scl (cm amla fia rem til)

7/25/2019 Scl (Cm Amla Fia Rem Til)

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The Chattel Mortgage law

FIRST DIVISION

UNION BANK OF

THEPHILIPPINES,

GR No !"!#$%

Petitioner, Present:

- versus- CORONA, C.J., Chairperson, LEONARDO-DE CASTRO, BERSAMIN,ALAIN&UNIAT, 'IN'OOD

APPAREL, INC, 'ING(AN

APPAREL, INC, NON'OVENFABRIC PHILIPPINES,

DEL CASTILLO, andVILLARAMA, JR.JJ.

Promul!te":Respondents. Auust #, $%##

& - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - &

D E C I S I O N

DEL CASTILLO,J)

To '!ve ! ()n")n e**e+t on t')r" !rt)es, ! +ontr!+t o* le"e must !e!r )n !u(l)+ )nstrument.#

T')s Pet)t)on *or Rev)e/ on Certiorari$un"er Rule 01 o* t'e Rules o* Court

!ss!)ls t'e June $2, $%%1 De+)s)on 2!n" t'e 3e(ru!r4 5, $%%6 Resolut)on0o* t'e Court

o* Ae!ls 7CA8 )n CA-9.R. CV No. 6625$.

Factual Antecedents

Pet)t)oner n)on B!n; o* t'e P')l))nes 7n)on B!n;8 )s ! un)vers!l

(!n;)n +oror!t)on or!n)


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P')l))nes, In+. 7Non/oven8 )s ! P')l))ne +oror!t)on en!e" )n t'e m!nu*!+ture !n"

s!le o* v!r)ous t4es o* non/oven *!(r)+s.@

On Setem(er 2, #55$, et)t)oner *)le" /)t' t'e Re)on!l Tr)!l Court 7RTC8

o* M!;!t), Br!n+' 1?, ! Coml!)nt5

/)t' r!4er *or t'e )ssu!n+e o* e&-!rte /r)ts o*rel)m)n!r4 !tt!+'ment !n" relev)n !!)nst Jun)!t, =)n/oo", =)n4!n, !n" t'e erson

)n ossess)on o* t'e mort!e" motor)o/ever, on M!4 #@, #552, (e*ore t'e RTC +oul" !+ton t'e mot)on, et)t)oner sol" t'e !tt!+'e" roert)es *or t'e !mount o* P#,21%,%%%.%%.$?

Non/o/en move" to +)te t'e o**)+ers o* et)t)oner )n +ontemt *or sell)n t'e

!tt!+'e" roert)es, (ut t'e RTC "en)e" t'e s!me on t'e roun" t'!t n)on B!n; !+te" )n

oo" *!)t'.$@
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Ruling of the Regional Trial Court

On M!4 $%, #555, t'e RTC o* M!;!t), Br!n+' #01,$5ren"ere" ! De+)s)on2%)n

*!vor o* et)t)oner. T'e RTC rule" t'!t (ot' t'e C'!ttel Mort!e "!te" M!r+' $?, #55$

)n *!vor o* et)t)oner !n" t'e Areement "!te" M!4 5, #55$ )n *!vor o* Non/oven '!veno o(l)!tor4 e**e+t on t')r" ersons (e+!use t'ese "o+uments /ere not not!r)ERE3ORE, !(ove rem)ses +ons)"ere", u"ment )s 'ere(4

ren"ere" !s *ollo/s:

#. De+l!r)n t'e et)t)oner NION BAN O3 T>E P>ILIPPINES,!s '!v)n t'e (etter r)'t to t'e oo"s !n"or m!+')ner)es su(e+t o* t'e =r)tso* Prel)m)n!r4 Att!+'ment !n" Relev)n )ssue" (4 t')s Court on Setem(er#%, #55$.

$. De+l!r)n t'e et)t)oner !s ent)tle" to t'e ro+ee"s o* t'e s!le o*

t'e su(e+t m!+')ner)es )n t'e !mount o* P#,21%,%%%.%%2. De+l!r)n reson"ents All!)n Jun)!t, =)n/oo" A!rel, In+. !n"

=)n4!n A!rel, In+. to (e o)ntl4 !n" sever!ll4 l)!(le to t'e et)t)oner, *ort'e "e*)+)en+4 (et/een t'e ro+ee"s o* t'e s!le o* t'e m!+')ner)es su(e+t o*t')s su)t P#,21%,%%%.%% !n" or))n!l +l!)m o* t'e l!)nt)** P#,5#5,5%?.%2, )nt'e !mount o* P165,5%?.%2, /)t' le!l )nterest !t t'e r!te o* #$F er !nnum*rom "!te o* t')s u"ment unt)l *ull4 !)" !n"

0. De+l!r)n reson"ents All!)n Jun)!t, =)n/oo" A!rel, In+. !n"

=)n4!n A!rel, In+. to (e o)ntl4 !n" sever!ll4 l)!(le to t'e et)t)oner *ort'e !mount o* P1%,%%%.%% !s re!son!(le !ttorne4s *ees !n"

1. Cost o* t')s su)t !!)nst t'e reson"ents.SO ORDERED.22

Non/oven move" *or re+ons)"er!t)on20(ut t'e RTC "en)e" t'e s!me )n )ts

Or"er21"!te" Jul4 #0, #555.
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Ruling of the Court of Appeals

On !e!l, t'e CA reverse" t'e rul)n o* t'e RTC. T'e CA rule" t'!t t'e +ontr!+t

o* le"e entere" )nto (et/een Jun)!t !n" Non/oven )s v!l)" !n" ()n")n, !n" t'!t t'e

motor)


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!reement, no ot'er ev)"en+e /!s resente" (4 Non/oven to s'o/ t'!t t'e motor)


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g-ara*teeMe!n/')le, Non/oven /)ll resume "el)ver4 to =)n/oo"=)nG!n !s usu!l.& & & &057Em'!s)s sul)e".8

It )ns)sts t'!t s)n+e t'e !tt!+'e" roert)es /ere !ss)ne" or +e"e" to )t (4 Jun)!t, )t '!s !

(etter r)'t over t'e ro+ee"s o* t'e s!le o* t'e !tt!+'e" roert)es t'!n et)t)oner, /'ose

+l!)m )s (!se" on !n unnot!r)IRD PARTG NON=OVEN (4 /!4 o* dacion en pago, ! +ontr!+t l!ter entere" )nto

(4 =IN=OOD=IN9GAN !n" T>IRD PARTG NON=OVEN.12As !tl4 o)nte"

out (4 et)t)oner, no ev)"en+e /!s resente" (4 Non/oven to s'o/ t'!t t'e !tt!+'e"

roert)es /ere su(seuentl4 sol" to )t (4 /!4 o* ! dacion en pago. Also, t'ere )s

not')n )n t'e Areement "!te" M!4 5, #55$ to )n")+!te t'!t t'e motor)


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=)n4!ns !n" =)n/oo"s o(l)!t)on. It (e!rs stress)n t'!t t'ere +!n (e no tr!ns*er o*

o/ners') )* t'e "el)ver4 o* t'e roert4 to t'e +re")tor )s (4 /!4 o* se+ur)t4.10In *!+t, )n

+!se o* "ou(t !s to /'et'er ! tr!ns!+t)on )s one o* le"e or dacion en pago, t'e

resumt)on )s t'!t )t )s ! le"e !s t')s )nvolves ! lesser tr!nsm)ss)on o* r)'ts !n"

)nterests.11

In v)e/ o* t'e *oreo)n, /e !re +onstr!)ne" to reverse t'e rul)n o* t'e

CA. Non/oven )s not ent)tle" to t'e ro+ee"s o* t'e s!le o* t'e !tt!+'e" roert)es

(e+!use )t *!)le" to s'o/ t'!t )t '!s ! (etter t)tle over t'e s!me.

'HEREFORE, t'e et)t)on )s 'ere(4 GRANTED T'e !ss!)le" June $2, $%%1

De+)s)on !n" t'e 3e(ru!r4 5, $%%6 Resolut)on o* t'e Court o* Ae!ls )n CA-9.R. CV

No. 6625$ !re 'ere(4 REVERSED a*+ SET ASIDE. T'e M!4 $%, #555 De+)s)on o*

t'e Re)on!l Tr)!l Court o* M!;!t), Br!n+' #01, )s

'ere(4 REINSTATED !n" AFFIRMED.

SO ORDERED

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 103576 August 22, 1996

ACME SHOE, RUBBER & PAST!C CORPORAT!ON "#$ CHUA PAC, petitioners,

vs.

HON. COURT O% APPEAS, BAN O% THE PH!!PP!NES "#$ REG!ONA SHER!%% O% CAOOCAN

C!T',respondents.

(!TUG, J.:p

ould it be valid and effective to have a clause in a chattel !ort"a"e that purports to li#e$ise e%tend its

covera"e to obli"ations &et to be contracted or incurred' This (uestion is the core issue in the instant petition

for revie$ oncertiorari.

