 45 is the wrong mode of appeal because a finding of probable cause for the issuance of a warrant of arrest presupposes evaluation of facts and circumstances, which is not proper under said Rule.

Respondents further claim that the Department of Justice (DOJ), through the Secretary of Justice, is the principal party to file a Petition for Review on Certiorari,considering that the incident was indorsed by the DOJ.

We find merit in the petition.

The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the Informations and, therefore, because of this defect, there is no basis for the existence of probable cause which will justify the issuance of the warrant of arrest. Petitioner assails the dismissal contending that the Informations for Qualified Theft sufficiently state facts which constitute (a) the qualifying circumstance of grave abuse of confidence; and (b) the element of taking, with intent to gain and without the consent of the owner, which is the Bank.

In determining the existence of probable cause to issue a warrant of arrest, the RTC judge found the allegations in the Information inadequate. He ruled that the Information failed to state facts constituting the qualifying circumstance of grave abuse of confidence and the element of taking without the consent of the owner, since the owner of the money is not the Bank, but the depositors therein. He also citesPeople v. Koc Song,[4] in which this Court held:There must be allegation in the information and proof of a relation, by reason of dependence, guardianship or vigilance, between the respondents and the offended party that has created a high degree of confidence between them, which the respondents abused.At this point, it needs stressing that the RTC Judge based his conclusion that there was no probable cause simply on the insufficiency of the allegations in the Informations concerning the facts constitutive of the elements of the offense charged. This, therefore, makes the issue of sufficiency of the allegations in the Informations the focal point of discussion.

Qualified Theft, as defined and punished under Article 310 of the Revised Penal Code, is committed as follows, viz:ART. 310. Qualified Theft. - The crime of theft shall be punished by the penalties next higher by two degrees than those respectively specified in the next preceding article, if committed by a domestic servant, or with grave abuse of confidence, or if the property

stolen is motor vehicle, mail matter or large cattle or consists of coconuts taken from the premises of a plantation, fish taken from a fishpond or fishery or if property is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity, vehicular accident or civil disturbance. (Emphasis supplied.)Theft, as defined in Article 308 of the Revised Penal Code, requires the physical taking of another's property without violence or intimidation against persons or force upon things. The elements of the crime under this Article are:

1. Intent to gain;

2. Unlawful taking;3. Personal property belonging to another;4. Absence of violence or intimidation

against persons or force upon things.

To fall under the crime of Qualified Theft, the following elements must concur:

1. Taking of personal property;

2. That the said property belongs to another;

3. That the said taking be done with intent to gain;

4. That it be done without the owner's consent;

5. That it be accomplished without the use of violence or intimidation against persons, nor of force upon things;

6. That it be done with grave abuse of confidence.

On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court requires, inter alia, that the information must state the acts or omissions complained of as constitutive of the offense.

On the manner of how the Information should be worded, Section 9, Rule 110 of the Rules of Court, is enlightening:Section 9. Cause of the accusation. The acts or omissions complained of as constituting the offense and the qualifying and aggravating circumstances must be stated in ordinary and concise language and not necessarily in the language used in the statute but in terms sufficient to enable a person of common understanding to know what offense is being charged as well as its qualifying and

aggravating circumstances and for the court to pronounce judgment.It is evident that the Information need not use the exact language of the statute in alleging the acts or omissions complained of as constituting the offense. The test is whether it enables a person of common understanding to know the charge against him, and the court to render judgment properly.[5]

The portion of the Information relevant to this discussion reads:[A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank x x x.It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank who come into possession of the monies deposited therein enjoy the confidence reposed in them by their employer. Banks, on the other hand, where monies are deposited, are considered the owners thereof. This is very clear not only from the express provisions of the law, but from established jurisprudence. The relationship between banks and depositors has been held to be that of creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as appropriately pointed out by petitioner, provide as follows:Article 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.

Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning loan.In a long line of cases involving Qualified Theft, this Court has firmly established the nature of possession by the Bank of the money deposits therein, and the duties being performed by its employees who have custody of the money or have come into possession of it. The Court has consistently considered the allegations in the Information that such employees acted with grave abuse of confidence, to the damage and prejudice of the Bank, without particularly referring to it as owner of the money deposits, as sufficient to make out a case of Qualified Theft. For a graphic illustration, we cite Roque v. People,[6] where the accused teller was

convicted for Qualified Theft based on this Information:That on or about the 16th day of November, 1989, in the municipality of Floridablanca, province of Pampanga, Philippines and within the jurisdiction of his Honorable Court, the above-named accused ASUNCION GALANG ROQUE, being then employed as teller of the Basa Air Base Savings and Loan Association Inc. (BABSLA) with office address at Basa Air Base, Floridablanca, Pampanga, and as such was authorized and reposed with the responsibility to receive and collect capital contributions from its member/contributors of said corporation, and having collected and received in her capacity as teller of the BABSLA the sum of TEN THOUSAND PESOS (P10,000.00), said accused, with intent of gain, with grave abuse of confidence and without the knowledge and consent of said corporation, did then and there willfully, unlawfully and feloniously take, steal and carry away the amount of P10,000.00, Philippine currency, by making it appear that a certain depositor by the name of Antonio Salazar withdrew from his Savings Account No. 1359, when in truth and in fact said Antonio Salazar did not withdr[a]w the said amount of P10,000.00 to the damage and prejudice of BABSLA in the total amount of P10,000.00, Philippine currency.In convicting the therein appellant, the Court held that:[S]ince the teller occupies a position of confidence, and the bank places money in the teller's possession due to the confidence reposed on the teller, the felony of qualified theft would be committed.[7]

Also in People v. Sison,[8] the Branch Operations Officer was convicted of the crime of Qualified Theft based on the Information as herein cited:That in or about and during the period compressed between January 24, 1992 and February 13, 1992, both dates inclusive, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully and feloniously, with intent of gain and without the knowledge and consent of the owner thereof, take, steal and carry away the following, to wit:

Cash money amounting to P6,000,000.00 in different denominations belonging to the PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIBank for brevity), Luneta Branch, Manila represented by its Branch Manager, HELEN U. FARGAS, to the damage and prejudice of the said owner in the aforesaid amount of P6,000,000.00, Philippine Currency.

That in the commission of the said offense, herein accused acted with grave abuse of confidence and unfaithfulness, he being the Branch Operation Officer of the said complainant and as such he had free access to the place where the said amount of money was kept.

The judgment of conviction elaborated thus:

The crime perpetuated by appellant against his employer, the Philippine Commercial and Industrial Bank (PCIB), is Qualified Theft. Appellant could not have committed the crime had he not been holding the position of Luneta Branch Operation Officer which gave him not only sole access to the bank vault xxx. The management of the PCIB reposed its trust and confidence in the appellant as its Luneta Branch Operation Officer, and it was this trust and confidence which he exploited to enrich himself to the damage and prejudice of PCIB x x x.[9]

From another end, People v. Locson,[10] in addition to People v. Sison, described the nature of possession by the Bank. The money in this case was in the possession of the defendant as receiving teller of the bank, and the possession of the defendant was the possession of the Bank. The Court held therein that when the defendant, with grave abuse of confidence, removed the money and appropriated it to his own use without the consent of the Bank, there was taking as contemplated in the crime of Qualified Theft.[11]

Conspicuously, in all of the foregoing cases, where the Informations merely alleged the positions of the respondents; that the crime was committed with grave abuse of confidence, with intent to gain and without the knowledge and consent of the Bank, without necessarily stating the phrase being assiduously insisted upon by respondents,"of a relation by reason of dependence, guardianship or vigilance, between the respondents and the offended party that has created a high degree of confidence between them, which respondents abused,"[12] and without employing the word "owner" in lieu of the "Bank" were considered to have satisfied the test of sufficiency of allegations.

As regards the respondents who were employed as Cashier and Bookkeeper of the Bank in this case, there is even no reason to quibble on the allegation in the Informations that they acted with grave abuse of confidence. In fact, the

Information which alleged grave abuse of confidence by accused herein is even more precise, as this is exactly the requirement of the law in qualifying the crime of Theft.

In summary, the Bank acquires ownership of the money deposited by its clients; and the employees of the Bank, who are entrusted with the possession of money of the Bank due to the confidence reposed in them, occupy positions of confidence. The Informations, therefore, sufficiently allege all the essential elements constituting the crime of Qualified Theft.

On the theory of the defense that the DOJ is the principal party who may file the instant petition, the ruling in Mobilia Products, Inc. v. Hajime Umezawa[13] is instructive. The Court thus enunciated:In a criminal case in which the offended party is the State, the interest of the private complainant or the offended party is limited to the civil liability arising therefrom. Hence, if a criminal case is dismissed by the trial court or if there is an acquittal, a reconsideration of the order of dismissal or acquittal may be undertaken, whenever legally feasible, insofar as the criminal aspect thereof is concerned and may be made only by the public prosecutor; or in the case of an appeal, by the State only, through the OSG. x x x.On the alleged wrong mode of appeal by petitioner, suffice it to state that the rule is well-settled that in appeals by certiorari under Rule 45 of the Rules of Court, only errors of law may be raised,[14] and herein petitioner certainly raised a question of law.

As an aside, even if we go beyond the allegations of the Informations in these cases, a closer look at the records of the preliminary investigation conducted will show that, indeed, probable cause exists for the indictment of herein respondents. Pursuant to Section 6, Rule 112 of the Rules of Court, the judge shall issue a warrant of arrest only upon a finding of probable cause after personally evaluating the resolution of the prosecutor and its supporting evidence. Soliven v. Makasiar,[15] as reiterated inAllado v. Driokno,[16] explained that probable cause for the issuance of a warrant of arrest is the existence of such facts and circumstances that would lead a reasonably discreet and prudent person to believe that an offense has been committed by the person sought to be arrested.[17] The records reasonably indicate that the respondents may have, indeed, committed the offense charged.

Before closing, let it be stated that while it is truly imperative upon the fiscal or the judge, as the case may be, to relieve the respondents from the pain of going through a trial once it is ascertained that no probable cause exists to form a sufficient belief as to the guilt of the respondents, conversely, it is also equally imperative upon the judge to proceed with the case upon a showing that there is a prima facie case against the respondents.

