1 CASE DIGEST (Commercial Law): PNB vs. Gancayco G.R. No.

L-18343 September 30, 1965 FACTS: Defendants Emilio Gancayco and Florentino Flor, as special prosecutors of the Department of Justice, required the plaintiff Philippine National Bank to produce at a hearing the records of the bank deposits of Ernesto Jimenez, former administrator of the Agricultural Credit and Cooperative Administration, who was then under investigation for unexplained wealth. In declining to reveal its records, the plaintiff bank invoked Section 2 of Republic Act No. 1405. On the other hand, the defendants cited Section 8 of the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) in support of their claim of authority,which allegedly provides an additional ground for the examination of bank deposits. ISSUE: Whether Section 8 of Republic Act No. 3019 provides an additional ground for the examination of bank deposits. HELD: Yes. The truth is that these laws are so repugnant to each other than no reconciliation is possible. x x x. The only conclusion possible is that section 8 of the Anti-Graft Law is intended to amend section 2 of Republic Act No. 1405 by providing additional exception to the rule against the disclosure of bank deposits. x x x [W]hile section 2 of Republic Act 1405 declares bank deposits to be "absolutely confidential," it nevertheless allows such disclosure in the following instances: (1) Upon written permission of the depositor; (2) In cases of impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; (4) In cases where the money deposited is the subject matter of the litigation. Cases of unexplained wealth are similar to cases of bribery or dereliction of duty CASE DIGEST (Commercial Law) Banco Filipino vs. Purisima G.R. No. L-56429 May 28, 1988 FACTS: Customs special agent Manuel Caturla is accused by the Bureau of Internal Revenue of having violated R.A. No. 3019 of the "Anti-Graft and Corrupt Practices Act" for having allegedly acquired property manifestly out of proportion to his salary and other lawful income. In the course of the preliminary investigation thereof, the Tanodbayan issued a subpoena duces tecum to the Banco Filipino Savings & Mortgage Bank, commanding its representative to appear at a specified time at the Office of the Tanodbayan and furnish the latter with duly certified copies of the records in all its branches and extension offices, of the loans, savings and time deposits and other banking transactions, dating back to 1969, appearing in the names of Caturla, his wife, Purita Caturla, their children Manuel, Jr., Marilyn and Michael and/or Pedro Escuyos. Caturla moved to quash the subpoena duces tecum but was denied by Tanodbayan Vicente Ericta.Petitioner Banco Filipino filed a complaint for declaratory relief with the Court of First Instance of Manila but was denied for lack of merit by respondent Judge Purisima. ISSUE: Whether or not the RA 1405 "Law on Secrecy of Bank Deposits" precludes production by subpoena duces tecum of bank records of transactions by or in the names of the wife, children and friends of a special agent of the Bureau of Customs, accused before the Tanodbayan of having allegedly acquired property manifestly out of proportion to his salary and other lawful income, in violation of the "Anti-Graft and Corrupt Practices Act".

HELD: No. The inquiry into illegally acquired property or property NOT "legitimately acquired" extends to cases where such property is concealed by being held by or recorded in the name of other persons. This proposition is made clear by R.A. No. 3019 which quite categorically states that the term, "legitimately acquired property of a public officer or employee shall not include .. property unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the name of, or held by, respondent's spouse, ascendants, descendants, relatives or any other persons." To sustain the petitioner's theory, and restrict the inquiry only to property held by or in the name of the government official or employee, or his spouse and unmarried children is unwarranted in the light of the provisions of the statutes in question, and would make available to persons in government who illegally acquire property an easy and fool-proof means of evading investigation and prosecution; all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to the lawmakers. Case Digest on Mellon Bank v. Magsino et. al. GR No. 71479, 18 October 1990 Facts: Dolores Ventosa, on May 27, 1977, requested the First National Bank in U.S.A. to transfer $1,000.00 to Vidtoria Javier through Prudential Bank. First National Bank requested Mellon Bank to effect the transfer, it wired to Manufacture Hanover Bank a correspondence of Prudential Bank. However, Mellon Bank erroneously indicated there $ 1,000,000.00 as the amount to be transferred instead of $1,000.00 only. Prudential Bank chief accountant, Roberto Grio immediately informed Javier spouses of such transfer though he knew of such mistake in the transfer of the amount. The spouses without wasting their time opened a new dollar account No. 343 in Prudential Bank. They withdrew the money and converted each with a payee of different companies, these were delivered to Jose Marquez and Honorio Poblador, Jr. Melchor Javier, Jr. requested Marues to look for a real property for sale in U.S.A. as an agent of Poblador, Jr., Marquez - acre, in Mojave Desert, California City, or P 3, 268,800 ( $437,405), without having seen the said property he agreed to buy the same. Deeds were issued in favor of Javier the other one of which was sent to Kern County Registrar in California for Registration. For the payment of which, Poblador, Jr. requested it shall not be directed to him, instead to the companies, thus the checks were delivered to companies each with different instructions from Poblador, Jr.Mellon filed a complaint in California, against the Javier spouses to imposed constructive trust of the property from the money erroneously transferred to their account. They, the spouses and each of them must be held as an involuntary or constructive trustee of the property. Mellon also filed a complaint before the Court of first Instance of Rizal, Branch X, to recover the proceeds of the California property. In order to trace the whereabouts the portion of the funds , witnesses Boylasis and Red made to testify that in PVB there was a transaction made by Azada which involved checks No. 339736 and339737 for the total amount of P874, 490,75 and this was to transferred to Hagedorn one of the companies which is in connection with Poblador, Jr. The defendants averred that such testimonies must be stricken from the record because this was against R.A. No. 1405 the secrecy of bank deposit. Issue: Whether or not an account deposit which is relevant and material to the resolution of the case may be covered under R.A. No. 1405. Held: No, sec. 2 of R.A. No. 1405 states that it allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as in this case, it aimed the recovery of the amount converted by Javier for their own benefit, necessarily, an inquiry to the whereabouts of the illegally acquired amount extend to whatever is concealed by being held or recorded in the name of the persons other than the one responsible for the illegal acquisition.