Petitioner )hua Pac, the president and "eneral !ana"er of co*petitioner +c!e Shoe, Rubber - Plastic

)orporation,+ e%ecuted on / 0une 12/3, for and in behalf of the co!pan&, a chattel !ort"a"e in favor of

private respondent Producers 4an# of the Philippines. The !ort"a"e stood b& $a& of securit& for petitioner5s

corporate loan of three !illion pesos 6P7,888,888.889. provision in the chattel !ort"a"e a"ree!ent $as to

this effect :
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6c9 If the MORT;;OR, his heirs, e%ecutors or ad!inistrators shall $ell and trul& perfor! the

full obli"ation or obli"ations above*stated accordin" to the ter!s thereof, then this !ort"a"e

shall be null and void. . . .

In case the MORT;;OR e%ecutes subse(uent pro!issor& note or notes either as a rene$al

of the for!er note, as an e%tension thereof, or as a ne$ loan, or is "iven an& other #ind of

acco!!odations such as overdrafts, letters of credit, acceptances and bills of e%chan"e,releases of i!port ship!ents on Trust Receipts, etc., this !ort"a"e shall also stand as

securit& for the pa&!ent of the said pro!issor& note or notes and, the ban# &et a"ain e%tended to petitioner corporation a loan of one !illion pesos

6P1,888,888.889 covered b& four pro!issor& notes for P?8,888.88 each. Due to financial constraints, the loan

$as not settled at !aturit&. 3Respondent ban# thereupon applied for an e%tra @udicial foreclosure of the

chattel !ort"a"e, herein before cited, $ith the Sheriff of )aloocan )it&, pro!ptin" petitioner corporation to

forth$ith file an action for in@unction, $ith da!a"es and a pra&er for a $rit of preli!inar& in@unction, before

the Re"ional Trial )ourt of )aloocan )it& 6)ivil )ase No. )*18319. Alti!atel&, the court dis!issed the

co!plaint and ordered the foreclosure of the chattel !ort"a"e. It held petitioner corporation bound b& the

stipulations, afore(uoted, of the chattel !ort"a"e.

Petitioner corporation appealed to the )ourt of ppeals )$hich, on 1> u"ust 1221, affir!ed, +in all

respects,+ the decision of the court a quo. The !otion for reconsideration $as denied on > 0anuar&

122.

The instant petition interposed b& petitioner corporation $as initiall& dinied on 8> March 122 b& this )ourt for

havin" been insufficient in for! and substance. Private respondent filed a !otion to dis!iss the petition $hile

petitioner corporation filed a co!pliance and an opposition to private respondent5s !otion to dis!iss. The )ourt

denied petitioner5s first !otion for reconsideration but "ranted a second !otion for reconsideration, thereb&

reinstatin" the petition and re(uirin" private respondent to co!!ent thereon. 5

=%cept in cri!inal cases $here the penalt& of reclusion perpetua or death is i!posed 6$hich the )ourt so

revie$s as a !atter of course, an appeal fro! @ud"!ents of lo$er courts is not a !atter of ri"ht but of

sound @udicial discretion. The circulars of the )ourt prescribin" technical and other procedural

re(uire!ents are !eant to $eed out un!eritorious petitions that can unnecessaril& clo" the doc#et and

needlessl& consu!e the ti!e of the )ourt. These technical and procedural rules, ho$ever, are intendedto help secure, not suppress, substantial @ustice. deviation fro! the ri"id enforce!ent of the rules !a&

thus be allo$ed to attain the pri!e ob@ective for, after all, the dispensation of @ustice is the core reason for

the e%istence of courts. In this instance, once a"ain, the )ourt is constrained to rela% the rules in order to

"ive $a& to and uphold the para!ount and overridin" interest of @ustice.

)ontracts of securit& are either personal or real. In contracts of personal securit&, such as a "uarant& or a

suret&ship, the faithful perfor!ance of the obli"ation b& the principal debt or is secured b&

thepersonalco!!it!ent of another 6the "uarantor or suret&9. In contracts of real securit&, such as a pled"e, a


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!ort"a"e or an antichresis, that fulfill!ent is secured b& an encumbrance of property: in pled"e, the placin"

of !ovable propert& in the possession of the creditorB in chattel !ort"a"e, b& the e%ecution of the

correspondin" deed substantiall& in the for! prescribed b& la$B in real estate mortgage, b& the e%ecution of a

public instru!ent encu!berin" the real propert& covered thereb&B and in antichresis, b& a $ritten instru!ent

"rantin" to the creditor the ri"ht to receive the fruits of an i!!ovable propert& $ith the obli"ation to appl& such

fruits to the pa&!ent of interest, if o$in", and thereafter to the principal of his credit : upon the essential

condition that if the obli"ation beco!es due and the debtor defaults, then the propert& encu!bered can bealienated for the pa&!ent of the obli"ation, 7but that should the obli"ation be dul& paid, then the contract is

auto!aticall& e%tin"uished proceedin" fro! the accessor& character *of the a"ree!ent. s the la$ so

puts it, once the obli"ation is co!plied $ith, then the contract of securit& beco!es, ipso facto, null and

void. 9

hile a pled"e, real estate !ort"a"e, or antichresis !a& e%ceptionall& secure after*incurred obli"ations so lon"

as these future debts are accuratel& described, 10a chattel !ort"a"e, ho$ever, can onl& cover obli"ations

e%istin" at the ti!e the !ort"a"e is constituted. lthou"h apromisee%pressed in a chattel !ort"a"e to

include debts that are &et to be contracted can be a bindin" co!!it!ent that can be co!pelled upon, the

securit& itself, ho$ever, does not co!e into e%istence or arise until after a chattel !ort"a"e a"ree!ent

coverin" the ne$l& contracted debt is e%ecuted either b& concludin" a fresh chattel !ort"a"e or b&

a!endin" the old contract confor!abl& $ith the for! prescribed b& the )hattel Mort"a"e Ca$. 11Refusal

on the part of the borro$er to e%ecute the a"ree!ent so as to cover the after*incurred obli"ation can

constitute an act of default on the part of the borro$er of the financin" a"ree!ent $hereon the pro!ise is

$ritten but, of course, the re!ed& of foreclosure can onl& cover the debts e%tant at the ti!e of constitution

and durin" the life of the chattel !ort"a"e sou"ht to be foreclosed.

chattel !ort"a"e, as hereinbefore so inti!ated, !ust co!pl& substantiall& $ith the for! prescribed

b& the )hattel Mort"a"e Ca$ itself. One of the re(uisites, under Section ? thereof, is an affidavit of

"ood faith. hile it is not doubted that if such an affidavit is not appended to the a"ree!ent, the chattel

!ort"a"e $ould still be valid bet$een the parties 6not a"ainst third persons actin" in "ood faith 129, the

fact, ho$ever, that the statute has provided that the parties to the contract !ust e%ecute an oath

that :

. . . 6the9 !ort"a"e is !ade for the purpose of securin" the obli"ation specified in theconditions thereof, and for no other purpose, and that the sa!e is a @ust and valid obli"ation,

and one not entered into for the purpose of fraud. 13

!a#es it obvious that the debt referred to in the la$ is a current, not an obli"ation that is &et !erel&

conte!plated. In the chattel !ort"a"e here involved, the onl& obli"ation specified in the chattel

!ort"a"e contract $as the P7,888,888.88 loan $hich petitioner corporation later full& paid. 4& virtue of

Section 7 of the )hattel Mort"a"e Ca$, the pa&!ent of the obli"ation auto!aticall& rendered the

chattel !ort"a"e void or ter!inated. In Belgian Catholic Missionaries, Inc., vs. Magallanes Press,

Inc.,et al., 1)the )ourt

said :

. . . !ort"a"e that contains a stipulation in re"ard to future advances in the credit $ill ta#eeffect onl& fro! the date the sa!e are !ade and not fro! the date of the !ort"a"e. 15

The si"nificance of the rulin" to the instant proble! $ould be that since the 12/3 chattel !ort"a"e had

ceased to e%ist coincidentall& $ith the full pa&!ent of the P7,888,888.88 loan, 16there no lon"er $as

an& chattel !ort"a"e that could cover the ne$ loans that $ere concluded thereafter.

e find no !erit in petitioner corporation5s other pra&er that the case should be re!anded to the trial court for a

specific findin" on the a!ount of da!a"es it has sustained +as a result of the unla$ful action ta#en b&


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respondent ban# a"ainst it.+ 17This pra&er is not reflected in its co!plaint $hich has !erel& as#ed for the

a!ount of P7,888,888.88 b& $a& of moral damages. 1*In LBC Epress, Inc.vs. Court of !ppeals,19$e

have said

Moral da!a"es are "ranted in reco!pense for ph&sical sufferin", !ental an"uish, fri"ht,

serious an%iet&, bes!irched reputation, $ounded feelin"s, !oral shoc#, social hu!iliation,

and si!ilar in@ur&. corporation, bein" an artificial person and havin" e%istence onl& in le"alconte!plation, has no feelin"s, no e!otions, no sensesB therefore, it cannot e%perience

ph&sical sufferin" and !ental an"uish. Mental sufferin" can be e%perienced onl& b& one

havin" a nervous s&ste! and it flo$s fro! real ills, sorro$s, and "riefs of life : all of $hich

cannot be suffered b& respondent ban# as an artificial person. 20

hile )hua Pac is included in the case, the co!plaint, ho$ever, clearl& states that he has !erel& been

so na!ed as a part& in representation of petitioner corporation.

