INTENGAN, NERI AND BRAWNER v CA G.R. No.

128996, February 15, 2002 FACTS: Citibank filed a complaint against two of its officers, Dante Santos and Malou Genuino, for alleged violation of section 311of the Corporation Code. Attached to the complaint was an affidavit executed by Vic Lim, a VP of Citibank. In Lims affidavit, he stated that: 1. He assisted in the investigation of certain anomalous activities of Santos, the Treasurer of the banks Global Consumer Group and Genuino, the AVP in Santos office. The investigation was conducted because the bank found out that Santos and Genuino caused existing Citibank clients to divert their money from Citibank to products offered by other companies that were commanding higher rate of yields. The clients monies were transferred to two companies (in which Santos and Genuino had financial interest), which in turn placed the monies of the bank clients in securities, shares of stock and other certificates of third parties. Carmen Intengan, Rosario Neri and Rita Brawner were some those clients who diverted their deposits to Torrance and Global.

2.

3.

In said affidavit, Lim annexed bank records, including documents pertaining to the dollar deposits of Intengan, Neri and Brawner. Joven Reyes, another VP of Citibank, admits to having authorized Lim to state the names of the clients involved and to attach the pertinent bank records. Intengan et al, filed motions for the exclusion and physical withdrawal of their bank records that were attached to Lims affidavit. An information was subsequently filed against Lim and Reyes for alleged violation of RA 1405 (Bank Secrecy Law). Both DOJ Secretary Drilon and the CA ruled that the disclosure deposits falls under the 4th exception of RA 1405 (i.e., "in cases where the money deposited or invested is the subject matter of the litigation") and found that: the disclosure of deposits was necessary to establish the allegation that Santos and Genuino had violated Section 31 of the Corporation Code in acquiring "any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence; and Although Intengan, et al were not the parties involved the case filed by Citibank, their accounts were relevant to the complete prosecution of the case against Santos and Genuino

ISSUE: W/N the disclosures fall under the 4th exception under the RA 1405(Bank Secrecy Law) HELD: No. RA 1405 (Bank Secrecy Law) is not applicable. The Court, however, dismissed the petition due to prescription. RATIO: The accounts in question are U.S. dollar deposits, so the applicable law is not RA 1405 (Bank Secrecy Law) but RA 6426 (Foreign Currency Deposit Act of the Philippines):

SEC. 31. Liability of directors, trustees or officers-Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. ***

Sec. 8. Secrecy of Foreign Currency Deposits.- All foreign currency deposits authorized under this Act, as amended by PD 1035, as well as foreign currency deposits authorized under PD 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Thus, under RA 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is allowed only upon the written permission of the depositor . The act complained of happened before the enactment on RA 9160 (Anti-Money Laundering Act). A case for violation of RA 6426 should have been the proper case brought against private respondents. Lim and Reyes admitted that they had disclosed details of the dollar deposits without their written permission. Lims act of disclosing details of petitioners bank records regarding their foreign currency deposits, with the authority of Reyes, would appear to belong to that species of criminal acts punishable by special laws, (malum prohibitum) where criminal intent is not necessary. The Court, in applying Act. No. 33262, as amended, ruled that the action has already prescribed. According to the said Act: SECTION 1. Violations penalized by special acts shall, unless otherwise provided in such acts, prescribe in accordance with the following rules: *** (c) after eight years for those punished by imprisonment for two years or more, but less than six years; *** A violation of RA 6426 shall subject the offender to imprisonment of 1-5 yrs, or by a fine of 5,000-25,000 pesos, or both. Applying Act No. 3326, the offense prescribes in eight years. In this case Lim made the disclosure in September of 1993 in his affidavit. Intengan, Neri and Brawner learned of the disclosure in 1993/1994. Based on any of these dates, prescription has set in. The filing of the complaint for alleged violation of RA 1405 did not have the effect of tolling the prescriptive period. It may well be argued that the foregoing disquisition would leave petitioners with no remedy in law. We point out, however, that the confidentiality of foreign currency deposits mandated by RA 6426, as amended by PD 1246, came into effect as far back as 1977. Hence, ignorance thereof cannot be pretended.

An Act to Establish Periods of Prescription for Violations Penalized by Special Acts and Municipal Ordinances and to Provide When Prescription Shall Begin to Run

JOSEPH VICTOR G. EJERCITO vs. SANDIGANBAYAN (Special Division) and PEOPLE OF THE PHILIPPINES G.R. Nos. 157294-95, November 30, 2006 FACTS: In the plunder case against former President Estrada, the Special Prosecution Panel filed with 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) to produce various bank documents pertaining to various accounts (e.g., Trust Agreement, Account Opening Documents, Statement of Account/Ledger, etc) during the scheduled hearings. 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. Ejercito then filed a Motion to Quash Subpoena Duces Tecum/Ad Testificandum praying that the subpoenas previously issued to the President of the EIB. Ejercito claimed that: 1. 2. his bank accounts are covered by RA 1405 (The Secrecy of Bank Deposits Law) and do not fall under any of the exceptions stated therein; 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 PDIC) in its capacity as receiver of the then Urban Bank; and since such disclosure is illegal, the prosecution in the case may not be allowed to make use of the information under the fruit of the poisonous tree doctrine

3.