WHEREFORE, premises considered, the Petition for Review on Certiorari is herebyGRANTED. The Orders dated 30 January 2006 and 9 June 2006 of the RTC dismissing Criminal Cases No. 05-3054 to 05-3165 are REVERSED and SET ASIDE. Let the corresponding Warrants of Arrest issue against herein respondents TERESITA PUIG and ROMEO PORRAS. The RTC Judge of Branch 68, in Dumangas, Iloilo, is directed to proceed with the trial of Criminal Cases No. 05-3054 to 05-3165, inclusive, with reasonable dispatch. No pronouncement as to costs.

SO ORDERED.

Ynares-Santiago, (Chairperson), Austria-Martinez, Reyes, and Leonardo-De Castro,JJ., concur.

CITYTRUST v IAC (Ysan)

Facts:Herrero, a businesswoman, made regular deposits Citytrust at its Burgos branch in Calamba, Laguna. Oo one occasion, she deposited with petitioner the amount P31,500.00 in cash, in order to amply cover 6 postdated checks she issued. When presented for encashment upon maturity, all the checks were dishonored due to “insufficient funds”. Petitioner, in its answer, asserted that it was due to private respondent's fault that her checks were dishonored. It averred that instead of stating her correct account number, i.e., 29000823, in her deposit slip, she inaccurately wrote 2900823.

Issue: Whether Herrero’s mistake absolves Citytrust from liability

Held. No.The Court reiterated its ruling in Mundin v. Far East Bank & Trust to wit:

Having accepted a deposit in the course of its business

transactions, it behooved upon defendant bank to see to it and without recklessness that the depositor was accurately credited therefor. To post a deposit in somebody else's name despite the name of the depositor clearly written on the deposit slip is indeed sheer negligence which could have easily been avoided if defendant bank exercised due diligence and circumspection in the acceptance and posting of plaintiff's deposit.

Phil. Bank of Commerce v. CAG.R. No. 97626, March 14, 1997

The negligence must be the proximate cause of the loss

FACTS: 

Rommel’s Marketing Corporation (RMC) maintained two separate current accounts with PBC in connection with its business of selling appliances. The RMC General Manager Lipana entrusted to his secretary, Irene Yabut, RMC funds amounting to P300,000+ for the purpose of depositing the same to RMC’s account with PBC. However, it turned out that Yabut deposited the amounts in her husband’s account instead of RMC. Lipana never checked his monthly statement of accounts regularly furnished by PBC so that Yabut’s modus operandi went on for the span of more than one year.ISSUE: 

What is the proximate cause of the loss – Lipana’s negligence in not checking his monthly statements or the bank’s negligence through its teller in validating the deposit slips?

HELD: 

The bank teller was negligent in validating, officially stamping and signing all the deposit slips prepared and presented by Yabut, despite the glaring fact that the duplicate copy was not completely accomplished contrary to the self-imposed procedure of the bank with respect to the proper validation of deposit slips, original or duplicate.

The bank teller’s negligence, as well as the negligence of the bank in the selection and supervision of its bank teller, is the proximate

cause of the loss suffered by the private respondent, not the latter’s entrusting cash to a dishonest employee. Xxx Even if Yabut had the fraudulent intention to misappropriate the funds, she would not have been able to deposit those funds in her husband’s current account, and then make plaintiff believe that it was in the latter’s accounts wherein she had deposited them, had it not been for the bank teller’s aforesaid gross and reckless negligence.

Doctrine of Last Clear Chance – where both parties are negligent, but the negligent act of one is appreciably later in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident, the one who had the last clear opportunity to avoid the impending harm and failed to do so is chargeable with the consequences thereof. It means that the antecedent negligence of a person does not preclude the recovery of damages for the supervening negligence of, or bar a defense against liability sought by another, if the latter, who had the last fair chance, could have avoided the impending harm by exercise of due diligence. (Phil. Bank of Commerce v. CA, supra)

PHILIPPINE SAVINGS BANK (PSBank) VS. CHOWKING FOOD CORPORATION (Chowking)G.R. No. 177526, July 04, 2008Petition for review on certiorari of the Decision of the CA REYES, R.T., J.:

Facts: The RTC ordered petitioner PSBank and its Bustos Branch Head, Erlinda O. Santos, to reimburse respondent Chowking the amount corresponding to five (5) illegally encashed checks. The total amount of the subject checks reached P556,981.86. On the respective due dates of each check, Chowking's acting accounting manager, Rino T. Manzano, endorsed and encashed said checks with the Bustos branch of respondent PSBank. All the five checks were honored by defendant Santos, even with only the endorsement of Manzano approving them. The signatures of the other authorized officers of respondent corporation were absent in the five (5) checks, contrary to usual banking practice. Unexpectedly, Manzano absconded with and misappropriated the check proceeds. When Chowking found out Manzano's scheme, it demanded reimbursement from PSBank. When PSBank refused to pay, Chowking filed a complaint for a sum of money with damages before the RTC. In its Answer, petitioner did not controvert the foregoing facts,

but denied liability to respondent for the encashed checks. RTC rendered judgment in favor of respondent. On motion for reconsideration of the plaintiff, the RTC reversed its earlier decision and dismissed Chowking's complaint. In its appeal, CA granted the petition reinstating the first decision of the RTC.

Issue: WON banks' required diligence is that of pater familias.

Ruling: CA decision affirmed. Petition Denied.

It cannot be over emphasized that the banking business is impressed with public interest. Of paramount importance is the trust and confidence of the public in general in the banking industry. Consequently, the diligence required of banks is more than that of a Roman pater familias or a good father of a family. The highest degree of diligence is expected. In its declaration of policy, the General Banking Law of 2000 requires of banks the highest standards of integrity and performance. Needless to say, a bank is "under obligation to treat the accounts of its depositors with meticulous care. The fiduciary nature of the relationship between the bank and the depositors must always be of paramount concern.

"Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done....Art. 2180. The obligation imposed by Art. 2176 is demandable not only for one's own acts or omissions but also for those of persons for whom one is responsible.

x x x xEmployers shall be liable for the damage caused by their employees and household helpers acting within the scope of their assigned tasks even though the former are not engaged in any business or activity.

x x x xThe responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage."x x x

However, with banks like PSB, the degree of diligence required is more than that of a good father of a family considering that the business of banking is imbued with public interest due to the nature of its functions. Highest degree of diligence is needed which PSB, in this case, failed to observe. x x x Its argument that it should no be held responsible for the negligent acts of Santos because those were independent

acts x x x perpetrated without its knowledge and consent is without basis in fact and in law. Assuming that PSB did not err in hiring Santos for her position, its lack of supervision over her made it solidarily liable for the unauthorized encashment of the checks involved. In the supervision of employees, the employer must formulate standard operating procedures, monitor their implementation and impose disciplinary measures for the breach thereof. The appellee, in this case, presented no evidence that it formulated rules/guidelines for the proper performance of functions of its employees and that it strictly implemented and monitored compliance therewith. x x x

BPI v CASA MONTESSORI INTL

BPI VS. CASA MONTESSORI

INTERNATIONAL

FACTS: On November 8, 1982, CASA Montessori

International opened Current AccouNT with BPI

with CASA’s President Lebron as one of its

authorized signatories. In 1991, after

conducting an investigation, plaintiff discovered

that nine of its checks had been encashed by a

certain Sonny D. Santos since 1990 in the total

amount of P782,000.00. It turned out that

Santos with account at BPI Greenbelt Branch

was a fictitious name used by third party

defendant Leonardo T. Yabut who worked as

external auditor of CASA. Third party defendant

voluntarily admitted that he forged the

signature of Lebron and encashed the checks. In

1991, plaintiff filed Complaint for Collection with

Damages against defendant bank praying that

the latter be ordered to reinstate the amount of

P782,500.00 with interest. RTC rendered

decision in favor of the plaintiff. CA modified

decision holding CASA as contributory negligent

hence ordered Yabut to reimburse BPI half the

total amount claimed and CASA, the other half.

It also disallowed attorney’s fees and moral and

exemplary damages.

ISSUE: W/N moral and exemplary damages and

attorney’s fees should be awarded.

RULING: Moral and exemplary damages denied

but atty.’s fees granted.

In the absence of a wrongful act or omission, or

of fraud or bad faith, moral damages cannot be

awarded. The adverse result of an action does

not per se make the action wrongful, or the

party liable for it.CASA was unable to identify

the particular instance upon which its claim for

moral damages is predicated. Neither bad faith

nor negligence so gross that it amounts to

malice can be imputed to BPI.

Imposed by way of correction for the public

good, exemplary damages cannot be recovered

as a matter of right. There is no bad faith on the

part of BPI for paying the checks of CASA upon

forged signatures. Therefore, the former cannot

be said to have acted in a wanton, fraudulent,

reckless, oppressive or malevolent manner. The

latter, having no right to moral damages, cannot

demand exemplary damages.

When the act or omission of the defendant has

compelled the plaintiff to incur expenses to

protect the latter’s interest, or where the court

deems it just and equitable, attorney’s fees may

be recovered. In the present case, BPI

persistently denied the claim of CASA under the

NIL to recredit the latter’s account for the value

of the forged checks. This denial constrained

CASA to incur expenses and exert effort for

more than ten years in order to protect its

corporate interest in its bank account.

SECOND DIVISION

[G.R. No. 121413. January 29, 2001]

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA

AND AMERICA),,Petitioner, v. COURT OF APPEALS and FORD PHILIPPINES, INC. and

CITIBANK, N.A., Respondents.

[G.R. No. 121479. January 29, 2001]

FORD PHILIPPINES, INC., petitioner-plaintiff, vs. COURT OF APPEALS and CITIBANK,

N.A. and PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondents.

[G.R. No. 128604. January 29, 2001]

FORD PHILIPPINES, INC., Petitioner, v. CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL

BANK and THE COURT OF APPEALS, Respondents.

D E C I S I O N

QUISUMBING, J.:

These consolidated petitions involve several fraudulently negotiated checks.

The original actions a quo were instituted by Ford Philippines to recover from the drawee bank, CITIBANK, N.A. (Citibank) and collecting bank, Philippine Commercial International Bank (PCIBank) [formerly Insular Bank of Asia and America], the value of several checks payable to the Commissioner of Internal Revenue, which were embezzled allegedly by an organized syndicate.