Petitioner corporation5s counsel could be co!!ended for his Eeal in pursuin" his client5s cause. It instead

turned out to be, ho$ever, a source of disappoint!ent for this )ourt to read in petitioner5s repl& to private

respondent5s co!!ent on the petition his so*called +One Final ordB+ vi"

In si!pl& (uotin" in totothe patentl& erroneous decision of the trial court, respondent )ourt of

ppeals should be re(uired to @ustif& its decision $hich co!pletel& disre"arded the basic la$s

on obli"ations and contracts, as $ell as the clear provisions of the )hattel Mort"a"e Ca$ and

$ell*settled @urisprudence of this onorable )ourtB that in the event that its e%planation is

$holl& unacceptable, this onorable )ourt should i!pose appropriate sanctions on the errin"

@ustices. #his is one positive step in ridding our courts of la$ of incompetent and dishonest

magistrates especially members of a superior court of appellate %urisdiction. 216=!phasis

supplied.9

The state!ent is not called for. The )ourt invites counsel5s attention to the ad!onition in &uerrero

vs.'illamorB 22thus

6C9a$&ers . . . should bear in !ind their basic dut& +to observe and !aintain the respect due tothe courts of @ustice and @udicial officers and . . . 6to9 insist on si!ilar conduct b& others.+ This

respectful attitude to$ards the court is to be observed, +not for the sa#e of the te!porar&

incu!bent of the @udicial office, but for the !aintenance of its supre!e i!portance.+ nd it is

throu"h a scrupulous preference for respectful lan"ua"e that a la$&er best de!onstrates his

observance of the respect due to the courts and @udicial officers . . . 23

The virtues of hu!ilit& and of respect and concern for others !ust still live on even in an a"e of

!aterialis!.

=R=FOR=, the (uestioned decisions of the appellate court and the lo$er court are set aside $ithout

pre@udice to the appropriate le"al recourse b& private respondent as !a& still be $arranted as an unsecured

creditor. No costs.

tt&. Francisco R. Sotto, counsel for petitioners, is ad!onished to be circu!spect in dealin" $ith the courts.

SO ORD=R=D.

T>IRD DIVISION


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9GR No !!::3; No8e4/er !%, !%%%)l"! Tee /!s /ron*ull4 "et!)n)n t'e motor

ve')+le *or t'e urose o* "e*e!t)n )ts mort!e l)en !n" t'!t ! su**)+)ent (on" '!"

(een *)le" )n +ourt. 7Coml!)nt /)t' Anne&es, . #-#2, )()".8. On Jul4 2%, #5@0, t'e

+ourt !rove" t'e relev)n (on" 7. $%, )()".8

On Auust #, #5@0, Al(erto V)ll!*r!n+! *)le" ! t')r" !rt4 +l!)m +onten")n t'!t 'e )s

t'e !(solute o/ner o* t'e su(e+t motor ve')+le "ul4 ev)"en+e" (4 t'e Bure!u o* L!n"

Tr!nsort!t)ons Cert)*)+!te o* Re)str!t)on )ssue" )n ')s n!me on June $$, #5@0 t'!t

'e !+u)re" t'e s!)" mot'er ve')+le *rom ! +ert!)n Reme")os D. G!n un"er ! Dee" o*

S!le "!te" M!4 #6, #5@0 t'!t 'e !+u)re" t'e s!me *ree *rom !ll l)en !n"

em+um(r!n+es !n" t'!t on Jul4 2%, #5@0, t'e s!)" !utomo()le /!s t!;en *rom ')s

res)"en+e (4 Deut4 S'er)** Bern!r"o Bern!(e ursu!nt to t'e se)


13/140

Re)on!l Tr)!l Court o* M!;!t), Br!n+' #0%, "o+;ete" !s C)v)l C!se No. @2#%,

)nvolv)n t'e se)o/ever, t'e !ell!te +ourt!**)rme" t'e "e+)s)on o* t'e lo/er Court r!t)o+)n!t)n, t'us:

A +ursor4 re!")n, 'o/ever, o* t'e Prom)ssor4 Note "!te" M!4 #0, #5?6 )n *!vor o*

3ortune Motors 7P')ls.8 Cor. )n t'e sum o* P16,%$@.%% 7Anne& A o* Coml!)nt, . ?,

Or))n!l Re+or"s8 !n" t'e C'!ttel Mort!e o* t'e s!me "!te 7Anne& B o* Coml!)nt

. @-5, )()".8 /)ll ")s+lose t'!t t'e m!;er !n" mort!or rese+t)vel4 !re one !n" t'e

s!me erson: Let)+)! L!us. In *!+t, l!)nt)**-!ell!nt !"m)ts )n !r!r!'s 7s)+8 nos. $

!n" 2 o* )ts Coml!)nt t'!t t'e !*ores!)" u(l)+ "o+uments 7Anne&es A !n" B t'ereo*8

/ere e&e+ute" (4 Let)+)! L!us, /'o, *or re!sons not e&l!)ne", /!s never)mle!"e". In t'e +!se un"er +ons)"er!t)on, l!)nt)**-!ell!nts m!)n +!se )s *or

u")+)!l *ore+losure o* t'e +'!ttel mort!e !!)nst >)l"! Tee !n" Jo'n Doe /'o /!s

l!ter su(st)tute" (4 !ellee Al(erto V)ll!*r!n+!. But !s t'ere )s no r)v)t4 o* +ontr!+t,

not even ! +!us!l l)n;, (et/een l!)nt)**-!ell!nt Serv)+e/)"e Se+)!l)sts, In+. !n"

"e*en"!nt-!ellee Al(erto V)ll!*r!n+!, t'e +ourt ! uo +omm)tte" no revers)(le error

/'en )t ")sm)sse" t'e +!se *or )nsu**)+)en+4 o* ev)"en+e !!)nst >)l"! Tee !n" Al(erto

V)ll!*r!n+! s)n+e t'e ev)"en+e !""u+e" o)nte" to Let)+)! L!us !s t'e !rt4 l)!(le *or

t'e o(l)!t)on sue" uon 7. $, RTC De+)s)on8.2

Pet)t)oner resente" ! Mot)on *or Re+ons)"er!t)on (ut )n )ts Resolut)on 0o* M!4

#%, #552, t'e Court o* Ae!ls "en)e" t'e s!me, t!;)n not)+e o* !not'er +!se en")n

(et/een t'e s!me !rt)es &&& rel!t)n to t'e ver4 +'!ttel mort!e o* t'e motor

ve')+le )n l)t)!t)on.
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>en+e, t'e resent et)t)on *or rev)e/ on certiorariun"er Rule 01. Essent)!ll4, t'e

sole )ssue 'ere )s: ='et'er or not ! +!se *or relev)n m!4 (e ursue" !!)nst t'e

"e*en"!nt, Al(erto V)ll!*r!n+!, /)t'out )mle!")n t'e !(s+on")n "e(tor-mort!orK

Rule 6% o* t'e Rev)se" Rules o* Court reu)res t'!t !n !l)+!nt *or relev)n must

s'o/ t'!t 'e )s t'e o/ner o* t'e roert4 +l!)me", !rt)+ul!rl4 "es+r)()n )t, or )s

ent)tle" to t'e ossess)on t'ereo*. 1='ere t'e r)'t o* t'e l!)nt)** to t'e ossess)on o*

t'e se+)*)e" roert4 )s so +on+e"e" or ev)"ent, t'e !+t)on nee" onl4 (e m!)nt!)ne"

!!)nst ')m /'o so ossesses t'e roert4.In rem action est per quam rem nostram

quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet.6

C)t)n Norther* Motor, I*0 8 Herrera,? t'e Court s!)" )n t'e +!se o* BA

F.*a*0e 7/')+' )s o* s)m)l!r )mort /)t' t'e resent +!se8:

T'ere +!n (e no uest)on t'!t ersons '!v)n ! se+)!l r)'t o* roert4 )n t'e oo"st'e re+over4 o* /')+' )s sou't, su+' !s ! +'!ttel mort!ee, m!4 m!)nt!)n !n !+t)on

*or relev)n t'ere*or. ='ere t'e mort!e !ut'or)


15/140

)s (!s)+ t'!t un"er Rule 01, t')s Court onl4 entert!)ns uest)ons o* l!/, !n" r!re !re

t'e e&+et)ons !n" t'e resent +!se "oes not !e!r to (e one o* t'em.