ISSUE/S: 1. 2. 3. W/N Trust Account is covered by the term "deposit" as used in R.A. 1405; W/N Ejercitos Trust Account and Savings Account are excepted from the protection of R.A. 1405; and W/N the "extremely-detailed" information contained in the Panels requests for subpoena was obtained through a prior illegal disclosure of petitioners bank accounts, in violation of the "fruit of the poisonous tree" doctrine

HELD: 1. 2. Yes, the Trust Account is covered by the term deposit Yes, the accounts fall under the 3rd and 4th exceptions in RA 1405: a. the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials, and b. the money deposited or invested is the subject matter of the litigation. No, the details were lawfully acquired

3. RATIO:

On the meaning of deposits The contention that trust accounts are not covered by the term "deposits," as used in R.A. 1405, by the mere fact that they do not entail a creditor-debtor relationship is without merit. The policy behind the law is laid down in Section 1 of said law: It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country .

If the money deposited under an account may be used by banks for authorized loans to third persons, then such account, regardless of whether it creates a creditor-debtor relationship between the depositor and the bank, falls under the category of accounts which the law precisely seeks to protect. Section 2 also shows that the term "deposits" was intended to be understood broadly. It states that, 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. The phrase "of whatever nature" indicates a general interpretation of "deposits." Also, the law applies not only to money which is deposited but also to those which are invested. The law was not intended to apply only to "deposits" in the strict sense of the word. Otherwise, there would have been no need to add the phrase "or invested." 3rd exception: upon order of a competent court in cases of bribery or dereliction of duty of public officials While Ejercito contends that since plunder is neither bribery nor dereliction of duty, the Court has previously held that: 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. The crime of plunder is likewise defined under RA 7080 law as a crime wherein Any public officer who, by himself or in connivance with members of his family, relatives by affinity or consanguinity, business associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth through a combination or series of overt or criminal acts as described in Sec. 1(d). Bribery is among the criminal acts under Sec. 1(d). Plunder being analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must also apply to cases of plunder. 4th exception: the money deposited or invested is the subject matter of the litigation The meaning of the phrase "subject matter of the litigation" as used in R.A. 1405 has previously been explained by the Court: the subject of the action is the matter or thing with respect to which the controversy has arisen, concerning which the wrong has been done, and this ordinarily is the property or the contract and its subject matter, or the thing in dispute." In this case, Ejercitos definition of the phrase subject matter of the action is consistent with the term subject matter of the litigation, as used in the Bank Deposits Secrecy Act. In the case of Mellon Bank, the Court sanctioned the examination of the bank accounts where part of the money was subsequently caused to be deposited. According to the court, 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." The plunder case pending with the Sandiganbayan necessarily involves an inquiry into the whereabouts of the amount purportedly acquired illegally by former President Joseph Estrada. The subject matter of the litigation, therefore, 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.

Admissiblity of the information obtained by the Panel Ejercito argued that that the "extremely-detailed" information stated in the request was obtained by the Ombudsman from the bank officials concerned during a previous investigation of the charges against President Estrada. He relied on Marquez v. Desierto, where the Court held that there must be a pending case before a court of competent jurisdiction, for inspection to be allowed. Ejercito argued that because no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction at the time the Ombudsman conducted an investigation, the information about his bank accounts were acquired illegally. As such inquiry was illegal, they cannot be admitted now under the fruit of the poisonous tree doctrine. This contention is without merit. R.A. 1405 does not provide 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 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. Clearly, the "fruit of the poisonous tree" doctrine13 presupposes a violation of law. If there was no violation of R.A. 1405 in the instant case, then there would be no "poisonous tree" to begin with, and, thus, no reason to apply the doctrine. The reliance of Ejercito on the Marquez case is misplaced, because said ruling was a reversal of a prevailing doctrine. The Ombudsmans inquiry into the subject bank accounts prior to the filing of any case before a court of competent jurisdiction was valid at the time it was conducted. More so, the details contained in the request, according to respondent People, were obtained from various sources including the proceedings during the impeachment of President Estrada, related reports, articles and investigative journals. In the absence of proof to the contrary, this explanation proffered by respondent must be upheld. To presume that the information was obtained in violation of R.A. 1405 would infringe the presumption of regularity in the performance of official functions.