G.R. Nos. 121413 and 121479 are twin petitions for review of the March 27, 1995 Decision [1 of the Court of Appeals in CA-G.R. CV No. 25017, entitled Ford Philippines, Inc. vs. Citibank, N.A. and Insular Bank of Asia and America (now Philippine Commercial International Bank), and the August 8, 1995 Resolution, [2 ordering the collecting bank, Philippine Commercial International Bank, to pay the amount of Citibank Check No. SN-04867.

In G.R. No. 128604, petitioner Ford Philippines assails the October 15, 1996 Decision [3 of the Court of Appeals and its March 5, 1997 Resolution [4 in CA-G.R. No. 28430 entitled Ford Philippines, Inc. vs. Citibank, N.A. and Philippine Commercial International Bank, affirming in

toto the judgment of the trial court holding the defendant drawee bank, Citibank, N.A., solely liable to pay the amount of P12,163,298.10 as damages for the misapplied proceeds of the plaintiffs Citibank Check Numbers SN-10597 and 16508.

I. G.R. Nos. 121413 and 121479

The stipulated facts submitted by the parties as accepted by the Court of Appeals are as follows:

On October 19, 1977, the plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment of plaintiffs percentage or manufacturers sales taxes for the third quarter of 1977.

The aforesaid check was deposited with the defendant IBAA (now PCIBank) and was subsequently cleared at the Central Bank. Upon presentment with the defendant Citibank, the proceeds of the check was paid to IBAA as collecting or depository bank.

The proceeds of the same Citibank check of the plaintiff was never paid to or received by the payee thereof, the Commissioner of Internal Revenue.

As a consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, the plaintiff was compelled to make a second payment to the Bureau of Internal Revenue of its percentage/manufacturers sales taxes for the third quarter of 1977 and that said second payment of plaintiff in the amount of P4,746,114.41 was duly received by the Bureau of Internal Revenue.

It is further admitted by defendant Citibank that during the time of the transactions in question, plaintiff had been maintaining a checking account with defendant Citibank; that Citibank Check No. SN-04867 which was drawn and issued by the plaintiff in favor of the Commissioner of Internal Revenue was a crossed check in that, on its face were two parallel lines and written in between said lines was the phrase Payees Account Only; and that defendant Citibank paid the full face value of the check in the amount of P4,746,114.41 to the defendant IBAA.

It has been duly established that for the payment of plaintiffs percentage tax for the last quarter of 1977, the Bureau of Internal Revenue

issued Revenue Tax Receipt No. 18747002, dated October 20, 1977, designating therein in Muntinlupa, Metro Manila, as the authorized agent bank of Metrobank, Alabang Branch to receive the tax payment of the plaintiff.

On December 19, 1977, plaintiffs Citibank Check No. SN-04867, together with the Revenue Tax Receipt No. 18747002, was deposited with defendant IBAA, through its Ermita Branch. The latter accepted the check and sent it to the Central Clearing House for clearing on the same day, with the indorsement at the back all prior indorsements and/or lack of indorsements guaranteed. Thereafter, defendant IBAA presented the check for payment to defendant Citibank on same date, December 19, 1977, and the latter paid the face value of the check in the amount of P4,746,114.41. Consequently, the amount of P4,746,114.41 was debited in plaintiffs account with the defendant Citibank and the check was returned to the plaintiff.

Upon verification, plaintiff discovered that its Citibank Check No. SN-04867 in the amount of P4,746,114.41 was not paid to the Commissioner of Internal Revenue. Hence, in separate letters dated October 26, 1979, addressed to the defendants, the plaintiff notified the latter that in case it will be re-assessed by the BIR for the payment of the taxes covered by the said checks, then plaintiff shall hold the defendants liable for reimbursement of the face value of the same. Both defendants denied liability and refused to pay.

In a letter dated February 28, 1980 by the Acting Commissioner of Internal Revenue addressed to the plaintiff - supposed to be Exhibit D, the latter was officially informed, among others, that its check in the amount of P4,746,114.41 was not paid to the government or its authorized agent and instead encashed by unauthorized persons, hence, plaintiff has to pay the said amount within fifteen days from receipt of the letter. Upon advice of the plaintiffs lawyers, plaintiff on March 11, 1982, paid to the Bureau of Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiffs percentage tax for the third quarter of 1977.

As a consequence of defendants refusal to reimburse plaintiff of the payment it had made for the second time to the BIR of its percentage taxes, plaintiff filed on January 20, 1983 its original complaint before this Court.

On December 24, 1985, defendant IBAA was merged with the Philippine Commercial International Bank (PCI Bank) with the latter as the surviving entity.

Defendant Citibank maintains that; the payment it made of plaintiffs Citibank Check No. SN-04867 in the amount of P4,746,114.41 was in due course; it merely relied on the clearing stamp of the depository/collecting bank, the defendant IBAA that all prior indorsements and/or lack of indorsements guaranteed; and the proximate cause of plaintiffs injury is the gross negligence of defendant IBAA in indorsing the plaintiffs Citibank check in question.

It is admitted that on December 19, 1977 when the proceeds of plaintiffs Citibank Check No. SN-04867 was paid to defendant IBAA as collecting bank, plaintiff was maintaining a checking account with defendant Citibank.[5

Although it was not among the stipulated facts, an investigation by the National Bureau of Investigation (NBI) revealed that Citibank Check No. SN-04867 was recalled by Godofredo Rivera, the General Ledger Accountant of Ford. He purportedly needed to hold back the check because there was an error in the computation of the tax due to the Bureau of Internal Revenue (BIR). With Riveras instruction, PCIBank replaced the check with two of its own Managers Checks (MCs). Alleged members of a syndicate later deposited the two MCs with the Pacific Banking Corporation.

Ford, with leave of court, filed a third-party complaint before the trial court impleading Pacific Banking Corporation (PBC) and Godofredo Rivera, as third party defendants. But the court dismissed the complaint against PBC for lack of cause of action. The court likewise dismissed the third-party complaint against Godofredo Rivera because he could not be served with summons as the NBI declared him as a fugitive from justice.

On June 15, 1989, the trial court rendered its decision, as follows:

Premises considered, judgment is hereby rendered as follows:

1. Ordering the defendants Citibank and IBAA (now PCI Bank), jointly and severally, to pay the plaintiff the amount of P4,746,114.41 representing the face value of plaintiffs Citibank Check No. SN-04867, with interest thereon at the legal rate starting January 20, 1983, the

date when the original complaint was filed until the amount is fully paid, plus costs;

2. On defendant Citibanks cross-claim: ordering the cross-defendant IBAA (now PCI BANK) to reimburse defendant Citibank for whatever amount the latter has paid or may pay to the plaintiff in accordance with the next preceding paragraph;

3. The counterclaims asserted by the defendants against the plaintiff, as well as that asserted by the cross-defendant against the cross-claimant are dismissed, for lack of merits; and

4. With costs against the defendants.

SO ORDERED.[6

Not satisfied with the said decision, both defendants, Citibank and PCIBank, elevated their respective petitions for review on certiorari to the Court of Appeals. On March 27, 1995, the appellate court issued its judgment as follows:

WHEREFORE, in view of the foregoing, the court AFFIRMS the appealed decision with modifications.

The court hereby renders judgment:

1. Dismissing the complaint in Civil Case No. 49287 insofar as defendant Citibank N.A. is concerned;

2. Ordering the defendant IBAA now PCI Bank to pay the plaintiff the amount of P4,746,114.41 representing the face value of plaintiffs Citibank Check No. SN-04867, with interest thereon at the legal rate starting January 20, 1983. the date when the original complaint was filed until the amount is fully paid;

3. Dismissing the counterclaims asserted by the defendants against the plaintiff as well as that asserted by the cross-defendant against the cross-claimant, for lack of merits.

Costs against the defendant IBAA (now PCI Bank).

IT IS SO ORDERED.[7

PCIBank moved to reconsider the above-quoted decision of the Court of Appeals, while Ford filed

a Motion for Partial Reconsideration. Both motions were denied for lack of merit.

Separately, PCIBank and Ford filed before this Court, petitions for review by certiorari under Rule 45.

In G.R. No. 121413, PCIBank seeks the reversal of the decisionand resolution of the Twelfth Division of the Court of Appeals contending that it merely acted on the instruction of Ford and such cause of action had already prescribed.

PCIBank sets forth the following issues for consideration:

I. Did the respondent court err when, after finding that the petitioner acted on the check drawn by respondent Ford on the said respondents instructions, it nevertheless found the petitioner liable to the said respondent for the full amount of the said check.

II. Did the respondent court err when it did not find prescription in favor of the petitioner.[8

In a counter move, Ford filed its petition docketed as G.R. No. 121479, questioning the same decision and resolution of the Court of Appeals, and praying for the reinstatement in toto of the decision of the trial court which found both PCIBank and Citibank jointly and severally liable for the loss.

In G.R. No. 121479, appellant Ford presents the following propositions for consideration:

I. Respondent Citibank is liable to petitioner Ford considering that:

1. As drawee bank, respondent Citibank owes to petitioner Ford, as the drawer of the subject check and a depositor of respondent Citibank, an absolute and contractual duty to pay the proceeds of the subject check only to the payee thereof, the Commissioner of Internal Revenue.

2. Respondent Citibank failed to observe its duty as banker with respect to the subject check, which was crossed and payable to Payees Account Only.

3. Respondent Citibank raises an issue for the first time on appeal; thus the same should not be considered by the Honorable Court.

4. As correctly held by the trial court, there is no evidence of gross negligence on the part of petitioner Ford.[9

II. PCIBank is liable to petitioner Ford considering that:

1. There were no instructions from petitioner Ford to deliver the proceeds of the subject check to a person other than the payee named therein, the Commissioner of the Bureau of Internal Revenue; thus, PCIBanks only obligation is to deliver the proceeds to the Commissioner of the Bureau of Internal Revenue.[10

2. PCIBank which affixed its indorsement on the subject check (All prior indorsement and/or lack of indorsement guaranteed), is liable as collecting bank.[11

3. PCIBank is barred from raising issues of fact in the instant proceedings.[12

4. Petitioner Fords cause of action had not prescribed.[13

II. G.R. No. 128604

The same syndicate apparently embezzled the proceeds of checks intended, this time, to settle Fords percentage taxes appertaining to the second quarter of 1978 and the first quarter of 1979.