In ! su)t *or relev)n, ! clear right of possession must be established. 7It!l)+s

sul)e"8 A *ore+losure un"er ! +'!ttel mort!e m!4 roerl4 (e +ommen+e" onl4

on+e t'ere )s "e*!ult on t'e !rt o* t'e mort!or o* ')s o(l)!t)on se+ure" (4 t'e

mort!e. T'e relev)n )n t')s +!se '!s (een resorte" to )n or"er to !ve t'e /!4 *or

t'e *ore+losure o* /'!t )s +overe" (4 t'e +'!ttel mort!e. T'e +on")t)ons essent)!l

*or su+' *ore+losure /oul" (e to s'o/, *)rstl4, t'e e&)sten+e o* t'e +'!ttel mort!e

!n", se+on"l4, t'e "e*!ult o* t'e mort!or. T'ese reu)rements must (e s'o/n

(e+!use t'e v!l)")t4 o* t'e l!)nt)**s e&er+)se o* t'e r)'t o* *ore+losure )s )nev)t!(l4

"een"ent t'ereon.#$

S)n+e t'e mort!ees r)'t o* ossess)on )s +on")t)one" uon t'e !+tu!l *!+t o*

"e*!ult /')+' )tsel* m!4 (e +ontroverte", t'e )n+lus)on o* ot'er !rt)es, l);e t'e "e(toror t'e mort!or ')msel*, m!4 (e reu)re" )n or"er to !llo/ ! *ull !n" +on+lus)ve

"eterm)n!t)on o* t'e +!se. ='en t'e mort!ee see;s ! relev)n )n or"er to e**e+t t'e

eventu!l *ore+losure o* t'e mort!e, )t )s not onl4 t'e e&)sten+e o*, (ut !lso t'e

mort!ors "e*!ult on, t'e +'!ttel mort!e t'!t, !mon ot'er t')ns, +!n roerl4

u'ol" t'e r)'t to relev4 t'e roert4. T'e (ur"en to est!(l)s' ! v!l)" ust)*)+!t)on

*or su+' !+t)on l)es /)t' t'e l!)nt)**. An !"verse ossessor, /'o )s not t'e mort!or,

+!nnot ust (e "er)ve" o* ')s ossess)on, let !lone (e (oun" (4 t'e terms o* t'e

+'!ttel mort!e +ontr!+t, s)ml4 (e+!use t'e mort!ee (r)ns u !n !+t)on *or

relev)n.#2

Let)+)! L!us, (e)n !n )n")sens!(le !rt4, s'oul" '!ve (een )mle!"e" )n t'e

+oml!)nt *or relev)n !n" "!m!es. An )n")sens!(le !rt4 )s one /'ose )nterest /)ll

(e !**e+te" (4 t'e +ourts !+t)on )n t'e l)t)!t)on, !n" /)t'out /'om no *)n!l

"eterm)n!t)on o* t'e +!se +!n (e '!". T'e !rt4s )nterest )n t'e su(e+t m!tter o* t'e

su)t !n" )n t'e rel)e* sou't !re so )ne&tr)+!(l4 )ntert/)ne" /)t' t'e ot'er !rt)es t'!t

')s le!l resen+e !s ! !rt4 to t'e ro+ee")n )s !n !(solute ne+ess)t4. In ')s !(sen+e,

t'ere +!nnot (e ! resolut)on o* t'e ")sute o* t'e !rt)es (e*ore t'e Court /')+' )s

e**e+t)ve, +omlete, or eu)t!(le.

Conversel4, ! !rt4 )s not )n")sens!(le to t'e su)t )* ')s )nterest )n t'e +ontrovers4

or su(e+t m!tter )s ")st)n+t !n" ")v)s)(le *rom t'e )nterest o* t'e ot'er !rt)es !n" /)ll

not ne+ess!r)l4 (e reu")+e" (4 ! u"ment /')+' "oes +omlete ust)+e to t'e !rt)es

)n Court. >e )s not )n")sens!(le )* ')s resen+e /oul" merel4 +omlete rel)e*

(et/een ')m !n" t'ose !lre!"4 !rt)es to t'e !+t)on or /)ll s)ml4 !vo)" mult)le
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l)t)!t)on.#0=)t'out t'e resen+e o* )n")sens!(le !rt)es to ! su)t or ro+ee")n, !

u"ment o* ! Court +!nnot !tt!)n re!l *)n!l)t4.#1

T'!t et)t)oner +oul" not lo+!te t'e mort!or, Let)+)! L!us, )s no e&+use *or

resort)n to ! ro+e"ur!l s'ort-+ut. It +oul" '!ve roerl4 !v!)le" o* su(st)tute"

serv)+e o* summons un"er t'e Rev)se" Rules o* Court. #6I* )t "eeme" su+' ! mo"e to

(e un!v!)l)n, )t +oul" '!ve ro+ee"e" )n !++or"!n+e /)t' Se+t)on #0 o* t'e s!me

Rule.#? In"ee", et)t)oner '!" ot'er roer reme")es, )t +oul" '!ve resorte" to (ut

*!)le" to !v!)l o*. 3or )nst!n+e, )t +oul" '!ve roerl4 )mle!"e" t'e mort!or. Su+'

*!)lure )s *!t!l to et)t)oners +!use.

=)t' t'e *oreo)n ")su)s)t)on !n" +on+lus)on, t'e ot'er )ssues r!)se" (4

et)t)oner nee" not (e !sse" uon.

'HEREFORE, t'e Pet)t)on )s DENIED !n" t'e De+)s)on o* t'e Court o*Ae!ls )n CA-9.R. CV No. #51?# A33IRMED. No ronoun+ement !s to +osts.

SO ORDERED

AMLA

Republic of the Philippines

SUPREME COURT

Manila

SECON+ +!(!S!ON

G.R. No. 17)629 %-u"/ 1), 200*

REPUB!C O% THE PH!!PP!NES, Rs#t$ -/ THE ANT!MONE' AUN+ER!NG COUNC!

AMC,petitioner,

vs.

HON. ANTON!O M. EUGEN!O, 4R., AS PRES!+!NG 4U+GE O% RTC, MAN!A, BRANCH 3), PANTAEON

A(ARE "#$ !!A CHENG,respondents.

+ E C ! S ! O N

T!NGA, J.

The present petition for certiorari and prohibition under Rule G? assails the orders and resolutions issued b&

t$o different courts in t$o different cases. The courts and cases in (uestion are the Re"ional Trial )ourt of

Manila, 4ranch >, $hich heard SP )ase No. 8G*11>881and the )ourt of ppeals, Tenth Division, $hich

heared )*;.R. SP No. 2?123.4oth cases arose as part of the after!ath of the rulin" of this )ourt in !gan v.

PI!#C(7nullif&in" the concession a"ree!ent a$arded to the Philippine International irport Ter!inal

)orporation 6PIT)O9 over the Nino& (uino International irport H International Passen"er Ter!inal 7 6NI

79 Pro@ect.
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I.

Follo$in" the pro!ul"ation of!gan, a series of investi"ations concernin" the a$ard of the NI 7 contracts to

PIT)O $ere underta#en b& the O!buds!an and the )o!pliance and Investi"ation Staff 6)IS9 of petitioner

nti*Mone& Caunderin" )ouncil 6MC)9. On > Ma& 88?, the Office of the Solicitor ;eneral 6OS;9 $rote the

MC) re(uestin" the latters assistance +in obtainin" !ore evidence to co!pletel& reveal the financial trail of

corruption surroundin" the JNI 7K Pro@ect,+ and also notin" that petitioner Republic of the Philippines $aspresentl& defendin" itself in t$o international arbitration cases filed in relation to the NI 7 Pro@ect.>The )IS

conducted an intelli"ence database search on the financial transactions of certain individuals involved in the

a$ard, includin" respondent Pantaleon lvareE 6lvareE9 $ho had been the )hair!an of the P4) Technical

)o!!ittee, NI*IPT7 Pro@ect.?4& this ti!e, lvareE had alread& been char"ed b& the O!buds!an $ith

violation of Section 76@9 of R.. No. 7812.GThe search revealed that lvareE !aintained ei"ht 639 ban# accounts

$ith si% 6G9 different ban#s./

On / 0une 88?, the MC) issued Resolution No. /?, Series of 88?,3$hereb& the )ouncil resolved to

authoriEe the =%ecutive Director of the MC) +to si"n and verif& an application to in(uire into andThereafter, on > 0ul& 88?, the Ma#ati RT) rendered

an Order 6Ma#ati RT) ban# in(uir& order9 "rantin" the MC) the authorit& to in(uire and e%a!ine the sub@ect

ban# accounts of lvareE, Trinidad, Cion"son and )hen" Lon", the trial court bein" satisfied that there e%isted

+JpKrobable cause JtoK believe that the deposits in various ban# accounts, details of $hich appear in para"raph

1 of the pplication, are related to the offense of violation of nti*;raft and )orrupt Practices ct no$ the

sub@ect of cri!inal prosecution before the Sandi"anba&an as attested to b& the Infor!ations, =%hibits ), D, =,

F, and ;.+1?Pursuant to the Ma#ati RT) ban# in(uir& order, the )IS proceeded to in(uire and e%a!ine the

deposits, invest!ents and related $eb accounts of the four.1G

Mean$hile, the Special Prosecutor of the Office of the O!buds!an, Dennis Villa*I"nacio, $rote a letter dated

Nove!ber 88?, re(uestin" the MC) to investi"ate the accounts of lvareE, PIT)O, and several other

entities involved in the nullified contract. The letter adverted to probable cause to believe that the ban#

accounts +$ere used in the co!!ission of unla$ful activities that $ere co!!itted+ in relation to the cri!inal

cases then pendin" before the Sandi"anba&an.1/ttached to the letter $as a !e!orandu! +on $h& the

investi"ation of the JaccountsK is necessar& in the prosecution of the above cri!inal cases before the

Sandi"anba&an.+13

In response to the letter of the Special Prosecutor, the MC) pro!ul"ated on 2 Dece!ber 88? Resolution No.

