CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants,

vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila,
Branch VIII, and VICENTE G. ACABAN, respondents-appellees.
Sy Santos, Del Rosario and Associates for petitioners-appellants.
Tagalo, Gozar and Associates for respondents-appellees.
MAKALINTAL, J.:

The only issue in this petition for certiorari to review the orders dated March 4, 1972 and March 27,
1972, respectively, of the Court of First Instance of Manila in its Civil Case No. 75138, is whether or
not a banking institution may validly refuse to comply with a court process garnishing the bank
deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.
Facts:
Vicente Acaban won in a civil case for sum of money against B & B Forest Development
Corporation. To satisfy the judgment, the Acaban sought the garnishment of the bank deposit of the
B & B Forest Development Corporation with the China Banking Corporation (CBC). Accordingly, a
notice of garnishment was issued by the Deputy Sheriff of the trial court and served on said bank
through its cashier, Tan Kim Liong. Liong was ordered to inform the Court whether or not there is a
deposit in the CBC of B & B Forest Development Corporation, and if there is any deposit, to hold the
same intact and not allow any withdrawal until further order from the Court. CBC and Liong refuse
to comply with a court process garnishing the bank deposit of a judgment debtor by invoking the
provisions of Republic Act No. 1405 ( Secrecy of Bank Deposits Act) which allegedly prohibits the
disclosure of any information concerning to bank deposits.
Issue:
Whether or not a banking institution may validly refuse to comply with a court processes garnishing
the bank deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.
Held:
No. The lower court did not order an examination of or inquiry into 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 the 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 is sufficiently clear
that the prohibition against examination of or inquiry into bank deposit under RA 1405 does not
preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in
such a case, and the existence of the deposit is disclosed the disclosure is purely incidental to the
execution process. It is hard to conceive that it was ever within the intention of Congress to
enable debtors to evade payment of their just debts, even if ordered by the Court, through the
expedient of converting their assets into cash and depositing the same in a bank. (China Banking
Corporation vs Ortega, G.R. No. L-34964, 31 January 1973)

G.R. No. 71479

October 18, 1990

MELLON BANK, N.A vs. MAGSINO

FACTS:
Dolores Ventosa requested the transfer of $1,000 from the First National Bank of Moundsville, West
Virginia, U.S.A. to Victoria Javier in Manila through the Prudential Bank.
To effect the transfer, the First National Bank requested the petitioner, Mellon Bank, which
mistakenly indicated in its wire sent to Manufacturers Hanover Bank, a correspondent of Prudential
Bank the amount transferred as "US$1,000,000.00" instead of US$1,000.00.
Manufacturers Hanover Bank transferred one million dollars less bank charges of $6.30 to the
Prudential Bank for the account of Victoria Javier.
Javier opened a new dollar account (No. 343) in the Prudential Bank and deposited $999,943.70.
Immediately, Victoria Javier and her husband, Melchor Javier, Jr., made withdrawals from the
account, deposited them in several banks only to withdraw them later in an apparent plan to conceal,
"launder" and dissipate the erroneously sent amount.
Melchor Javier, requested Jose Marquez, a realtor, to look for properties for sale in the United States.
Marquez offered a 160-acre lot in the Mojave Desert in California City which was owned by Honorio
Poblador.
Without having seen the property, Javier agreed to buy said property. Deeds were issued and one of it
was sent to the Kern County Registrar in California for registration.
The payment of the purchased property was made through six cashier's checks withdrawn from
dollar account 434 while the balance of P236,000 was paid in cash by Javier who did not even ask for
a receipt.
Inasmuch as Poblador had requested that the purchase price should not be paid directly to him, the
payment was coursed through six companies in which he is financially related with.
Mellon Bank filed a complaint in the Superior Court of California, County of Kern, against Javier
spouses to impose constructive trust of the property theyve purchased from the money mistakenly
and erroneously transferred to their account.
Mellon Bank also filed in the Court of First Instance
of Rizal, Branch X, a complaint against the Javier spouses, Honorio Poblador, etc to recover the
amount they received for the sale of the 160-acre lot in California City.
In due course, it was found out that the checks originally issued by Javier spouses were already
negotiated and now were deposited to Account 2825-1 of the Philippine Veterans Bank in the name of
Cipriano Azada, Poblador's law partner and counsel to the Javiers.
Mellon Bank then subpoenaed Erlinda Baylosis of Veterans Bank to show that Azada deposited HSBC
checks No. 339736 and 339737 amounting to P874,490.75 in his personal current account with said
bank and Pilologo Red, Jr. of HSBC to prove that said amount was returned by Azada to Hagedorn
one of the companies connected with Poblador.