The facts as narrated by the Court of Appeals are as follows:

Ford drew Citibank Check No. SN-10597 on July 19, 1978 in the amount of P5,851,706.37 representing the percentage tax due for the second quarter of 1978 payable to the Commissioner of Internal Revenue. A BIR Revenue Tax Receipt No. 28645385 was issued for the said purpose.

On April 20, 1979, Ford drew another Citibank Check No. SN-16508 in the amount of P6,311,591.73, representing the payment of percentage tax for the first quarter of 1979 and payable to the Commissioner of Internal Revenue. Again a BIR Revenue Tax Receipt No. A-1697160 was issued for the said purpose.

Both checks were crossed checks and contain two diagonal lines on its upper left corner between which were written the words payable to the payees account only.

The checks never reached the payee, CIR. Thus, in a letter dated February 28, 1980, the BIR, Region 4-B, demanded for the said tax payments the corresponding periods above-mentioned.

As far as the BIR is concerned, the said two BIR Revenue Tax Receipts were considered fake and spurious. This anomaly was confirmed by the NBI upon the initiative of the BIR. The findings forced Ford to pay the BIR anew, while an action was filed against Citibank and PCIBank for the recovery of the amount of Citibank Check Numbers SN-10597 and 16508.

The Regional Trial Court of Makati, Branch 57, which tried the case, made its findings on the modus operandi of the syndicate, as follows:

A certain Mr. Godofredo Rivera was employed by the plaintiff FORD as its General Ledger Accountant. As such, he prepared the plaintiffs check marked Ex. A [Citibank Check No. SN-10597] for payment to the BIR. Instead, however, of delivering the same to the payee, he passed on the check to a co-conspirator named Remberto Castro who was a pro-manager of the San Andres Branch of PCIB.*   In connivance with one Winston Dulay, Castro himself subsequently opened a Checking Account in the name of a fictitious person denominated as Reynaldo Reyes in the Meralco Branch of PCIBank where Dulay works as Assistant Manager.

After an initial deposit of P100.00 to validate the account, Castro deposited a worthless Bank of America Check in exactly the same amount as the first FORD check (Exh. A, P5,851,706.37) while this worthless check was coursed through PCIBs main office enroute to the Central Bank for clearing, replaced this worthless check with FORDs Exhibit A and accordingly tampered the accompanying documents to cover the replacement. As a result, Exhibit A was cleared by defendant CITIBANK, and the fictitious deposit account of Reynaldo Reyes was credited at the PCIB Meralco Branch with the total amount of the FORD check Exhibit A. The same method was again utilized by the syndicate in profiting from Exh. B [Citibank Check No. SN-16508] which was subsequently pilfered by Alexis Marindo, Riveras Assistant at FORD.

From this Reynaldo Reyes account, Castro drew various checks distributing the shares of the other participating conspirators namely (1) CRISANTO BERNABE, the mastermind who formulated the method for the embezzlement;

(2) RODOLFO R. DE LEON a customs broker who negotiated the initial contact between Bernabe, FORDs Godofredo Rivera and PCIBs Remberto Castro; (3) JUAN CASTILLO who assisted de Leon in the initial arrangements; (4) GODOFREDO RIVERA, FORDs accountant who passed on the first check (Exhibit A) to Castro; (5) REMBERTO CASTRO, PCIBs pro-manager at San Andres who performed the switching of checks in the clearing process and opened the fictitious Reynaldo Reyes account at the PCIB Meralco Branch; (6) WINSTON DULAY, PCIBs Assistant Manager at its Meralco Branch, who assisted Castro in switching the checks in the clearing process and facilitated the opening of the fictitious Reynaldo Reyes bank account; (7) ALEXIS MARINDO, Riveras Assistant at FORD, who gave the second check (Exh. B) to Castro; (8) ELEUTERIO JIMENEZ, BIR Collection Agent who provided the fake and spurious revenue tax receipts to make it appear that the BIR had received FORDs tax payments.

Several other persons and entities were utilized by the syndicate as conduits in the disbursements of the proceeds of the two checks, but like the aforementioned participants in the conspiracy, have not been impleaded in the present case. The manner by which the said funds were distributed among them are traceable from the record of checks drawn against the original Reynaldo Reyes account and indubitably identify the parties who illegally benefited therefrom and readily indicate in what amounts they did so.[14

On December 9, 1988, Regional Trial Court of Makati, Branch 57, held drawee-bank, Citibank, liable for the value of the two checks while absolving PCIBank from any liability, disposing as follows:

WHEREFORE, judgment is hereby rendered sentencing defendant CITIBANK to reimburse plaintiff FORD the total amount of P12,163,298.10 prayed for in its complaint, with 6% interest thereon from date of first written demand until full payment, plus P300,000.00 attorneys fees and expenses of litigation, and to pay the defendant, PCIB (on its counterclaim to crossclaim) the sum of P300,000.00 as attorneys fees and costs of litigation, and pay the costs.

SO ORDERED.[15

Both Ford and Citibank appealed to the Court of Appeals which affirmed, in toto, the decision of the trial court. Hence, this petition.

Petitioner Ford prays that judgment be rendered setting aside the portion of the Court of Appeals decisionand its resolution dated March 5, 1997, with respect to the dismissal of the complaint against PCIBank and holding Citibank solely responsible for the proceeds of Citibank Check Numbers SN-10597 and 16508 for P5,851,706.73 and P6,311,591.73 respectively.

Ford avers that the Court of Appeals erred in dismissing the complaint against defendant PCIBank considering that:

I. Defendant PCIBank was clearly negligent when it failed to exercise the diligence required to be exercised by it as a banking institution.

II. Defendant PCIBank clearly failed to observe the diligence required in the selection and supervision of its officers and employees.

III. Defendant PCIBank was, due to its negligence, clearly liable for the loss or damage resulting to the plaintiff Ford as a consequence of the substitution of the check consistent with Section 5 of Central Bank Circular No. 580 series of 1977.

IV. Assuming arguendo that defendant PCIBank did not accept, endorse or negotiate in due course the subject checks, it is liable, under Article 2154 of the Civil Code, to return the money which it admits having received, and which was credited to it in its Central Bank account.[16

The main issue presented for our consideration by these petitions could be simplified as follows: Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? Or has Fords cause of action already prescribed?

Note that in these cases, the checks were drawn against the drawee bank, but the title of the person negotiating the same was allegedly defective because the instrument was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. It was established that instead of paying the checks to the CIR, for the settlement of the appropriate quarterly percentage taxes of Ford, the checks were diverted and encashed for the eventual distribution among the members of the syndicate. As to the unlawful negotiation of the check the applicable law is Section 55 of the

Negotiable Instruments Law (NIL), which provides:

When title defective -- The title of a person who negotiates an instrument is defective within the meaning of this Act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith or under such circumstances as amount to a fraud.

Pursuant to this provision, it is vital to show that the negotiation is made by the perpetrator in breach of faith amounting to fraud. The person negotiating the checks must have gone beyond the authority given by his principal. If the principal could prove that there was no negligence in the performance of his duties, he may set up the personal defense to escape liability and recover from other parties who, through their own negligence, allowed the commission of the crime.

In this case, we note that the direct perpetrators of the offense, namely the embezzlers belonging to a syndicate, are now fugitives from justice. They have, even if temporarily, escaped liability for the embezzlement of millions of pesos. We are thus left only with the task of determining who of the present parties before us must bear the burden of loss of these millions. It all boils down to the question of liability based on the degree of negligence among the parties concerned.

Foremost, we must resolve whether the injured party, Ford, is guilty of the imputed contributory negligence that would defeat its claim for reimbursement, bearing in mind that its employees, Godofredo Rivera and Alexis Marindo, were among the members of the syndicate.

Citibank points out that Ford allowed its very own employee, Godofredo Rivera, to negotiate the checks to his co-conspirators, instead of delivering them to the designated authorized collecting bank (Metrobank-Alabang) of the payee, CIR. Citibank bewails the fact that Ford was remiss in the supervision and control of its own employees, inasmuch as it only discovered the syndicates activities through the information given by the payee of the checks after an unreasonable period of time.

PCIBank also blames Ford of negligence when it allegedly authorized Godofredo Rivera to divert the proceeds of Citibank Check No. SN-04867,

instead of using it to pay the BIR. As to the subsequent run-around of funds of Citibank Check Nos. SN-10597 and 16508, PCIBank claims that the proximate cause of the damage to Ford lies in its own officers and employees who carried out the fraudulent schemes and the transactions. These circumstances were not checked by other officers of the company, including its comptroller or internal auditor. PCIBank contends that the inaction of Ford despite the enormity of the amount involved was a sheer negligence and stated that, as between two innocent persons, one of whom must suffer the consequences of a breach of trust, the one who made it possible, by his act of negligence, must bear the loss.

For its part, Ford denies any negligence in the performance of its duties. It avers that there was no evidence presented before the trial court showing lack of diligence on the part of Ford. And, citing the case of Gempesaw vs. Court of Appeals, [17 Ford argues that even if there was a finding therein that the drawer was negligent, the drawee bank was still ordered to pay damages.

Furthermore, Ford contends that Godofredo Rivera was not authorized to make any representation in its behalf, specifically, to divert the proceeds of the checks. It adds that Citibank raised the issue of imputed negligence against Ford for the first time on appeal. Thus, it should not be considered by this Court.

On this point, jurisprudence regarding the imputed negligence of employer in a master-servant relationship is instructive. Since a master may be held for his servants wrongful act, the law imputes to the master the act of the servant, and if that act is negligent or wrongful and proximately results in injury to a third person, the negligence or wrongful conduct is the negligence or wrongful conduct of the master, for which he is liable. [18 The general rule is that if the master is injured by the negligence of a third person and by the concurring contributory negligence of his own servant or agent, the latters negligence is imputed to his superior and will defeat the superiors action against the third person, assuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made. [19

Accordingly, we need to determine whether or not the action of Godofredo Rivera, Fords General Ledger Accountant, and/or Alexis Marindo, his assistant, was the proximate cause

of the loss or damage. As defined, proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient, intervening cause produces the injury, and without which the result would not have occurred. [20

It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of Fords negligence, if any, could not be characterized as the proximate cause of the injury to the parties.