11 Series of 88?,12$hich authoriEed the e%ecutive director of the MC) to in(uire into and e%a!ine the

accounts na!ed in the letter, includin" one !aintained b& lvareE $ith D4S 4an# and t$o other accounts in
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the na!e of )hen" Lon" $ith Metroban#. The Resolution characteriEed the !e!orandu! attached to the

Special Prosecutors letter as +e%tensivel& @ustifJ&in"K the e%istence of probable cause that the ban# accounts of

the persons and entities !entioned in the letter are related to the unla$ful activit& of violation of Sections 76"9

and 76e9 of Rep. ct No. 7812, as a!ended.+8

Follo$in" the Dece!ber 88? MC) Resolution, the Republic, throu"h the MC), filed an application1before

the Manila RT) to in(uire into and88 and filed an Ar"ent Motion to Sta& =nforce!ent of Order of 0anuar& 1, 88G.>lvareE alle"ed

that he fortuitousl& learned of the ban# in(uir& order, $hich $as issued follo$in" an e parteapplication, and hear"ued that nothin" in R.. No. 21G8 authoriEed the MC) to see# the authorit& to in(uire into ban#

accounts e parte.?The da& after lvareE filed his !otion, G 0anuar& 88G, the Manila RT) issued an

OrderGsta&in" the enforce!ent of its ban# in(uir& order and "ivin" the Republic five 6?9 da&s to respond to

lvareEs !otion.

The Republic filed an O!nibus Motion for Reconsideration/of the G 0anuar& 88G Manila RT) Order and

li#e$ise sou"ht to stri#e out lvareEs !otion that led to the issuance of said order. For his part, lvareE filed a

Repl& and Motion to Dis!iss3the application for ban# in(uir& order. On Ma& 88G, the Manila RT) issued an

O!nibus Order2"rantin" the Republics Motion for Reconsideration, den&in" lvareEs !otion to dis!iss and

reinstatin" +in full force and effect+ the Order dated 1 0anuar& 88G. In the o!nibus order, the Manila RT)

reiterated that the !aterial alle"ations in the application for ban# in(uir& order filed b& the Republic stood as

+the probable cause for the investi"ation and e%a!ination of the ban# accounts and invest!ents of the

respondents.+78

lvareE filed on 18 Ma& 88G an Ar"ent Motion71e%pressin" his apprehension that the MC) $ould

i!!ediatel& enforce the o!nibus order and $ould thereb& render the !otion for reconsideration he intended to

file as !oot and acade!icB thus he sou"ht that the Republic be refrained fro! enforcin" the o!nibus order in

the !eanti!e. ctin" on this !otion, the Manila RT), on 11 Ma& 88G, issued an Order7re(uirin" the OS; to

file a co!!entdated ? 0ul& 88G.

On 11 0ul& 88G, lvareE filed an Ar"ent Motion and Manifestation7?$herein he !anifested havin" received

reliable infor!ation that the MC) $as about to i!ple!ent the Manila RT) ban# in(uir& order even thou"h he$as intendin" to appeal fro! it. On the pre!ise that onl& a final and e%ecutor& @ud"!ent or order could be

e%ecuted or i!ple!ented, lvareE sou"ht that the MC) be i!!ediatel& ordered to refrain fro! enforcin" the

Manila RT) ban# in(uir& order.

On 1 0ul& 88G, the Manila RT), actin" on lvareEs latest !otion, issued an Order7Gdirectin" the MC) +to

refrain fro! enforcin" the order dated 0anuar& 1, 88G until the e%piration of the period to appeal, $ithout an&

appeal havin" been filed.+ On the sa!e da&, lvareE filed a Notice of ppeal7/$ith the Manila RT).
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On > 0ul& 88G, lvareE filed an Ar"ent E Parte Motion for )larification.73Therein, he alle"ed havin" learned

that the MC) had be"an to in(uire into the ban# accounts of the other persons !entioned in the application

for ban# in(uir& order filed b& the Republic.72)onsiderin" that the Manila RT) ban# in(uir& order $as

issued e parte, $ithout notice to those other persons, lvareE pra&ed that the MC) be ordered to refrain fro!

in(uirin" into an& of the other ban# deposits and alle"ed $eb of accounts enu!erated in MC)s application

$ith the RT)B and that the MC) be directed to refrain fro! usin", disclosin" or publishin" in an& proceedin" or

venue an& infor!ation or docu!ent obtained in violation of the 11 Ma& 88G RT) Order.

>8

On ? 0ul& 88G, or one da& after lvareE filed his !otion, the Manila RT) issued an Order>1$herein it clarified

that +the E Parte Order of this )ourt dated 0anuar& 1, 88G can not be i!ple!ented a"ainst the deposits or

accounts of an& of the persons enu!erated in the MC) pplication until the appeal of !ovant lvareE is finall&

resolved, other$ise, the appeal $ould be rendered !oot and acade!ic or even nu"ator&.+>In addition, the

MC) $as ordered +not to disclose or publish an& infor!ation or docu!ent found or obtained in JvKiolation of

the Ma& 11, 88G Order of this )ourt.+ >7The Manila RT) reasoned that the other persons !entioned in MC)s

application $ere not served $ith the courts 1 0anuar& 88G Order. This ? 0ul& 88G Manila RT) Order is the

first of the four rulin"s bein" assailed throu"h this petition.

In response, the Republic filed an Ar"ent O!nibus Motion for Reconsideration>>dated / 0ul& 88G, ur"in" that

it be allo$ed to i!!ediatel& enforce the ban# in(uir& order a"ainst lvareE and that lvareEs notice of appeal

be e%pun"ed fro! the records since appeal fro! an order of in(uir& is disallo$ed under the nti !one&Caunderin" ct 6MC9.

Mean$hile, respondent Cilia )hen" filed $ith the )ourt of ppeals a Petition for )ertiorari, Prohibition and

Manda!us $ith pplication for TRO and?dated 18 0ul& 88G, directed a"ainst

the Republic of the Philippines throu"h the MC), Manila RT) 0ud"e =u"enio, 0r. and Ma#ati RT) 0ud"e

Marella, 0r.. She identified herself as the $ife of )hen" Lon">G$ith $ho! she @ointl& o$ns a con@u"al ban#

account $ith )itiban# that is covered b& the Ma#ati RT) ban# in(uir& order, and t$o con@u"al ban# accounts

$ith Metroban# that are covered b& the Manila RT) ban# in(uir& order. Cilia )hen" i!puted "rave abuse of

discretion on the part of the Ma#ati and Manila RT)s in "rantin" MC)s e parteapplications for a ban#

in(uir& order, ar"uin" a!on" others that the e parteapplications violated her constitutional ri"ht to due

process, that the ban# in(uir& order under the MC can onl& be "ranted in connection $ith violations of the

MC and that the MC can not appl& to ban# accounts opened and transactions entered into prior to the

effectivit& of the MC or to ban# accounts located outside the Philippines.>/

On 1 u"ust 88G, the )ourt of ppeals, actin" on Cilia )hen"s petition, issued a Te!porar& Restrainin"

Order>3en@oinin" the Manila and Ma#ati trial courts fro! i!ple!entin", enforcin" or e%ecutin" the respective

ban# in(uir& orders previousl& issued, and the MC) fro! enforcin" and i!ple!entin" such orders. On even

date, the Manila RT) issued an Order>2resolvin" to hold in abe&ance the resolution of the ur"ent o!nibus

!otion for reconsideration then pendin" before it until the resolution of Cilia )hen"s petition for certiorari $ith

the )ourt of ppeals. The )ourt of ppeals Resolution directin" the issuance of the te!porar& restrainin" order

is the second of the four rulin"s assailed in the present petition.