The testimonies of these witnesses were objected to by the defense on the grounds of res inter alios
acta, immateriality, irrelevancy and confidentiality and then moved to strike off the testimonies from
the record of the case in violation of Republic Act No. 1405 the Secrecy of Bank Deposits.
ISSUE:
Whether or not disclosure of bank deposits in cases where the money is the subject matter of
litigation violates RA 1405.
HELD:
Private respondents' protestations that to allow the questioned testimonies to remain on record would
be in violation of the provisions of Republic Act No. 1405 on the secrecy of bank deposits, is
unfounded.
Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. Inasmuch as Civil Case 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.
G.R. No. 135882
June 27, 2001
MARQUEZ VS. DESIERTO
FACTS:
Petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto to produce several
bank documents for purposes of inspection in camera relative to various accounts maintained at
Union Bank of the Philippines, Julia Vargas Branch, where she is 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.
The basis of the Ombudsman ordering an in camera inspection of the accounts is a trail managers
checks purchased by one George Trivinio, a respondent in OMB-097-0411, pending with the office of
the Ombudsman by virtue of its power to investigate and to require the production and inspection of
records and documents granted to it by RA No.6770.
The Ombudsman issued an order directing petitioner to produce the bank documents relative to
accounts in issue in line of her persistent refusal to comply with Ombudsman's order which they sais
as an unjustified, and is merely intended to delay the investigation of the case; constitutes
disobedience of or resistance to a lawful order issued by this office punishable as Indirect under R.A.
6770.
Petitioner together with Union Bank of the Philippines filed a petition for declaratory relief,
prohibition and injunctions8 with the Regional Trial Court, Makati City, against the Ombudsman.

The lower court denied petitioner's petition.

On August 21, 1998, petitioner received a copy of the motion to cite her for contempt, filed with the
Office of the Ombudsman by Agapito B. Rosales, Director, Fact Finding and Intelligence Bureau
(FFIB).
Petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the
ground that compliance with the Ombudsmans orders would be in violation of RA. No. 1405.
But petitioners motion for reconsideration was dismissed. Hence, the present petition.
ISSUE:
Whether or not an in camera inspection of the questioned account is allowed as an exception to the
law on secrecy of bank deposits (R.A. No.1405)
HELD:
The order of the Ombudsman to produce for in camera inspection the subject accounts with the
Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office
of the Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g)
relative to the Joint Venture Agreement between the Public Estates Authority and AMARI.
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 the case at bar, there is yet no pending litigation before any court of competent authority. Whats
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.
Zone of privacy are recognized and protected in our laws. 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.
IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman 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. No costs
Salvacion vs. Central Bank of the Philippines, China Banking Corporation
and Greg Bartelli y Northcott
G.R. No. 94723 August 21, 1997
Torres,Jr., J,:
Facts:

On February 4-7, 1989, Greg Bartelli y Northcott, an American tourist, detained and
repeatedly raped Karen Salvacion, a 12-year old the victim, in the apartment of the accused in
Makati City. That, on the 4th day of detention, Karen was finally found by the policemen after a
neighbor heard her crying and screaming for help. The accused was immediately arrested within the
premises of the building, and eventually brought to Makati Municipal Jail.
After thorough investigation and medical examination, the victim, as represented by her
parents, together with the Fiscal filed criminal cases against Greg Bartelli y Northcott for Serious
Illegal Detention and for Four (4) counts of Rape. The petitioners also filed a separate civil action for
damages with preliminary attachment against the accused that had several dollar accounts in
COCOBANK and China Banking Corporation. On February 24, 1989, the day there was a hearing for
Bartellis petition for bail the latter escaped from jail.
The deputy sheriff served Notice of Garnishment on China Banking Corporation but the latter
declined to furnish a copy as it invoked R.A. No. 1405. The sheriff again sent a letter stating that the
garnishment did not violate the bank secrecy law as it was legally made by virtue of a court order but
China Banking Corporation invoked Section 113 of Central Bank Circular No. 960, that dollar accounts
are exempt from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body, whatsoever. The Central Bank sent a reply after a
demand from the court asking if the Section 113 of Central Bank Circular No.960 is absolute in
nature of which it replied in affirmative.
After the accused was declared in default, the court rendered a judgment in favor of the
petitioners based on the heinous acts of the accused and the grave effects on social, moral and
psychological aspects on the part of the petitioners. China Banking Corporation refused the Writ of
Execution of the court. Thus;
Petitioners file a Petition for Relief in the Supreme Court.
Issues:
Whether the dollar accounts of the Accused is absolutely exempt from attachment,
garnishment or any other order or process of any court?
Held:
While it is true that the protective cloak of confidentiality over foreign deposit accounts would better
encourage the inflow of foreign currency deposits, lending capacity of the government and would help
financial stability and the national development, what would be the relief of someone claiming
damages against a person with foreign deposit accounts? More so against a person who heinously
and feloniously committed an offense in the territory of the Philippines? As in this case, the accused
deemed liable for the damages based of the heinous acts according to the testimonies of the victim
and the witnesses.
It is the duty of the government to encourage foreign currency deposits and to comply by giving
confidentiality but in the correct argument of the Solicitor General, foreign currency deposits of a
tourist or transient is not the one encouraged by PD Nos. 1034 and 1305 on the ground that said
accounts is temporary and only for a short period of time.
The application of the law depends on the extent of its justice. If we rule Section 113 of Central Bank
Circular No.960 which exempts from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body whatsoever, is applicable to
foreign transient , injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli.
Article 10 of the New Civil Code provides that in case of doubt in the interpretation or application of
laws, it is presumed that the lawmaking body intended right and justice to prevail. Simply stated,
when the statute is ambiguous, this is one of those fundamental solutions that would respond
to vehement urge of conscience.

It would be unthinkable that Section 113 of CB circular 960 would be used as a device by the
accused for wrongdoing, and in so doing, acquitting the guilty as the expense of the innocent. The
situation calls for fairness against legal tyranny.
We definitely cannot have both ways and rest in the belief that we have served the ends of justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No.960 and PD No.1246, insofar as
it amends Section 8 of RA 6426 are hereby held to be INAPPLICABLE to this case because of its
peculiar circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution
issued in Civil Case No. 89-3214 RTC Makati, and to RELEASE to petitioners the dollar deposit of
respondent Greg Bartelli y Nothcott in such amount as would satisfy the judgment.
SAMPAGUITA BUILDERS v PNB
Mini digest: Sampaguita loaned money from PNB. PNB unilaterally increased rates of interest in the
loan w/o informing Sampaguita. PNB claimed they were authorized to do it as there was a clause in
the agreement that they may do so. Besides, Usury law was no longer in force = SC said NO! PNB
cannot do so; it will violate mutuality of contracts under 1308. Besides, SC may intervene when
amount of interest is unconscionable.
Facts:
Sampaguita secured a loan from PNB in an aggregate amount of 8M pesos, mortgaging the properties
of Sampaguitas president and chairman of the board. Sampaguita also executed several promissory
notes due on different dates (payment dates). The first promissory note had 19.5% interest rate. The
2nd and 3rd had 21.5%. a uniform clause therein permitted PNB to increase the rate within the limits
allowed by law at any time depending on whatever policy it may adopt in the future x x x, without
even giving prior notice to petitioners. There was also a clause in the promissory note that stated that
if the same is not paid 2 years after release then it shall be converted to a medium term loan and
the interest rate for such loan would apply.
Later on, Sampaguita defaulted on its payments and failed to comply with obligations on promissory
notes. Sampaguita thus requested for a 90 day extension to pay the loan. Again they defaulted, so
they asked for loan restructuring. It partly paid the loan and promised to pay the balance later on.
AGAIN they failed to pay so PNB extrajudicially foreclosed the mortgaged properties. It was sold for
10M. PNB claimed that Sampaguita owed it 12M so they filed a case in court asking sampaguita to
pay for deficiency.
RTC found that Sampaguita was automatically entitled to the debt relief package of PNB and ruled
that the latter had no cause of action against the former. CA reversed, saying Sampaguita was not
entitled, thus ordered them to pay the deficiency Appeal = Went to SC. Sampaguita claims the loan
was bloated so they dont really owe PNB anymore, but it just overcharged them!
Issues/Ruling:
W/N the loan accounts are bloated: YES. There is no deficiency; there is actually an overpayment of
more than 3M based on the computation of the SC.
Whether PNB could unilaterally increase interest rates: NO
Ratio:
Sampaguitas accessory duty to pay interest did not give PNB unrestrained freedom to charge any rate
other than that which was agreed upon. No interest shall be due, unless expressly stipulated in
writing. It would be the zenith of farcicality to specify and agree upon rates that could be
subsequently upgraded at whim by only one party to the agreement.