The Board of Directors of Ford, we note, did not confirm the request of Godofredo Rivera to recall Citibank Check No. SN-04867. Riveras instruction to replace the said check with PCIBanks Managers Check was not in the ordinary course of business which could have prompted PCIBank to validate the same.

As to the preparation of Citibank Checks Nos. SN-10597 and 16508, it was established that these checks were made payable to the CIR. Both were crossed checks. These checks were apparently turned around by Fords employees, who were acting on their own personal capacity.

Given these circumstances, the mere fact that the forgery was committed by a drawer-payors confidential employee or agent, who by virtue of his position had unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. [21 This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession.

With respect to the negligence of PCIBank in the payment of the three checks involved, separately, the trial courts found variations between the negotiation of Citibank Check No. SN-04867 and the misapplication of total proceeds of Checks SN-10597 and 16508. Therefore, we have to scrutinize, separately, PCIBanks share of negligence when the syndicate achieved its ultimate agenda of stealing the proceeds of these checks.

G.R. Nos. 121413 and 121479

Citibank Check No. SN-04867 was deposited at PCIBank through its Ermita Branch. It was coursed through the ordinary banking

transaction, sent to Central Clearing with the indorsement at the back all prior indorsements and/or lack of indorsements guaranteed, and was presented to Citibank for payment. Thereafter PCIBank, instead of remitting the proceeds to the CIR, prepared two of its Managers checks and enabled the syndicate to encash the same.

On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances.

Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent. As aptly stated by the trial court, to wit:

x x x. Since the questioned crossed check was deposited with IBAA [now PCIBank], which

claimed to be a depository/collecting bank of the BIR, it has the responsibility to make sure

that the check in question is deposited in Payees account only.

x x x

As agent of the BIR (the payee of the check), defendant IBAA should receive instructions only from its principal BIR and not from any other person especially so when that person is not known to the defendant. It is very imprudent on the part of the defendant IBAA to just rely on the alleged telephone call of one Godofredo Rivera and in his signature to the authenticity of such signature considering that the plaintiff is not a client of the defendant IBAA.

It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an agreement to the contrary, that of principal and agent. [22A bank which receives such paper for collection is the agent of the payee or holder. [23

Even considering arguendo, that the diversion of the amount of a check payable to the collecting bank in behalf of the designated payee may be allowed, still such diversion must be properly authorized by the payor. Otherwise stated, the diversion can be justified only by

proof of authority from the drawer, or that the drawer has clothed his agent with apparent authority to receive the proceeds of such check.

Citibank further argues that PCI Banks clearing stamp appearing at the back of the questioned checks stating that ALL PRIOR INDORSEMENTS AND/OR LACK OF INDORSEMENTS GUARANTEED should render PCIBank liable because it made it pass through the clearing house and therefore Citibank had no other option but to pay it. Thus, Citibank asserts that the proximate cause of Fords injury is the gross negligence of PCIBank. Since the questioned crossed check was deposited with PCIBank, which claimed to be a depository/collecting bank of the BIR, it had the responsibility to make sure that the check in question is deposited in Payees account only.

Indeed, the crossing of the check with the phrase Payees Account Only, is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payees account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement all prior indorsements and/or lack of indorsement guaranteed.

In Banco de Oro Savings and Mortgage Bank vs. Equitable Banking Corporation, [24 we ruled:

Anent petitioners liability on said instruments, this court is in full accord with the ruling of the PCHCs Board of Directors that:

In presenting the checks for clearing and for payment, the defendant made an express guarantee on the validity of all prior endorsements. Thus, stamped at the back of the checks are the defendants clear warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such warranty, plaintiff would not have paid on the checks.

No amount of legal jargon can reverse the clear meaning of defendants warranty. As the warranty has proven to be false and inaccurate, the defendant is liable for any damage arising out of the falsity of its representation.[25

Lastly, banking business requires that the one who first cashes and negotiates the check must take some precautions to learn whether or not it is genuine. And if the one cashing the check through indifference or other circumstance

assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the check from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the person negotiating the instrument before paying the check. For this reason, a bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the drawee bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee bank. The latter may recover from the holder the money paid on the check. [26

Having established that the collecting banks negligence is the proximate cause of the loss, we conclude that PCIBank is liable in the amount corresponding to the proceeds of Citibank Check No. SN-04867.

G.R. No. 128604

The trial court and the Court of Appeals found that PCIBank had no official act in the ordinary course of business that would attribute to it the case of the embezzlement of Citibank Check Numbers SN-10597 and 16508, because PCIBank did not actually receive nor hold the two Ford checks at all. The trial court held, thus:

Neither is there any proof that defendant PCIBank contributed any official or conscious participation in the process of the embezzlement. This Court is convinced that the switching operation (involving the checks while in transit for clearing) were the clandestine or hidden actuations performed by the members of the syndicate in their own personal, covert and private capacity and done without the knowledge of the defendant PCIBank.[27

In this case, there was no evidence presented confirming the conscious participation of PCIBank in the embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. [28A bank will be held liable

for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. In this case, we find a situation where the PCIBank appears also to be the victim of the scheme hatched by a syndicate in which its own management employees had participated.

The pro-manager of San Andres Branch of PCIBank, Remberto Castro, received Citibank Check Numbers SN 10597 and 16508. He passed the checks to a co-conspirator, an Assistant Manager of PCIBanks Meralco Branch, who helped Castro open a Checking account of a fictitious person named Reynaldo Reyes. Castro deposited a worthless Bank of America Check in exactly the same amount of Ford checks. The syndicate tampered with the checks and succeeded in replacing the worthless checks and the eventual encashment of Citibank Check Nos. SN 10597 and 16508. The PCIBank Pro-manager, Castro, and his co-conspirator Assistant Manager apparently performed their activities using facilities in their official capacity or authority but for their personal and private gain or benefit.

A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds these officers or agents were enabled to perpetrate in the apparent course of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. For the general rule is that a bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority. [29 And if an officer or employee of a bank, in his official capacity, receives money to satisfy an evidence of indebtedness lodged with his bank for collection, the bank is liable for his misappropriation of such sum. [30

Moreover, as correctly pointed out by Ford, Section 5 [31 of Central Bank Circular No. 580, Series of 1977 provides that any theft affecting items in transit for clearing, shall be for the account of sending bank, which in this case is PCIBank.

But in this case, responsibility for negligence does not lie on PCIBanks shoulders alone.

The evidence on record shows that Citibank as drawee bank was likewise negligent in the

performance of its duties. Citibank failed to establish that its payment of Fords checks were made in due course and legally in order. In its defense, Citibank claims the genuineness and due execution of said checks, considering that Citibank (1) has no knowledge of any infirmity in the issuance of the checks in question (2) coupled by the fact that said checks were sufficiently funded and (3) the endorsement of the Payee or lack thereof was guaranteed by PCI Bank (formerly IBAA), thus, it has the obligation to honor and pay the same.

For its part, Ford contends that Citibank as the drawee bank owes to Ford an absolute and contractual duty to pay the proceeds of the subject check only to the payee thereof, the CIR. Citing Section 62 [32 of the Negotiable Instruments Law, Ford argues that by accepting the instrument, the acceptor which is Citibank engages that it will pay according to the tenor of its acceptance, and that it will pay only to the payee, (the CIR), considering the fact that here the check was crossed with annotation Payees Account Only.

As ruled by the Court of Appeals, Citibank must likewise answer for the damages incurred by Ford on Citibank Checks Numbers SN 10597 and 16508, because of the contractual relationship existing between the two. Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. On this score, we agree with the respondent courts ruling.

Citibank should have scrutinized Citibank Check Numbers SN 10597 and 16508 before paying the amount of the proceeds thereof to the collecting bank of the BIR. One thing is clear from the record: the clearing stamps at the back of Citibank Check Nos. SN 10597 and 16508 do not bear any initials. Citibank failed to notice and verify the absence of the clearing stamps. Had this been duly examined, the switching of the worthless checks to Citibank Check Nos. 10597 and 16508 would have been discovered in time. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee. The fact that the drawee bank did not discover the irregularity seasonably, in our view, constitutes negligence in carrying out the banks duty to its depositors. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its

depositors with meticulous care, always having in mind the fiduciary nature of their relationship. [33

Thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 and 16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR.

Time and again, we have stressed that banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence. [34A banks liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment.[35

Banks handle daily transactions involving millions of pesos. [36By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. [37 Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. [38

On the issue of prescription, PCIBank claims that the action of Ford had prescribed because of its inability to seek judicial relief seasonably, considering that the alleged negligent act took place prior to December 19, 1977 but the relief was sought only in 1983, or seven years thereafter.

The statute of limitations begins to run when the bank gives the depositor notice of the payment, which is ordinarily when the check is returned to the alleged drawer as a voucher with a statement of his account, [39and an action upon a check is ordinarily governed by the statutory period applicable to instruments in writing. [40

Our laws on the matter provide that the action upon a written contract must be brought within ten years from the time the right of action accrues. [41Hence, the reckoning time for the prescriptive period begins when the instrument

was issued and the corresponding check was returned by the bank to its depositor (normally a month thereafter). Applying the same rule, the cause of action for the recovery of the proceeds of Citibank Check No. SN 04867 would normally be a month after December 19, 1977, when Citibank paid the face value of the check in the amount of P4,746,114.41. Since the original complaint for the cause of action was filed on January 20, 1983, barely six years had lapsed. Thus, we conclude that Fords cause of action to recover the amount of Citibank Check No. SN 04867 was seasonably filed within the period provided by law.

Finally, we also find that Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and diligence find therein, serves to mitigate the banks liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As provided in Article 1172 of the Civil Code of the Philippines, responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. [42

WHEREFORE , the assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 25017, are AFFIRMED.PCIBank, known formerly as Insular Bank of Asia and America, is declared solely responsible for the loss of the proceeds of Citibank Check No. SN 04867 in the amount P4,746,114.41, which shall be paid together with six percent (6%) interest thereon to Ford Philippines Inc. from the date when the original complaint was filed until said amount is fully paid.