The third assailed rulin"?8$as issued on 1? u"ust 88G b& the Manila RT), actin" on the Ar"ent Motion for

)larification?1dated 1> u"ust 88G filed b& lvareE. It appears that the 1 u"ust 88G Manila RT) Order had

a!ended its previous ? 0ul& 88G Order b& deletin" the last para"raph $hich stated that the MC) +shouldnot disclose or publish an& infor!ation or docu!ent found or obtained in violation of the Ma& 11, 88G Order of

this )ourt.+?In this ne$ !otion, lvareE ar"ued that the deletion of that para"raph $ould allo$ the MC) to

i!ple!ent the ban# in(uir& orders and publish $hatever infor!ation it !i"ht obtain thereupon even before the

final orders of the Manila RT) could beco!e final and e%ecutor&.?7In the 1? u"ust 88G Order, the Manila

RT) reiterated that the ban# in(uir& order it had issued could not be i!ple!ented or enforced b& the MC) or

an& of its representatives until the appeal therefro! $as finall& resolved and that an& enforce!ent thereof

$ould be unauthoriEed.?>
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The present )onsolidated Petition??for certiorari and prohibition under Rule G? $as filed on October 88G,

assailin" the t$o Orders of the Manila RT) dated ? 0ul& and 1? u"ust 88G and the Te!porar& Restrainin"

Order dated 1 u"ust 88G of the )ourt of ppeals. Throu"h an Ar"ent Manifestation and Motion?Gdated 2

October 88G, petitioner infor!ed the )ourt that on Septe!ber 88G, the )ourt of ppeals hearin" Cilia

)hen"s petition had "ranted a $rit of preli!inar& in@unction in her favor.?/Thereafter, petitioner sou"ht as $ell

the nullification of the Septe!ber 88G Resolution of the )ourt of ppeals, thereb& constitutin" the fourth

rulin" assailed in the instant petition.

?3

The )ourt had initiall& "ranted a Te!porar& Restrainin" Order?2dated G October 88G and later on a

Supple!ental Te!porar& Restrainin" OrderG8dated 17 October 88G in petitioners favor, en@oinin" the

i!ple!entation of the assailed rulin"s of the Manila RT) and the )ourt of ppeals. o$ever, on respondents

!otion, the )ourt, throu"h a ResolutionG1dated 11 Dece!ber 88G, suspended the i!ple!entation of the

restrainin" orders it had earlier issued.

Oral ar"u!ents $ere held on 1/ 0anuar& 88/. The )ourt consolidated the issues for ar"u!ent as follo$s

1. Did the RT)*Manila, in issuin" the Orders dated ? 0ul& 88G and 1? u"ust 88G $hich deferred

the i!ple!entation of its Order dated 1 0anuar& 88G, and the )ourt of ppeals, in issuin" its

Resolution dated 1 u"ust 88G, $hich ordered the status quoin relation to the 1 0ul& 88? Order of

the RT)*Ma#ati and the 1 0anuar& 88G Order of the RT)*Manila, both of $hich authoriEed thee%a!ination of ban# accounts under Section 11 of Rep. ct No. 21G8 6MC9, co!!it "rave abuse of

discretion'

6a9 Is an application for an order authoriEin" in(uir& into or e%a!ination of ban# accounts or

invest!ents under Section 11 of the MC e)partein nature or one $hich re(uires notice and

hearin"'

6b9 hat le"al procedures and standards should be observed in the conduct of the

proceedin"s for the issuance of said order'

6c9 Is such order susceptible to le"al challen"es and @udicial revie$'

. Is it proper for this )ourt at this ti!e and in this case to in(uire into and pass upon the validit& of the

1 0ul& 88? Order of the RT)*Ma#ati and the 1 0anuar& 88G Order of the RT)*Manila, considerin"

the pendenc& of ) ;.R. SP No. 2?*123 6Cilia )hen" v. Republic9 $herein the validit& of both orders

$as challen"ed'G

fter the oral ar"u!ents, the parties $ere directed to file their respective !e!oranda, $hich the& did, G7and the

petition $as thereafter dee!ed sub!itted for resolution.

II.

Petitioners "eneral advocac& is that the ban# in(uir& orders issued b& the Manila and Ma#ati RT)s are valid

and i!!ediatel& enforceable $hereas the assailed rulin"s, $hich effectivel& sta&ed the enforce!ent of theManila and Ma#ati RT)s ban# in(uir& orders, are sullied $ith "rave abuse of discretion. These conclusions flo$

fro! the posture that a ban# in(uir& order, issued upon a findin" of probable cause, !a& be issued e

parteand, once issued, is i!!ediatel& e%ecutor&. Petitioner further ar"ues that the infor!ation obtained

follo$in" the ban# in(uir& is necessaril& beneficial, if not indispensable, to the MC) in dischar"in" its

a$eso!e responsibilit& re"ardin" the effective i!ple!entation of the MC and that an& restraint in the

disclosure of such infor!ation to appropriate a"encies or other @udicial fora $ould render !eanin"less the relief

supplied b& the ban# in(uir& order.
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Petitioner raises particular ar"u!ents (uestionin" Cilia )hen"s ri"ht to see# in@unctive relief before the )ourt of

ppeals, notin" that not one of the ban# in(uir& orders is directed a"ainst her. er +cr&ptic assertion+ that she is

the $ife of )hen" Lon" cannot, accordin" to petitioner, +!eta!orphose into the re(uisite le"al standin" to see#

redress for an i!a"ined in@ur& or to !aintain an action in behalf of another.+ In the sa!e breath, petitioner

ar"ues that lvareE cannot assert an& violation of the ri"ht to financial privac& in behalf of other persons $hose

ban# accounts are bein" in(uired into, particularl& those other persons na!ed in the Ma#ati RT) ban# in(uir&

order $ho did not ta#e an& step to oppose such orders before the courts.

Ostensibl&, the pro%i!ate (uestion before the )ourt is $hether a ban# in(uir& order issued in accordance $ith

Section 18 of the MC !a& be sta&ed b& in@unction. Let in ar"uin" that it does, petitioner relies on $hat it

posits as the final and i!!ediatel& e%ecutor& character of the ban# in(uir& orders issued b& the Manila and

Ma#ati RT)s. I!plicit in that position is the notion that the in(uir& orders are valid, and such notion is

susceptible to revie$ and validation based on $hat appears on the face of the orders and the applications

$hich tri""ered their issuance, as $ell as the provisions of the MC "overnin" the issuance of such orders.

Indeed, to test the viabilit& of petitioners ar"u!ent, the )ourt $ill have to be satisfied that the sub@ect in(uir&

orders are valid in the first place. o$ever, even fro! a cursor& e%a!ination of the applications for in(uir&

order and the orders the!selves, it is evident that the orders are not in accordance $ith la$.

III.

brief overvie$ of the MC is called for.

Mone& launderin" has been "enerall& defined b& the International )ri!inal Police Or"aniEation 6Interpol9 as

+an& act or atte!pted act to conceal or dis"uise the identit& of ille"all& obtained proceeds so that the& appear

to have ori"inated fro! le"iti!ate sources.+G>=ven before the passa"e of the MC, the proble! $as

addressed b& the Philippine "overn!ent throu"h the issuance of various circulars b& the 4an"#o Sentral n"

Pilipinas. Let ulti!atel&, le"islative proscription $as necessar&, especiall& $ith the inclusion of the Philippines in

the Financial ction Tas# Forces list of non*cooperative countries and territories in the fi"ht a"ainst !one&

launderin".G?The ori"inal MC, Republic ct 6R..9 No. 21G8, $as passed in 881. It $as a!ended b& R..

No. 212> in 887.

Section > of the MC states that +J!Kone& launderin" is a cri!e $hereb& the proceeds of an unla$ful activit&as Jdefined in the la$K are transacted, thereb& !a#in" the! appear to have ori"inated fro! le"iti!ate

sources.+GGThe section further provides the three !odes throu"h $hich the cri!e of !one& launderin" is

co!!itted. Section / creates the MC) and defines its po$ers, $hich "enerall& relate to the enforce!ent of

the MC provisions and the initiation of le"al actions authoriEed in the MC such as civil forefeiture

proceedin"s and co!plaints for the prosecution of !one& launderin" offenses.G/

In addition to providin" for the definition and penalties for the cri!e of !one& launderin", the MC also

authoriEes certain provisional re!edies that $ould aid the MC) in the enforce!ent of the MC. These are

the +freeEe order+ authoriEed under Section 18, and the +ban# in(uir& order+ authoriEed under Section 11.

Respondents posit that a ban# in(uir& order under Section 11 !a& be obtained onl& upon the pre*e%istence of

a !one& launderin" offense case alread& filed before the courts.G3The conclusion is based on the phrase

+upon order of an& co!petent court in cases of violation of this ct,+ the $ord +cases+ "enerall& understood asreferrin" to actual cases pendin" $ith the courts.

e are unconvinced b& this proposition, and a"ree instead $ith the then Solicitor ;eneral $ho conceded that

the use of the phrase +in cases of+ $as unfortunate, &et sub!itted that it should be interpreted to !ean +in the

event there are violations+ of the MC, and not that there are alread& cases pendin" in court concernin" such

violations.G2If the contrar& position is adopted, then the ban# in(uir& order $ould be li!ited in purpose as a tool

in aid of liti"ation of live cases, and $holl& inutile as a !eans for the "overn!ent to ascertain $hether there is

sufficient evidence to sustain an intended prosecution of the account holder for violation of the MC. Should
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that be the situation, in all li#elihood the MC) $ould be virtuall& deprived of its character as a discover& tool,

and thus $ould beco!e less circu!spect in filin" co!plaints a"ainst suspect account holders. fter all, under

such set*up the preferred strate"& $ould be to allo$ or even encoura"e the indiscri!inate filin" of co!plaints

under the MC $ith the hope or e%pectation that the evidence of !one& launderin" $ould so!eho$ surface

durin" the trial. Since the MC) could not !a#e use of the ban# in(uir& order to deter!ine $hether there is

evidentiar& basis to prosecute the suspected !alefactors, not filin" an& case at all $ould not be an alternative.