BANK OF THE PHILIPPINE ISLANDS vs. THE INTERMEDIATE APPELLATE COURT and the SPOUSES ARTHUR CANLAS and VIVIENE CANLAS G.R. No. 69162 February 21, 1992 FACTS: The spouses Arthur and Viviene Canlas opened a joint current account with the QC branch of the Commercial Bank and Trust Company. Prior thereto, Arthur Canlas had an existing separate personal checking the same branch. When the spouses Canlas opened their joint current account, the "new accounts" teller of the bank pulled out from the bank's files the old and existing signature card of Arthur for use as ID and reference. By mistake, she placed the old personal account number of Arthur Canlas on the deposit slip for the new joint checking account of the spouses so that the initial deposit of P2,250 for the joint checking account was miscredited to Arthur's personal account. When Viviene issued a check for Pl,639.89and for P1,160.00 on two separate dates, one of the checks was dishonored by the bank for insufficient funds and a penalty of P20 was deducted from the account in both instances. In view of the overdrawings, the bank tried to call up the spouses at the telephone number which they had given in their application form, but the bank could not contact them because they actually reside in Pampanga, and the city address and phone number which they gave to the bank belonged to Vivienes parents. The spouses filed a complaint for damages against CBTC in RTC Pampanga. During the pendency of the case, the Bank of the Philippine Islands (BPI) and CBTC were merged. As the surviving corporation, BPI took over as defendant in the case. Both the RTC and the CA ruled in favor of the spouses. BPI now contends that it should not be considered negligent, and it should not be held liable for damages on account of the inadvertence of its bank employee because Article 1173 of the Civil Code only requires it to exercise the diligence of a good father of family. ISSUE/S: 1. 2. HELD: 1. 2. RATIO: In Simex International (Manila), Inc. vs. Court of Appeals (183 SCRA 360, 367), this Court stressed the fiduciary nature of the relationship between a bank and its depositors and the extent of diligence expected of it in handling the accounts entrusted to its care. In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank, such as the dishonor of a check without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. Yes Yes, but not exemplary damages W/N there was negligence on the part of BPI in handling the account of the spouses W/N BPI should be held liable for damages and attorneys fees

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. . . . The bank is not expected to be infallible but, as correctly observed by appellate court, in this instance, it must bear the blame for not discovering the mistake of its teller despite the established procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. Apparently, the officials and employees tasked to do that did not perform their duties with due care, as may be gathered from the testimony of the bank's lone witness, Antonio Enciso, who casually declared that "the approving officer does not have to see the account numbers and all those things.Those are very petty things for the approving manager to look into". Unfortunately, it was a "petty thing," like the incorrect account number that the bank teller wrote on the initial deposit slip for the newly-opened joint current account of the Canlas spouses that sparked this half-a-million-peso damage suit against the bank. While the bank's negligence may not have been attended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and humiliation to the private respondents for which they are entitled to recover reasonable moral damages. The award of reasonable attorney's fees is proper for the private respondents were compelled to litigate to protect their interest. However, the absence of malice and bad faith renders the award of exemplary damages improper.

PHILIPPINE BANKING CORPORATION (PBCOM), vs.COURT OF APPEALS and LEONILO MARCOS G.R. No. 127469, January 15, 2004 FACTS: Leonilo Marcos filed a Complaint for Sum of Money with Damages against PBCOM. According to Marcos: 1. 2. Pagsaligan, a PBCOMofficial and a close friend of his, persuaded him to deposit money with PBCOM. Pagsaligan kept the various time deposit certificates on the assurance that PBCOM would take care of the certificates, interests and renewals. From the time of the deposit, he had not received the principal amount or its interest. He wanted to withdraw from PBCOM his time deposits (at the time they matured),but Pagsaligan convinced him to keep his time deposits intact and instead to open several domestic letters of credit. Marcos agreed and executed three Trust Receipt Agreements and deposited the required 30% deposit. Marcos claimed that his obligation to PBCOM was therefore only P595k representing 70% of the letters of credit. If PBCOMhad only automatically applied his time deposits (plus interest) to his remaining balance as he expected, he would have paid completely his debt. He did not apply for a renewal of the trust receipt agreements soPBCOM had no right to renew the same. PBCOM of unjustly demanded payment for the total amount of the trust receipt agreements without deducting the 30% deposit that he had already made. There was likewise no agreement as to the payment of interest. He never obtained a different loan from PBCOM, and never executed a Promissory Note to which his time deposits could have been applied.

3. 4.

5. 6. 7.

8.