However, the Decision and Resolution of the Court of Appeals in CA-G.R. No. 28430 are MODIFIED as follows: PCIBank and Citibank are adjudged liable for and must share the loss, (concerning the proceeds of Citibank Check Numbers SN 10597 and 16508 totalling P12,163,298.10) on a fifty-fifty ratio, and each bank is ORDERED to pay Ford Philippines Inc. P6,081,649.05, with six percent (6%) interest thereon, from the date the complaint was filed until full payment of said amount.

Costs against Philippine Commercial International Bank and Citibank, N.A.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur .

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 167346             April 2, 2007

SOLIDBANK CORPORATION/ METROPOLITAN BANK AND TRUST COMPANY,* Petitioner, vs.SPOUSES PETER and SUSAN TAN, Respondents.

D E C I S I O N

CORONA, J.:

Assailed in this petition for review by certiorari under Rule 45 of the Rules of Court are the decision1 and resolution2 of the Court of Appeals (CA) dated November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV No. 58618,3 affirming the decision of the Regional Trial Court (RTC) of Manila, Branch 31.4

On December 2, 1991, respondents’ representative, Remigia Frias, deposited with petitioner ten checks worthP455,962. Grace Neri, petitioner’s teller no. 8 in its Juan Luna, Manila Branch, received two deposit slips for the checks, an original and a duplicate. Neri verified the checks and their amounts in the deposit slips then returned the duplicate copy to Frias and kept the original copy for petitioner.

In accordance with the usual practice between petitioner and respondents, the latter’s passbook was left with petitioner for the recording of the deposits on the bank’s ledger. Later, respondents retrieved the passbook and discovered that one of the checks, Metropolitan Bank and Trust Company (Metrobank) check no. 403954, payable to cash in the sum of P250,000 was not posted therein.

Immediately, respondents notified petitioner of the problem. Petitioner showed respondent Peter Tan a duplicate

copy of a deposit slip indicating the list of checks deposited by Frias. But it did not include the missing check. The deposit slip bore the stamp mark "teller no. 7" instead of "teller no. 8" who previously received the checks.

Still later, respondent Peter Tan learned from Metrobank (where he maintained an account) that Metrobank check no. 403954 had cleared after it was inexplicably deposited by a certain Dolores Lagsac in Premier Bank in San Pedro, Laguna. Respondents demanded that petitioner pay the amount of the check but it refused, hence, they filed a case for collection of a sum of money in the RTC of Manila, Branch 31.

In its answer, petitioner averred that the deposit slips Frias used when she deposited the checks were spurious. Petitioner accused respondents of engaging in a scheme to illegally exact money from it. It added that, contrary to the claim of respondents, it was "teller no. 7" who received the deposit slips and, although respondents insisted that Frias deposited ten checks, only nine checks were actually received by said teller. By way of counterclaim, it sought payment of P1,000,000 as actual and moral damages and P500,000 as exemplary damages.

After trial, the RTC found petitioner liable to respondents:

Upon examination of the oral, as well as of the documentary evidence which the parties presented at the trial in support of their respective contentions, and after taking into consideration all the circumstances of the case, this Court believes that the loss of Metrobank Check No. 403954 in the sum of P250,000.00 was due to the fault of [petitioner]…[It] retained the original copy of the [deposit slip marked by "Teller No. 7"]. There is a presumption in law that evidence willfully suppressed would be adverse if produced.

Art. 1173 of the Civil Code states that "the fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person of the time and of the place"; and that "if the law or contract does not state the diligence which is to be observed in the performance, the same as expected of a good father of a family shall be required."

…For failure to comply with its obligation, [petitioner] is presumed to have been at fault or to have acted negligently unless they prove that

they observe extraordinary diligence as prescribed in Arts. 1733 and 1735 of the Civil Code (Art. 1756)…

xxx xxx xxx

WHEREFORE, premises considered, judgment is hereby rendered in favor of [respondents], ordering [petitioner] to pay the sum of P250,000, with legal interest from the time the complaint [for collection of a sum of money] was filed until satisfied; P25,000.00 moral damages; P25,000.00 exemplary damages plus 20% of the amount due [respondents] as and for attorney’s fees. With costs.

SO ORDERED.5

Petitioner appealed to the CA which affirmed in toto the RTC’s assailed decision:

Serious doubt [was] engendered by the fact that [petitioner] did not present the original of the deposit slip marked with "Teller No. 7" and on which the entry as to Metrobank Check No. 403954 did not appear. Even the most cursory look at the handwriting thereon reveal[ed] a very marked difference with that in the other deposit slips filled up [by Frias] on December 2, 1991. Said circumstances spawn[ed] the belief thus, the said deposit slip was prepared by [petitioner] itself to cover up for the lost check.6

Petitioner filed a motion for reconsideration but the CA dismissed it. Hence, this appeal.1a\^/phi1.net

Before us, petitioner faults the CA for upholding the RTC decision. Petitioner argues that: (1) the findings of the RTC and the CA were not supported by the evidence and records of the case; (2) the award of damages in favor of respondents was unwarranted and (3) the application by the RTC, as affirmed by the CA, of the provisions of the Civil Code on common carriers to the instant case was erroneous.7

The petition must fail.

On the first issue, petitioner contends that the lower courts erred in finding it negligent for the loss of the subject check. According to petitioner, the fact that the check was deposited in Premier Bank affirmed its claim that it did not receive the check.

At the outset, the Court stresses that it accords respect to the factual findings of the trial court

and, unless it overlooked substantial matters that would alter the outcome of the case, this Court will not disturb such findings.8We meticulously reviewed the records of the case and found no reason to deviate from the rule. Moreover, since the CA affirmed these findings on appeal, they are final and conclusive on us.9 We therefore sustain the RTC’s and CA’s findings that petitioner was indeed negligent and responsible for respondents’ lost check.

On the issue of damages, petitioner argues that the moral and exemplary damages awarded by the lower courts had no legal basis. For the award of moral damages to stand, petitioner avers that respondents should have proven the existence of bad faith by clear and convincing evidence. According to petitioner, simple negligence cannot be a basis for its award. It insists that the award of exemplary damages is justified only when the act complained of was done in a wanton, fraudulent and oppressive manner.10

We disagree.

While petitioner may argue that simple negligence does not warrant the award of moral damages, it nonetheless cannot insist that that was all it was guilty of. It refused to produce the original copy of the deposit slip which could have proven its claim that it did not receive respondents’ missing check. Thus, in suppressing the best evidence that could have bolstered its claim and confirmed its innocence, the presumption now arises that it withheld the same for fraudulent purposes.11

Moreover, in presenting a false deposit slip in its attempt to feign innocence, petitioner’s bad faith was apparent and unmistakable. Bad faith imports a dishonest purpose or some moral obliquity or conscious doing of a wrong that partakes of the nature of fraud.12

As to the award of exemplary damages, the law allows it by way of example for the public good. The business of banking is impressed with public interest and great reliance is made on the bank’s sworn profession of diligence and meticulousness in giving irreproachable service.13 For petitioner’s failure to carry out its responsibility and to account for respondents’ lost check, we hold that the lower courts did not err in awarding exemplary damages to the latter.

On the last issue, we hold that the trial court did not commit any error.1awphi1.nét A cursory

reading of its decision reveals that it anchored its conclusion that petitioner was negligent on Article 1173 of the Civil Code.14

In citing the different provisions of the Civil Code on common carriers,15 the trial court merely made reference to the kind of diligence that petitioner should have performed under the circumstances. In other words, like a common carrier whose business is also imbued with public interest, petitioner should have exercised extraordinary diligence to negate its liability to respondents.

Assuming arguendo that the trial court indeed used the provisions on common carriers to pin down liability on petitioner, still we see no reason to strike down the RTC and CA rulings on this ground alone.

In one case,16 the Court did not hesitate to apply the doctrine of last clear chance (commonly used in transportation laws involving common carriers) to a banking transaction where it adjudged the bank responsible for the encashment of a forged check. There, we enunciated that the degree of diligence required of banks is more than that of a good father of a family in keeping with their responsibility to exercise the necessary care and prudence in handling their clients’ money.

We find no compelling reason to disallow the application of the provisions on common carriers to this case if only to emphasize the fact that banking institutions (like petitioner) have the duty to exercise the highest degree of diligence when transacting with the public. By the nature of their business, they are required to observe the highest standards of integrity and performance, and utmost assiduousness as well.17

WHEREFORE, the assailed decision and resolution of the Court of Appeals dated November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV No. 58618 are hereby AFFIRMED. Accordingly, the petition is DENIED.

Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 168644 : February 16, 2010

BSB GROUP, INC., represented by its President, Mr. RICARDO

BANGAYAN, Petitioner, vs. SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.

D E C I S I O N

PERALTA, J.:

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. 876001cralaw dated April 20, 2005, which reversed and set aside the September 13, 20042cralaw and November 5, 20043cralaw Orders issued by the Regional Trial Court of Manila, Branch 364cralaw 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 theft5cralaw against respondent, alleging that several checks6cralaw representing 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.7cralaw Upon a finding that the evidence adduced was uncontroverted, the assistant city prosecutor recommended the filing of the Information for qualified theft against respondent.8cralaw

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.9cralaw

Respondent entered a negative plea when arraigned.10cralaw 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.11cralaw The trial court granted the motion and issued the corresponding subpoena.12cralaw

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.13cralaw

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.14cralaw 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. 1405.15cralaw The trial court did not sustain respondent; hence, it denied the motion to quash for lack of merit.16cralaw

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.17cralaw But before the testimony could be completed, respondent filed a Motion to Suppress,18cralaw 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.19cralaw A motion for reconsideration was subsequently filed, but it was also denied in the Order dated November 5, 2004.20cralaw 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.21cralawThe 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.22cralaw

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

In this Petition24cralaw 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.25cralaw 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. 1405.26cralaw 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.27cralaw

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.28cralaw 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. 1405.29cralaw

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.30cralaw

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.

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. 31cralaw 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.32cralaw 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.33cralaw 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 334cralaw 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.35cralaw

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.36cralaw 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.

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.37cralaw 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.38cralaw

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. 1405,39cralawotherwise known as the Bank Secrecy Act of 1955. 40cralaw

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.41cralaw Owing to this piece of legislation, the confidentiality of bank deposits remains to be a basic state policy in the Philippines.42cralaw 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:

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 enactments43cralaw 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.44cralaw 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.45cralaw

The measure of protection afforded by the law has been explained in China Banking Corporation v. Ortega.46cralaw 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,

x x x 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. 3977which 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 judgmentThus:

x x x 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. x x x

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. x x x47cralaw

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.,48cralaw 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.49cralaw 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.