Such un$holeso!e set*up should not co!e to pass. Thus Section 11 cannot be interpreted in a $a& that $oulde!asculate the re!ed& it has established and encoura"e the unfounded initiation of co!plaints for !one&

launderin".

Still, even if the ban# in(uir& order !a& be availed of $ithout need of a pre*e%istin" case under the MC, it

does not follo$ that such order !a& be availed of e parte.There are several reasons $h& the MC does not

"enerall& sanction e parteapplications and issuances of the ban# in(uir& order.

I'.

It is evident that Section 11 does not specificall& authoriEe, as a "eneral rule, the issuance e parteof the ban#

in(uir& order. e (uote the provision in full

SEC. 11.Authority to Inquire into Bank Deposits. Not/)t'st!n")n t'e rov)s)ons o* Reu(l)+ A+t

No. #0%1, !s !men"e", Reu(l)+ A+t No. 60$6, !s !men"e", Reu(l)+ A+t No. @?5#, !n" ot'er l!/s, t'e AMLC

m!4 )nu)re )nto or e&!m)ne !n4 !rt)+ul!r "eos)t or )nvestment /)t' !n4 (!n;)n )nst)tut)on or non (!n;

*)n!n+)!l )nst)tut)on uon or"er o* !n4 +ometent +ourt )n +!ses o* v)ol!t)on o* t')s A+t, whe* .t ha /ee*

eta/l.he+ that there . 2ro/a/le 0a-e that the +e2o.t or .*8et4e*t are relate+ to a* -*law1-l a0t.8.t7

a +e1.*e+ .* Se0t.o* 5>.? hereo1 or a 4o*e7 la-*+er.*g o11e*e -*+er Se0t.o* 3 hereo1, e@0e2t that *o 0o-rt

or+er hall /e re-.re+ .* 0ae .*8ol8.*g -*law1-l a0t.8.t.e +e1.*e+ .* Se0t.o* 5>.?!, >6? a*+ >!6?

To ensure co!pliance $ith this ct, the 4an"#o Sentral n" Pilipinas 64SP9 !a& in(uire into or e%a!ine

an& deposit of invest!ent $ith an& ban#in" institution or non ban# financial institution $hen the

e%a!ination is !ade in the course of a periodic or special e%a!ination, in accordance $ith the rules of

e%a!ination of the 4SP./86=!phasis supplied9

Of course, Section 11 also allo$s the MC) to in(uire into ban# accounts $ithout havin" to obtain a @udicial

order in cases $here there is probable cause that the deposits or invest!ents are related to #idnappin" for

ranso!,/1certain violations of the )o!prehensive Dan"erous Dru"s ct of 88, /hi@ac#in" and other violations

under R.. No. G7?, destructive arson and !urder. Since such special circu!stances do not appl& in this

case, there is no need for us to pass co!!ent on this proviso. Suffice it to sa&, the proviso conte!plates a

situation distinct fro! that $hich presentl& confronts us, and for purposes of the succeedin" discussion, our

reference to Section 11 of the MC e%cludes said proviso.

In the instances $here a court order is re(uired for the issuance of the ban# in(uir& order, nothin" in Section 11

specificall& authoriEes that such court order !a& be issued e parte.It !i"ht be ar"ued that this silence does

not preclude the e parteissuance of the ban# in(uir& order since the sa!e is not prohibited under Section 11.

Let this ar"u!ent falls $hen the i!!ediatel& precedin" provision, Section 18, is e%a!ined.

SEC. 10.Freezing of onetary Instru!ent or "roperty. T'e Court o* Ae!ls, uon a22l.0at.o* ex

parte(4 t'e AMLC !n" !*ter "eterm)n!t)on t'!t 2ro/a/le 0a-ee&)sts t'!t !n4 monet!r4 )nstrument or roert4

)s )n !n4 /!4 rel!te" to !n unl!/*ul !+t)v)t4 !s "e*)ne" )n Se+t)on 27)8 'ereo*, m!4 )ssue ! 1reee or+er wh.0h

hall /e e11e0t.8e .44e+.atel7. T'e *ree


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effectivel& co!bat and prosecute !one& launderin" offenses. )ruciall&, Section 18 uses specific lan"ua"e to

authoriEe ane parte application for the provisional relief therein, a circu!stance absent in Section 11. If indeed

the le"islature had intended to authoriEe e parteproceedin"s for the issuance of the ban# in(uir& order, then it

could have easil& e%pressed such intent in the la$, as it did $ith the freeEe order under Section 18.

=ven !ore tellin"l&, the current lan"ua"e of Sections 18 and 11 of the MC $as crafted at the sa!e ti!e,

throu"h the passa"e of R.. No. 212>. Prior to the a!endator& la$, it $as the MC), not the )ourt of ppeals,$hich had authorit& to issue a freeEe order, $hereas a ban# in(uir& order al$a&s then re(uired, $ithout

e%ception, an order fro! a co!petent court./>It $as throu"h the sa!e enact!ent that e parteproceedin"s

$ere introduced for the first ti!e into the MC, in the case of the freeEe order $hich no$ can onl& be issued

b& the )ourt of ppeals. It certainl& $ould have been convenient, throu"h the sa!e a!endator& la$, to allo$ a

si!ilar e parteprocedure in the case of a ban# in(uir& order had )on"ress been so !inded. Let nothin" in the

provision itself, or even the available le"islative record, e%plicitl& points to an e parte@udicial procedure in the

application for a ban# in(uir& order, unli#e in the case of the freeEe order.

That the MC does not conte!plate e parteproceedin"s in applications for ban# in(uir& orders is confir!ed

b& the present i!ple!entin" rules and re"ulations of the MC, pro!ul"ated upon the passa"e of R.. No.

212>. ith respect to freeEe orders under Section 18, the i!ple!entin" rules do e%pressl& provide that the

applications for freeEe orders be filed e parte,/?but no si!ilar clearance is "ranted in the case of in(uir& orders

under Section 11./GThese i!ple!entin" rules $ere pro!ul"ated b& the 4an"#o Sentral n" Pilipinas, theInsurance )o!!ission and the Securities and =%chan"e )o!!ission,//and if it $as the true belief of these

institutions that in(uir& orders could be issued e partesi!ilar to freeEe orders, lan"ua"e to that effect $ould

have been incorporated in the said Rules. This is stressed not because the i!ple!entin" rules could

authoriEe e parteapplications for in(uir& orders despite the absence of statutor& basis, but rather because the

fra!ers of the la$ had no intention to allo$ such e parteapplications.

=ven the Rules of Procedure adopted b& this )ourt in .M. No. 8?*11*8>*S)/3to enforce the provisions of the

MC specificall& authoriEe e parteapplications $ith respect to freeEe orders under Section 18/2but !a#e no

si!ilar authoriEation $ith respect to ban# in(uir& orders under Section 11.

The )ourt could divine the sense in allo$in" e parteproceedin"s under Section 18 and in proscribin" the

sa!e under Section 11. freeEe order under Section 18 on the one hand is ai!ed at preservin" !onetar&

instru!ents or propert& in an& $a& dee!ed related to unla$ful activities as defined in Section 76i9 of the MC.

The o$ner of such !onetar& instru!ents or propert& $ould thus be inhibited fro! utiliEin" the sa!e for the

duration of the freeEe order. To !a#e such freeEe order anteceded b& a @udicial proceedin" $ith notice to the

account holder $ould allo$ for or lead to the dissipation of such funds even before the order could be issued.

On the other hand, a ban# in(uir& order under Section 11 does not necessitate an& for! of ph&sical seiEure of

propert& of the account holder. hat the ban# in(uir& order authoriEes is the e%a!ination of the particular

deposits or invest!ents in ban#in" institutions or non*ban# financial institutions. The !onetar& instru!ents or

propert& deposited $ith such ban#s or financial institutions are not seiEed in a ph&sical sense, but are

e%a!ined on particular details such as the account holders record of deposits and transactions. Anli#e the

assets sub@ect of the freeEe order, the records to be inspected under a ban# in(uir& order cannot be ph&sicall&

seiEed or hidden b& the account holder. Said records are in the possession of the ban# and therefore cannot be

destro&ed at the instance of the account holder alone as that $ould re(uire the e%traordinar& cooperation anddevotion of the ban#.