PBCOM denied the allegations of Marcos andalleged that: 1. 2. Marcos delivered to PBCOM the time deposit certificates by virtue of a Deed of Assignment to secure his various loan obligations which are separate and distinct from the trust receipt agreements. When Marcos defaulted in the payment of one of his PNs, PBCOM debited his time deposits and applied the same to the obligation that is now considered fully paid. PBCOM insisted that the Deed of Assignment authorized it to apply the time deposits in payment of such Promissory Note. Marcos freely entered into the trust receipt agreements. When Marcos failed to account for the goods delivered or for the proceeds of the sale (under the Trust Receipts), PBCOM filed a complaint for violation of PD 115 or the Trust Receipts Law. Instead of initiating negotiations for the settlement of the account, Marcos filed this suit. They did not falsify the Promissory Note referred to by Marcos. Marcos could not deny the agreement for the payment of interest and penalties under the trust receipt agreements.

3.

4.

The trial court required PBCOM to produce the original copies of the loan application and Promissory Note so that it could determine who applied for this loan. However, PBCOM presented to the trial court only the "machine copies of the duplicate" of these documents. Based on the copies, the trial court noticed the following discrepancies: 1. 2. 3. 4. Marcos signature on the two documents are merely initials unlike in the other documents submitted by PBCOM; it is highly unnatural for PBCOM to only have duplicate copies of the two documents in its custody; the address of Marcos in the documents is different from the place of residence as stated by Marcos in the other documents annexed by PBCOM in its Answer; Pagsaligan made it appear that a check for the loan proceeds of P470,588 less bank charges was issued to Marcos but the checks payee was one ATTY. LEONILO MARCOS and, as the trial court noted, Marcos is not a lawyer; and Pagsaligan was not sure what branch of PBCOM issued the check for the loan proceeds. The trial court was convinced that Marcos did not execute the questionable documents covering the P500,000 loan

5.

and Pagsaligan used these documents as a means to justify his inability to explain and account for the time deposits of Marcos. The trial court noted PBCOMs "defective" documentation of its transaction with Marcos. First, PBCOM was not in possession of the original copies of the documents like the loan applications. Second, PBCOM did not have a ledger of the accounts of Marcos or of his various transactions with PBCOM. Last, PBCOM did not issue a certificate of time deposit to Marcos. Again, the trial court attributed PBCOMs lapses to Pagsaligans scheme to defraud Marcos of his time deposits. ISSUE: W/N PBCOM was able to prove Marcosoutstanding obligations secured by assignment of the time deposits HELD: No. RATIO: PBCOM failed to produce the best evidence the original copies of the loan application and promissory note. The Best Evidence Rule provides that the court shall not receive any evidence that is merely substitutionary in its nature, such as photocopies, as long as the original evidence can be had. Absent a clear showing that the original writing has been lost, destroyed or cannot be produced in court, the photocopy must be disregarded. PBCOM is liable to Marcos for offsetting his time deposits with a fictitious promissory note. The existence of the Promissory Note could have been easily proven had PBCOM presented the original copies of the promissory note and its supporting evidence. PBCOM presented the "machine copies of the duplicate" of the documents, and these substitute documents have no evidentiary value. PBCOMs failure to explain the absence of the original documents and to maintain a record of the offsetting of this loan with the time deposits bring to fore PBCOMs dismal failure to fulfill its fiduciary duty to Marcos. Section 2 of RA 8791 (General Banking Law of 2000) imposes this fiduciary duty on banks when it declares that the State recognizes the "fiduciary nature of banking that requires high standards of integrity and performance." Although RA No. 8791 took effect only in the year 2000 at the time that PBCOM transacted with Marcos, jurisprudence had already imposed on banks the same high standard of diligence required under RA No. 8791.This fiduciary relationship means that PBCOMs obligation to observe "high standards of integrity and performance" is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. The business of banking is imbued with public interest. The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. In Simex International (Manila) Inc. v. CAwe pointed out the depositors reasonable expectations from a bank and PBCOMs corresponding duty to its depositor, as follows: In every case, the depositor expects PBCOM to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. PBCOM must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that PBCOM will deliver it as and to whomever he directs. As PBCOMs depositor, Marcos had the right to expect that PBCOM was accurately recording his transactions with it. Upon the maturity of his time deposits, Marcos also had the right to withdraw the amount due him after PBCOM had correctly debited his outstanding obligations from his time deposits. It was Pagsaligan, PBCOMs branch manager and a close friend of Marcos, whom the trial court categorically blamed for the fictitious loan agreements. Whether it was PBCOMs negligence and inefficiency or Pagsaligans misdeed that deprived Marcos of the amount due him will not excuse PBCOM from its obligation to return to Marcos the correct amount of his time deposits with interest. The duty to observe "high standards of integrity and performance" imposes on PBCOM that obligation. We have held that a bank is liable for the wrongful acts of its officers done in the interest of PBCOM or in their dealings as bank representatives but not for acts outside the scope of their authority.