3 PCIB v. CA Facts: This case is composed of three consolidated petitions involving several checks, payable to the Bureau of Internal Revenue, but was embezzled allegedly by an organized syndicate. I. G. R. Nos. 121413 and 121479 On October 19, 1977, plaintiff Ford issued a Citibank check amounting to P4,746,114.41 in favor of the Commissioner of Internal Revenue for the payment of manufacturers taxes. The check was deposited with defendant IBAA (now PCIB), subsequently cleared the the Central Bank, and paid by Citibank to IBAA. The proceeds never reached BIR, so plaintiff was compelled to make a second payment. Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An investigation revealed that the check was recalled by Godofredo Rivera, the general ledger accountant of Ford, and was replaced by a managers check. Alleged members of a syndicate deposited the two managers checks with Pacific Banking Corporation. Ford filed a third party complaint against Rivera and PBC. The case against PBC was dismissed. The case against Rivera was likewise dismissed because summons could not be served. The trial court held Citibank and PCIB jointly and severally liable to Ford, but the Court of Appeals only held PCIB liable. II. G. R. No. 128604 Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payees account only. The checks never reached BIR, so plaintiff was compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank. On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made the checks but instead of delivering them to BIR, passed it to Castro, who was the manager of PCIB San Andres. Castro opened a checking account in the name of a fictitious person Reynaldo Reyes. Castro deposited a worthless Bank of America check with the same amount as that issued by Ford. While being routed to the Central Bank for clearing, the worthless check was replaced by the genuine one from Ford. The trial court absolved PCIB and held Citibank liable, which decision was affirmed in toto by the Court of Appeals. Issues: (1) Whether there is contributory negligence on the part of Ford (2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? Held: (2) The general rule is that if the master is injured by the negligence of a third person and by the concuring contributory negligence of his own servant or agent, the latter's negligence is imputed to his superior and will defeat the superior's action against the third person, asuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made. As defined, proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient, intervening cause produces the injury and without the result would not have occurred. It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the

4 parties. The mere fact that the forgery was committed by a drawer-payor's confidential employee or agent, who by virtue of his position had unusual facilities for perpertrating the fraud and imposing the forged paper upon the bank, does notentitle the bank toshift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession. (2) We have to scrutinize, separately, PCIBank's share of negligence when the syndicate achieved its ultimate agenda of stealing the proceeds of these checks. a. G. R. Nos. 121413 and 121479 On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances. Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent. It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an argreement to the contrary, that of principal and agent. A bank which receives such paper for collection is the agent of the payee or holder. Indeed, the crossing of the check with the phrase "Payee's Account Only," is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement guaranteed". Lastly, banking business requires that the one who first cashes and negotiates the check must take some precautions to learn whether or not it is genuine. And if the one cashing the check through indifference or other circumstance assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the check from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the person negotiating the instrument before paying the check. For this reason, a bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the drawee bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee bank. The latter may recover from the holder the money paid on the check. b. G. R. No. 128604 In this case, there was no evidence presented confirming the conscious participation of PCIBank in the embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. In this case, we find a situation where the PCIBank appears also to be the victim of the scheme hatched by a syndicate in which its own management employees had participated. But in this case, responsibility for negligence does not lie on PCIBank's shoulders alone.

5 Citibank failed to notice and verify the absence of the clearing stamps. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee. The 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. Thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 AND 16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR. SALVACION VS. CENTRAL BANK Leave a comment KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y NORTHCOTT G.R. No. 94723 August 21, 1997 FACTS: Greg Bartelli, an American tourist, was arrested for committing four counts of rape and serious illegal detention against Karen Salvacion. Police recovered from him several dollar checks and a dollar account in the China Banking Corp. He was, however, able to escape from prison. In a civil case filed against him, the trial court awarded Salvacion moral, exemplary and attorneys fees amounting to almost P1,000,000.00. Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China Banking Corp. but the latter refused arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Salvacion therefore filed this action for declaratory relief in the Supreme Court. ISSUE: Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426, as amended by PD 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient? HELD: NO. The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of Republic Act No. 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 the civil case and to release to petitioners the dollar deposit of Bartelli in such amount as would satisfy the judgment. Supreme Court ruled that the questioned law makes futile the favorable judgment and award of damages that Salvacion and her parents fully deserve. It then proceeded to show that the economic basis for the enactment of RA No. 6426 is not anymore present; and even if it still exists, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the law may be good when enacted. The law failed to anticipate the iniquitous effects producing outright injustice and inequality such as the case before us. The SC adopted the comment of the Solicitor General who argued that the Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits from foreign lenders and investors and, subsequently, to give the latter protection. However, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time. Considering that Bartelli is just a tourist or a transient, he is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes. Further, the SC said: In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any

6 other order or process of any court, legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which 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.

G.R. No. 135882June 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-0970411, 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 injunctions 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 accountholder 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

7 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 cost