Interestin"l&, petitioners !e!orandu! does not atte!pt to de!onstrate before the )ourt that the ban# in(uir&

order under Section 11 !a& be issued e parte, althou"h the petition itself did devote so!e space for that

ar"u!ent. The petition ar"ues that the ban# in(uir& order is +a special and peculiar re!ed&, drastic in its na!e,

and !ade necessar& because of a public necessit& JtKhus, b& its ver& nature, the application for an order or

in(uir& !ust necessaril&, be e parte.+ This ar"u!ent is insufficient @ustification in li"ht of the clear disinclination
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of )on"ress to allo$ the issuance e parteof ban# in(uir& orders under Section 11, in contrast to the

le"islatures clear inclination to allo$ the e parte"rant of freeEe orders under Section 18.

ithout doubt, a re(uire!ent that the application for a ban# in(uir& order be done $ith notice to the account

holder $ill alert the latter that there is a plan to inspect his ban# account on the belief that the funds therein are

involved in an unla$ful activit& or !one& launderin" offense. 38Still, the account holder so alerted $ill in fact be

unable to do an&thin" to conceal or cleanse his ban# account records of suspicious or ano!alous transactions,at least not $ithout the $hole*hearted cooperation of the ban#, $hich inherentl& has no vested interest to aid

the account holder in such !anner.

'.

The necessar& i!plication of this findin" that Section 11 of the MC does not "enerall& authoriEe the

issuancee parte of the ban# in(uir& order $ould be that such orders cannot be issued unless notice is "iven to

the o$ners of the account, allo$in" the! the opportunit& to contest the issuance of the order. ithout such a

conse(uence, the le"islated distinction bet$een e parteproceedin"s under Section 18 and those $hich are

not e parteunder Section 11 $ould be lost and rendered useless.

There certainl& is fertile "round to contest the issuance of an e parteorder. Section 11 itself re(uires that it be

established that +there is probable cause that the deposits or invest!ents are related to unla$ful activities,+ and

it obviousl& is the court $hich stands as arbiter $hether there is indeed such probable cause. The process of

in(uirin" into the e%istence of probable cause $ould involve the function of deter!ination reposed on the trial

court. Deter!ination clearl& i!plies a function of ad@udication on the part of the trial court, and not a !echanical

application of a standard pre*deter!ination b& so!e other bod&. The $ord +deter!ination+ i!plies deliberation

and is, in nor!al le"al conte!plation, e(uivalent to +the decision of a court of @ustice.+31

The court receivin" the application for in(uir& order cannot si!pl& ta#e the MC)s $ord that probable cause

e%ists that the deposits or invest!ents are related to an unla$ful activit&. It $ill have to e%ercise its

o$n deter!inative function in order to be convinced of such fact. The account holder $ould be certainl&

capable of contestin" such probable cause if "iven the opportunit& to be apprised of the pendin" application to

in(uire into his accountB hence a notice re(uire!ent $ould not be an e!pt& spectacle. It !a& be so that theprocess of obtainin" the in(uir& order !a& beco!e !ore cu!berso!e or prolon"ed because of the notice

re(uire!ent, &et $e fail to see an& unreasonable burden cast b& such circu!stance. fter all, as earlier stated,

re(uirin" notice to the account holder should not, in an& $a&, co!pro!ise the inte"rit& of the ban# records

sub@ect of the in(uir& $hich re!ain in the possession and control of the ban#.

Petitioner ar"ues that a ban# in(uir& order necessitates a findin" of probable cause, a characteristic si!ilar to a

search $arrant $hich is applied to and heard e parte.e have e%a!ined the supposed analo"& bet$een a

search $arrant and a ban# in(uir& order &et $e re!ain to be unconvinced b& petitioner.

The )onstitution and the Rules of )ourt prescribe particular re(uire!ents attachin" to search $arrants that are

not i!posed b& the MC $ith respect to ban# in(uir& orders. constitutional $arrant re(uires that the @ud"e

personall& e%a!ine under oath or affir!ation the co!plainant and the $itnesses he !a& produce, 3such

e%a!ination bein" in the for! of searchin" (uestions and ans$ers.37Those are i!positions $hich the

le"islative did not specificall& prescribe as to the ban# in(uir& order under the MC, and $e cannot find

sufficient le"al basis to appl& the! to Section 11 of the MC. Si!pl& put, a ban# in(uir& order is not a search

$arrant or $arrant of arrest as it conte!plates a direct ob@ect but not the seiEure of persons or propert&.

=ven as the )onstitution and the Rules of )ourt i!pose a hi"h procedural standard for the deter!ination of

probable cause for the issuance of search $arrants $hich )on"ress chose not to prescribe for the ban# in(uir&

order under the MC, )on"ress nonetheless disallo$ed e parteapplications for the in(uir& order. e can

discern that in e%chan"e for these procedural standards nor!all& applied to search $arrants, )on"ress chose
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instead to le"islate a ri"ht to notice and a ri"ht to be heard: characteristics of @udicial proceedin"s $hich are

note parte.bsent an& de!onstrable constitutional infir!it&, there is no reason for us to dispute such

le"islative polic& choices.

'I.

The )ourts construction of Section 11 of the MC is undoubtedl& influenced b& ri"ht to privac& considerations.If sustained, petitioners ar"u!ent that a ban# account !a& be inspected b& the "overn!ent follo$in" an e

parteproceedin" about $hich the depositor $ould #no$ nothin" $ould have si"nificant i!plications on the ri"ht

to privac&, a ri"ht innatel& cherished b& all not$ithstandin" the le"all& reco"niEed e%ceptions thereto. The

notion that the "overn!ent could be so e!po$ered is cause for concern of an& individual $ho values the ri"ht

to privac& $hich, after all, e!bodies even the ri"ht to be +let

alone,+ the !ost co!prehensive of ri"hts and the ri"ht !ost valued b& civiliEed people.3>

One !i"ht assu!e that the constitutional di!ension of the ri"ht to privac&, as applied to ban# deposits,

$arrants our present in(uir&. e decline to do so. d!ittedl&, that (uestion has proved controversial in

!erican @urisprudence. Notabl&, the Anited States Supre!e )ourt in *.+. v. Miller3?held that there $as no

le"iti!ate e%pectation of privac& as to the ban# records of a depositor.3GMoreover, the te%t of our )onstitution

has not bothered $ith the trivialit& of allocatin" specific ri"hts peculiar to ban# deposits.

o$ever, sufficient for our purposes, $e can assert there is a ri"ht to privac& "overnin" ban# accounts in the

Philippines, and that such ri"ht finds application to the case at bar. The source of such ri"ht is statutor&,

e%pressed as it is in R.. No. 1>8? other$ise #no$n as the 4an# Secrec& ct of 12??. The ri"ht to privac& is

enshrined in Section of that la$, to $it

S=)TION . A $os8ts o :;"to#8$#t8" #"tuand !a& not be e%a!ined, in(uired or loo#ed into b& an& person, "overn!ent

official, bureau or office, e%cept upon $ritten per!ission of the depositor, or in cases of i!peach!ent,

or upon order of a co!petent court in cases of briber& or dereliction of dut& of public officials, or incases $here the !one& deposited or invested is the sub@ect !atter of the liti"ation. 6=!phasis

supplied9

4ecause of the 4an# Secrec& ct, the confidentialit& of ban# deposits re!ains a basic state polic& in the

Philippines.3/Subse(uent la$s, includin" the MC, !a& have added e%ceptions to the 4an# Secrec& ct, &et

the secrec& of ban# deposits still lies as the "eneral rule. It falls $ithin the Eones of privac& reco"niEed b& our

la$s.33The fra!ers of the 123/ )onstitution li#e$ise reco"niEed that ban# accounts are not covered b& either

the ri"ht to infor!ation32under Section /, rticle III or under the re(uire!ent of full public disclosure28under

Section 3, rticle II.21Anless the 4an# Secrec& ct is repealed or

a!ended, the le"al order is obli"ed to conserve the absolutel& confidential nature of Philippine ban# deposits.

n& e%ception to the rule of absolute confidentialit& !ust be specificall& le"islated. Section of the 4an#

Secrec& ct itself prescribes e%ceptions $hereb& these ban# accounts !a& be e%a!ined b& +an& person,

"overn!ent official, bureau or office+B na!el& $hen 619 upon $ritten per!ission of the depositorB 69 in cases

of i!peach!entB 679 the e%a!ination of ban# accounts is upon order of a co!petent court in cases of briber& or

dereliction of dut& of public officialsB and 6>9 the !one& deposited or invested is the sub@ect !atter of the

liti"ation. Section 3 of R.. ct No. 7812, the nti*;raft and )orrupt Practices ct, has been reco"niEed b& this

)ourt as constitutin" an additional e%ception to the rule of absolute confidentialit&,2and there have been other

si!ilar reco"nitions as $ell.27
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The MC also provides e%ceptions to the 4an# Secrec& ct. Ander Section 11, the MC) !a& in(uire into a

ban# account upon order of an& co!petent court in cases of violation of the MC, it havin" been established

that there is probable cause that the deposits or invest!ents are related to unla$ful activities as defined in

Section 76i9 of the la$, or a !one& launderin" offense under Section > thereof. Further, in instances $here

there is probable cause that the deposits or invest!ents are related to #idnappin" for ranso!, 2>certain

violations of the )o!prehensive Dan"erous Dru"s ct of 88,2?hi@ac#in" and other violations under R.. No.

G7?, destructive arson and !urder, then there is no need for the MC) to

scl (cm amla fia rem til)

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