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,50cralaw 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.51cralaw 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.

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.52cralaw 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.53cralaw

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.

JOSEPH VICTOR G. EJERCITO v. SANDIGANBAYAN G.R. Nos. 157294-95, 30 November 2006, Carpio Morales, J. (En Banc) Plunder being thus analogous to bribery, the exception to RA 1405, otherwise known as the Bank SecrecyLaw, applicable in cases of bribery must also apply to cases of plunder. 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 cases of unlawful examination of bank accounts. RA 1405 does not provide for the application of this rule. At all events, the Ombudsman is not barred from requiring the production of documents based solely on information obtained by it from sources independentof its previous inquiry. Joseph Victor G. Ejercito is the owner of Trust Account No. 858 which was originally opened at Urban Bank but which is now maintained at Export and Industry Bank, which is the purchaser and owner now of the former Urban Bank and Urbancorp Investment, Inc. He is also the owner of Savings Account No. 0116-17345-9 which was originally opened at Urban Bank but which is now maintained at Export and Industry Bank, the purchaser and owner of the former Urban Bank and Urbancorp Investment, Inc. In Criminal Case No. 26558, People v. Estrada, et al., for plunder, defined and penalized under Republic Act No. 7080 (R.A. 7080), “AN ACT DEFINING AND PENALIZING THE CRIME OF PLUNDER,” 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 the following documents during the hearings scheduled: I. For Trust Account No. 858; 1. Account Opening Documents; 2. Trading Order No. 020385 dated January 29, 1999; 3. Confirmation Advice TA 858; 4. Original/Microfilm copies, including the dorsal side, of the following:

a. Bank of Commerce MC # 0256254 in the amount of P2,000,000.00; b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the amount of P10,875,749.43; c. Urban Bank MC # 34182 dated November 8, 1999 in the amount of P42,716,554.22; d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in the amount of P54,161,496.52; 5. Trust Agreement dated January 1999: Trustee: Joseph Victor C. Ejercito Nominee: URBAN BANK-TRUST DEPARTMENT Special Private Account No. (SPAN) 858; and 6. Ledger of the SPAN # 858. II. For Savings Account No. 0116-17345-9 SPAN No. 858 1. Signature Cards; and 2. Statement of Account/Ledger

III. Urban Bank Manager’s Check and their corresponding Urban Bank Manager’s Check Application Forms, as follows: 1. MC # 039975 dated January 18, 2000 in the amount of P70,000,000.00; 2. MC # 039976 dated January 18, 2000 in the amount of P2,000,000.00; 3. MC # 039977 dated January 18, 2000 in the amount of P2,000,000.00; 4. MC # 039978 dated January 18, 2000 in the amount of P1,000,000.00;

The Special Prosecution Panel also filed a Request for Issuance of Subpoena Duces Tecum/Ad Testificandum directed to the authorized representative of Equitable-PCI Bank to produce statements of account pertaining to certain accounts in the name of “Jose Velarde” and to testify thereon. The Sandiganbayan granted both requests by Resolution and subpoenas were accordingly issued. The Special Prosecution Panel filed still another Request for Issuance of Subpoena Duces Tecum/Ad Testificandum for the President of EIB or his/her authorized representative to produce the same documents subject of the first Subpoena Duces Tecum and to testify thereon on the hearings scheduled and subsequent dates until completion of the testimony. The request was likewise granted by the Sandiganbayan. A Subpoena Duces Tecum/Ad Testificandum was accordingly issued. Ejercito filed various motions to quash the various Subpoenas Duces Tecum/Ad

Testificandum previously issued. In his Motion to Quash, he claimed 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, he concluded, the prosecution in the case may not be allowed to make use of the information. Before the motion was resolved by the Sandiganbayan, the prosecution filed another Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum, again to direct the President of the EIB to produce, on the hearings scheduled, additional documents for Savings Account No. 1701-00646-1. The prosecution also filed a Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to produce the following documents on the scheduled hearings: 1. Letter of authority dated November 23, 1999 re: SPAN [Special Private Account Number] 858; 2. Letter of authority dated January 29, 2000 re: SPAN 858; 3. Letter of authority dated April 24, 2000 re: SPAN 858; 4. Urban Bank check no. 052092 dated April 24, 2000 for the amount of P36, 572, 315.43; 5. Urban Bank check no. 052093 dated April 24, 2000 for the amount of P107,191,780.85; and 6. Signature Card Savings Account No. 0116-17345-9. The subpoenae prayed for in both requests were issued by the Sandiganbayan. Consequently, Ejercito filed an Urgent Motion to Quash Subpoenae Duces Tecum/Ad Testificandum praying that the subpoena directed to Aurora Baldoz be quashed for the same reasons which he cited in the motion to quash he had earlier filed, which the Sandiganbayan, in a Resolution,

denied. Ejercito filed the present petition for certiorari under Rule 65 assailing the Sandiganbayan Resolutions denying his Motions to Quash Subpoenas Duces Tecum/Ad Testificandum, and Resolution denying his Motion for Reconsideration of the first two resolutions. People posits that Trust Account No. 858 may be inquired into, not merely because it falls under the exceptions to the coverage of R.A. 1405, but because it is not even contemplated therein. To People, the law applies only to “deposits” which strictly means the money delivered to the bank by which a creditor-debtor relationship is created between the depositor and the bank. ISSUES: 1.)Whether or not the Trust Account No. 858 is covered by the term “deposit” as used in R.A. 1405; 2.) Whether or not the Trust Account No. 858 and Savings Account No. 0116-17345-9 are excepted from the protection of R.A. 1405; 3.) Whether or not the “extremely-detailed” information contained in the Special Prosecution Panel’s requests for subpoena was obtained through a prior illegal disclosure of Ejercito’s bank accounts; and 4.) Whether or not the “fruit of the poisonous tree” doctrine or the exclusionary rule, 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, applicable in cases of unlawful examination of bank accounts HELD: The petition is DISMISSED. The Sandiganbayan did not commit grave abuse of discretion in issuing the challenged subpoenae for documents pertaining to Ejercito’s Trust Account No. 858 and Savings Account No. 0116-17345-9 for the following reasons: 1. Plunder is excepted from the protection of RA 1405 otherwise known as The Secrecy of Bank Deposits Law. R.A. 1405 is broad enough to cover Trust Account No. 858. However, the protection afforded by the law is not absolute. There being recognized exceptions thereto, as above-quoted 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. Ejercito contends that since plunder is neither bribery nor dereliction of duty, his accounts are not excepted from the protection of R.A. 1405. Philippine National Bank v. Gancayco holds otherwise: 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. Undoubtedly, cases for plunder involve unexplained wealth. The crime of bribery and the overt acts constitutive of plunder are crimes committed by public officers, and in either case the RECENT JURISPRUDENCE – MERCANTILE LAW noble idea 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” applies with equal force. Also, the plunder case now pending with the Sandiganbayan necessarily involves an inquiry into the whereabouts of the amount purportedly acquired illegally by former President Joseph Estrada. The meaning of the phrase “subject matter of the litigation” as used in R.A. 1405 is explained in Union Bank of the Philippines v. Court of Appeals, thus: In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently caused the transfer of the amount of US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the bank accounts where part of the money was subsequently caused to be deposited: ‘x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts

of the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition.” Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation since the money deposited was the very thing in dispute. x x x” In light then of the 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 Ejercito fall under this description and must thus be part of the subject matter of the litigation. Hence, these accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two exceptions to the said law applicable in this case, namely: (1)the examination of bank accounts is upon 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. 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 Ejercito’s bank accounts is said to form part of the subject matter of the same plunder case. 2. The “fruit of the poisonous tree” doctrine or the exclusionary rule is inapplicable in cases of unlawful examination of bank accounts. Ejercito’s attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it bears noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence obtained therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that “[a]ny violation of this law will subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of

the court.”

Even assuming arguendo, however, that the exclusionary rule applies in principle to cases involving R.A. 1405, the Court finds no reason to apply the same in this particular case. The “fruit of the poisonous tree” doctrine presupposes a violation of law. If there was no violation of R.A. 1405 inthe instant case, then there would be no “poisonous tree” to begin with, and, thus, no reason to apply the doctrine. Hence, 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. Moreover, there is no basis for applying the same in this case since the primary source for the detailed information regarding Joseph Victor G. Ejercito’s bank accounts – the investigation previously conducted by the Ombudsman – was lawful. 3. The “extremely-detailed” information was obtained by the Ombudsman from sources independent of its previous inquiry. In a further attempt to show that the subpoenas issued by the Sandiganbayan are invalid and may not be enforced, Ejercito contends that the information found therein, given their “extremely detailed” character, could only have been obtained by the Special Prosecution Panel through an illegal disclosure by the bank officials concerned. He thus claims that, following the “fruit of the poisonous tree” doctrine, the subpoenas must be quashed. He further contends that even if, as claimed by People, the “extremely-detailed” information was obtained by the Ombudsman from the bank officials concerned during a previous investigation of the charges against President Estrada, such inquiry into his bank accounts would itself be illegal. How the Ombudsman conducted his inquiry into the bank accounts of Ejercito is recounted by the People of the Philippines. At all events, even if the challenged subpoenas are quashed, the

Ombudsman is not barred from requiring the production of the same documents based solely on information obtained by it from sources independent of its previous inquiry. The Ombudsman may conduct on its own the same inquiry into the subject bank accounts that it earlier conducted last February-March 2001, there being a plunder case already pending against former President Estrada. To quash the challenged subpoenas would, therefore, be pointless since the Ombudsman may obtain the same documents by another route. Upholding the subpoenas avoids an unnecessary delay in the administration of justice.

LOURDES T. MARQUEZ vs. HON. ANIANO A.

DESIERTO, et al.