The unilateral determination and imposition of increased rates is violative of the principle of
mutuality of contracts ordained in Article 1308 of the Civil Code. One-sided impositions do not have
the force of law between the parties, because such impositions are not based on the parties essential
equality.
Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money
on long-term contracts, giving respondent an unbridled right to adjust the interest independently and
upwardly would completely take away from petitioners the right to assent to an important
modification in their agreement and would also negate the element of mutuality in their contracts.
The clause cited earlier made the fulfillment of the contracts dependent exclusively upon the
uncontrolled will of respondent and was therefore void. Besides, the pro forma promissory notes
have the character of a contract dadhsion, where the parties do not bargain on equal footing, the
weaker partys [the debtors] participation being reduced to the alternative to take it or leave it.
Circular that lifted the ceiling of interest rates of usury law did not authorize either party to
unilaterally raise the interest rate without the others consent.
the interest ranging from 26 percent to 35 percent in the statements of account -- must be equitably
reduced for being iniquitous, unconscionable and exorbitant. Rates found to be iniquitous or
unconscionable are void, as if it there were no express contract thereon. Above all, it is undoubtedly
against public policy to charge excessively for the use of money.
It cannot be argued that assent to the increases can be implied either from the June 18, 1991
request of petitioners for loan restructuring or from their lack of response to the statements of
account sent by respondent. Such request does not indicate any agreement to an interest increase;
there can be no implied waiver of a right when there is no clear, unequivocal and decisive act showing
such purpose. Besides, the statements were not letters of information sent to secure their conformity;
and even if we were to presume these as an offer, there was no acceptance. No one receiving a
proposal to modify a loan contract, especially interest -- a vital component -- is obliged to answer the
proposal.
Besides, PNB did not comply with its own stipulation that should the loan not be paid 2 years after
release of money then it shall be converted to a medium term loan.
*Court applied 12% interest rate instead for being a forbearance of money
(there were some pieces of evidence presented by PNB in court that sampaguita objected to. Lower
courts overruled the objections but SC said the objections were correct and the evidence should not
have been admitted. i.e. contract wasnt signed by the parties, a part of the contract wasnt properly
annexed/no reference was made in the main contract.)
In addition to the preceding discussion, it is then useless to labor the point that the increase in rates
violates the impairment clause of the Constitution, because the sole purpose of this provision is to
safeguard the integrity of valid contractual agreements against unwarranted interference by the State
in the form of laws. Private individuals intrusions on interest rates is governed by statutory
enactments like the Civil Code
Atty. Felipe Arcilla Jr. was
avail of a loan under the
DBP v. Arcilla Jr.
employed by the DBP. After
Individual Housing Project
Facts:
he was assigned to the legal
(IHP) of the bank for the
department, he decided to
payment of the parcel of

land purchased by him and

for its construction. When
Arcilla resigned grom DBP,
the bank notified him that
his loan has been converted
to a regular housing loan.
Arcilla agreed to the
reservation by the DBP of its
right to increase the rate of
interest on the loan, as well
as all other fees and charges
on loans and advances
pursuant to such policy as it
may adopt from time to time
during the period of the
loan.
Issue:
Whether or not DBP violated
RA 3765 otherwise known
as The Truth in Lending
Act.
Ruling:
Section 1 of R.A. No. 3765
provides that prior to the
consummation of a loan
transaction, the bank, as
creditor, is obliged to furnish
a client with a clear

statement, in writing, setting

forth, to the extent
applicable and in
accordance with the rules
and regulations prescribed
by the Monetary Board of
the Central Bank of the
Philippines, the following
information:

People v. Nitafan
G.R.
No. 75954 October 22,
1992
Facts:
On January 20,
1985, aid accused
did then and there
wilfully, unlawfully
and feloniously make
or draw and issue to
Fatima Cortez Sasaki
Philippine Trust
Company Check No.
117383 in the
amount of
P143,000.00
He knew that at the
time of issue he did
not have sufficient

funds in or credit
with the drawee
bank.
The check was
subsequently
dishonored by the
drawee bank for
insufficiency of
funds, and despite
receipt of notice of
such dishonor, said
accused failed to pay
Sasaki the amount of
said check or to
make arrangement
for full payment of
the same within five
banking days after
receiving said notice.

1.
the cash price or
delivered price of the
property or service to be
acquired;
2.
the amounts, if any,
to be credited as down
payment and/or trade-in;
3.
the difference
between the amounts set
forth under clauses (1) and
(2);
4.
the charges,
individually itemized, which
are paid or to be paid by
such person in connection
with the transaction but
which are not incident to the
extension of credit;

5.
the total amount to
be financed;
6.
the finance charges
expressed in terms of pesos
and centavos; and
7.
the percentage that
the finance charge bears to
the total amount to be
financed expressed as a
simple annual rate on the
outstanding unpaid balance
of the obligation.
If the borrower is not duly
informed of the data
required by the law prior to
the consummation of the
availment or drawdown, the
lender will have no right to
collect such charge or
increases thereof, even if
stipulated in the promissory
note. However, such failure
shall not affect the validity
or enforceability of any
contract or transaction.

Private respondent,
Mariano Lim moved
to quash the
Information of the
ground that the facts
charged did not
constitute a felony as
B.P. 22 was
unconstitutional and
that the check he
issued was a
memorandum check
which was in the
nature of a
promissory note in
thus, is civil in
nature.
On 1 September
1986, respondent
judge, ruling that

B.P. 22 on which the

Information was
based was
unconstitutional,
issued the
questioned Order
quashing the
Information. Hence,
this petition for
review on certiorari
filed by the Solicitor
General in behalf of
the government.
Issues:
W/N B.P. 22 is
unconstitutional
W/N a memorandum
check issued
postdated in partial
payment of a preexisting obligation is
within the coverage
of B.P. 22.
Ratio:
The constitutionality
of the Bouncing
Check Law has
already been
sustained by the SC
through
jurisprudence in
Lozano v. Martinez,
and the seven other
cases decided jointly
with it.
A memorandum
check is in the form
of an ordinary check,
with the word
"memorandum",

"memo" or "mem"
written across its
face, signifying that
the maker or drawer
engages to pay the
bona fide holder
absolutely, without
any condition
concerning its
presentment.
Such a check is an
evidence of debt
against the drawer,
and although may
not be intended to be
presented has the
same effect as an
ordinary check and if
passed to the third
person will be valid
in his hands like any
other check.
A memorandum
check comes within
the meaning of Sec.
185 of the Negotiable
Instruments Law
which defines a
check as "a bill of
exchange drawn on a
bank payable on
demand."
A memorandum
check must therefore
fall within the ambit
of B.P. 22 which does
not distinguish but
merely provides that
"any person who
makes or draws and
issues any check

knowing at the time

of issue that he does
not have sufficient
funds in or credit
with the drawee bank
which check is
subsequently
dishonored shall be
punished by
imprisonment"
A memorandum
check, upon
presentment, is
generally accepted by
the bank. Hence it
does not matter
whether the check
issued is in the
nature of a
memorandum as
evidence of
indebtedness or
whether it was
issued is partial
fulfillment of a preexisting obligation,
for what the law
punishes is the
issuance itself of a
bouncing check 15
and not the purpose
for which it was
issuance.
The mere act of
issuing a worthless
check, whether as a
deposit, as a
guarantee, or even as
an evidence of a preexisting debt, is
malum prohibitum.