G.R. No. 135882

June 27, 2001

En banc

FACTS:

In May 1998, petitioner Marquez received an

Order from the Ombudsman Aniano A. Desierto

dated April 29, 1998, to produce several bank

documents for purposes of inspection in

camera relative to various accounts maintained

at Union Bank of the Philippines (UBP) Julia

Vargas Branch where petitioner was the branch

manager.  The accounts to be inspected were

involved in a case pending with the

Ombudsman entitled, Fact-Finding and

Intelligence Bureau (FFIB) v. Amado Lagdameo,

et. al, for violation of RA 3019 Sec. 3 (e) and (g)

relative to the Joint Venture Agreement between

the Public Estates Authority and AMARI. The

Order was grounded on Section 15 of RA 6770

(Ombudsman Act of 1989) which provides,

among others, the following powers, functions

and duties of the Ombudsman, to wit:

(8)  Administer oaths, issue subpoena and

subpoena duces tecum and take testimony in

any investigation or inquiry, including the power

to examine and have access to bank accounts

and records;

(9)  Punish for contempt in accordance with the

Rules of Court and under the same procedure

and with the same penalties provided therein.

Clearly, the specific provision of R.A. 6770, a

later legislation, modifies the law on the Secrecy

of Bank Deposits (R.A. 1405) and places the

office of the Ombudsman in the same footing as

the courts of law in this regard.”

The basis of the Ombudsman in ordering an in

camera inspection of the accounts was a trail of

managers checks (MCs) purchased by one

George Trivinio, a respondent in OMB-0-97-

0411, pending with the office of the

Ombudsman. It appeared that Trivinio

purchased on May 2 and 3, 1995, 51 MCs for a

total amount of P272.1 Million at Traders Royal

Bank (TRB) UN Ave. Branch.  Out of the 51 MCs,

eleven 11 MCs in the amount of P70.6M were

deposited and credited to an account

maintained at the UBP.

On May 26, 1998, the FFIB panel met with

petitioner Marquez and Atty. Fe B. Macalino at

the bank’s main office in Makati City, for the

purpose of allowing petitioner and Atty.

Macalino to view the checks furnished by TRB.

After convincing themselves of the veracity of

the checks, Atty. Macalino advised Ms. Marquez

to comply with the order of the Ombudsman.

Petitioner agreed to an in camera inspection

set on June 3, 1998.  However, on June 4, 1998,

Marquez wrote the Ombudsman that the

accounts in question could not readily be

identified since the checks were issued in cash

or bearer, and asked for time to respond to the

order. Marquez surmised that these accounts

had long been dormant, hence were not

covered by the new account number generated

by the UB system, thus sought to verify from

the Interbank records archives for the

whereabouts of these accounts.

The Ombudsman, responding to the request of

Marquez for time to comply with the order,

stated that UBP-Julia Vargas, not Interbank, was

the depositary bank of the subject TRB MCs as

shown at its dorsal portion and as cleared by

the Philippine Clearing House.  Notwithstanding

the fact that the checks were payable to cash or

bearer, the name of the depositor(s) could

easily be identified since the account numbers

where said checks were deposited were

identified in the order.

Even assuming that the accounts were already

classified as dormant accounts, the bank was

still required to preserve the records pertaining

to the accounts within a certain period of time

as required by existing banking rules and

regulations.

On June 16, 1998, the Ombudsman issued an

order directing Marquez to produce the bank

documents relative to the accounts in issue,

stating that her persistent refusal to comply

with the order is unjustified, was merely

intended to delay the investigation of the case,

constitutes disobedience of or resistance to a

lawful order issued by the office and is

punishable as Indirect Contempt under Section

3(b) of R.A. 6770.

On July 10, 1998, Marquez together with UBP

filed a petition for declaratory relief, prohibition

and injunction with the Makati RTC against the

Ombudsman allegedly because the Ombudsman

and other persons acting under his authority

were continuously harassing her to produce the

bank documents relative to the accounts in

question. Moreover, on June 16, 1998, the

Ombudsman issued another order stating that

unless she appeared before the FFIB with the

documents requested, Marquez would be

charged with indirect contempt and obstruction

of justice.

The lower court denied petitioner’s prayer for a

temporary restraining order stating that since

petitioner failed to show prima facie evidence

that the subject matter of the investigation is

outside the jurisdiction of the Office of the

Ombudsman, no writ of injunction may be

issued by the RTC to delay the investigation

pursuant to Section 14 of the Ombudsman Act

of 1989.

Petitioner filed a motion for reconsideration but

was denied.

On August 21, 1998, petitioner received a copy

of the motion to cite her for contempt. On

August 31, 1998, petitioner filed with the

Ombudsman an opposition to the motion to cite

her in contempt on the ground that the filing

thereof was premature due to the petition

pending in the lower court. Petitioner likewise

reiterated that she had no intention to disobey

the orders of the Ombudsman. However, she

wanted to be clarified as to how she would

comply with the orders without her breaking

any law, particularly RA 1405.

ISSUES:

1. Whether or not Marquez may be cited for

indirect contempt for her failure to produce the

documents requested by the Ombudsman.

2. Whether or not the order of the Ombudsman

to have an in camera inspection of the

questioned account is allowed as an exception

to the law on secrecy of bank deposits (RA

1405).

HELD:

An examination of the secrecy of bank deposits

law (RA 1405) would reveal the following

exceptions:

1.  Where the depositor consents in writing;

2.  Impeachment case;

3.  By court order in bribery or dereliction of

duty cases against public officials;

4.  Deposit is subject of litigation;

5.  Sec. 8, R. A. No. 3019, in cases of

unexplained wealth as held in the case of PNB

vs. Gancayco

We rule that before an in camera inspection

may be allowed, there must be a pending case

before a court of competent jurisdiction.

Further, the account must be clearly identified,

the inspection limited to the subject matter of

the pending case before the court of competent

jurisdiction.  The bank personnel and the

account holder must be notified to be present

during the inspection, and such inspection may

cover only the account identified in the pending

case.

In Union Bank of the Philippines v. Court of

Appeals, we held that “Section 2 of the Law on

Secrecy of Bank Deposits, as amended, declares

bank deposits to be “absolutely confidential”

except:

(1) In an examination made in the course of a

special or general examination of a bank that is

specifically authorized by the Monetary Board

after being satisfied that there is reasonable

ground to believe that a bank fraud or serious

irregularity has been or is being committed and

that it is necessary to look into the deposit to

establish such fraud or irregularity,

(2) In an examination made by an independent

auditor hired by the bank to conduct its regular

audit provided that the examination is for audit

purposes only and the results thereof shall be

for the exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

(5) Upon order of a competent court in cases of

bribery or dereliction of duty of public officials,

or

(6) In cases where the money deposited or

invested is the subject matter of the litigation”

In the case at bar, there is yet no pending

litigation before any court of competent

authority. What is existing is an investigation by

the office of the Ombudsman. In short, what the

Office of the Ombudsman would wish to do is to

fish for additional evidence to formally charge

Amado Lagdameo, et. al., with the

Sandiganbayan. Clearly, there was no pending

case in court which would warrant the opening

of the bank account for inspection.

Zones of privacy are recognized and protected

in our laws.  The Civil Code provides that “every

person shall respect the dignity, personality,

privacy and peace of mind of his neighbors and

other persons” and punishes as actionable torts

several acts for meddling and prying into the

privacy of another.  It also holds a public officer

or employee or any private individual liable for

damages for any violation of the rights and

liberties of another person, and recognizes the

privacy of letters and other private

communications.  The Revised Penal Code

makes a crime of the violation of secrets by an

officer, the revelation of trade and industrial

secrets, and trespass to dwelling. Invasion of

privacy is an offense in special laws like the

Anti-Wiretapping Law, the Secrecy of Bank

Deposits Act, and the Intellectual Property

Code.

Ombudsman is ordered to cease and desist from

requiring Union Bank Manager Lourdes T.

Marquez, or anyone in her place to comply with

the order dated October 14, 1998, and similar

orders.

Case Digest on   Banco Filipino Savings and

Mortgage Bank v. PurisimaGR No. 56429, 28 May 1988 (Bank Secrecy)FACTS:The Bureau of Internal Revenue accused Customs special agent Manuel Caturla before the Tanodbayan of having illegal acquired property manifestly out of proportion to his salary and other lawful income. During the preliminary investigation, the Tanodbayan issued a subpoena duces tecum to the Banco Filipino Savings and Mortgage Bank, commanding its representative to appear at a specified time at the Office of the Tanodbayan and furnish the latter with duly certified copies of the records in all its branches and extension offices of the loans, savings and time deposits and other banking transactions, in the names of Caturla, his wife, Purita, their children, and/or Pedro Escuyos.Caturla moved to quash the subpoena for violating Sections 2 and 3 of RA 1405 which was denied by the Tanodbayan. In fact, the Tanodbayan issued another subpoena which expanded its scope including the production of bank records not only of the persons enumerated above but of additional persons and entities as well.The Banco Filipino filed an action for declaratory relief with the CFI of Manila which was denied by the lower court. Thus this special civil action of certiorari in the SC.ISSUE:   Whether or not the Law on Secrecy of Bank Deposits precludes production by subpoena duces tecumof bank records of transactions by or in the names of the wife, children and friends of a special agent of the

Bureau of Customs accused before the Tanodbayan of having allegedly acquired property manifestly out of proportion to his salary and other lawful income in violation of RA 3019?HELD:      NO.RATIO:     In PNB v. Gancayco, we ruled that: “while Section 2 of Republic Act No. 1405 provides that bank deposits are “absolutely confidential … and, therefore, may not be examined, inquired or looked into,” except in those cases enumerated therein, Section 8 of Republic Act No. 3019 (Anti-graft law) directs in mandatory terms that bank deposits “shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary.” The only conclusion possible is that Section 8 of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. 1405 by providing an additional exception to the rule against the disclosure of bank deposits.”The inquiry into illegally acquired property – or property not legitimately acquired – extends to cases where such property is concealed by being held by or recorded in the name of other persons. This proposition is made clear by RA 3019 which quite categorically states that the term “legitimately acquired property of a public officer or employee shall not include … property unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the name of, of held by, respondent’s spouse, ascendants, descendants, relatives or any other persons.To sustain the petitioner’s theory, and restrict the inquiry only to property held by or in the name of the government official or employee, or his spouse and unmarried children is unwarranted in the light of the provisions of the statutes in question, and would make available to persons in government who illegally acquire property an easy and fool-proof means of evading investigation and prosecution; all they have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to the lawmakers.