Cases%on%Chattel%Mortgage:%

Section%2%
Cebu%International%Finance%Corp.%v.%CA,%Robert%Ong%and%Ang%Tay%
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Facts:%
Ang!Tay!was!an!agent!of!Jacinto!Dy,!authorizing!the!former!to!sell!the!CARGO%
VESSEL!owned!by!the!latter.!
Ang%Tay%sold%the%vessel%to%private%respondent%ONG.%Ong!paid!the!purchase!
price!by!issuing!three!checks.!Since!the!payment!was!not!made!in!cash,!it!was!
specifically!stipulated!in!the!deed!of!sale!that!the!vessel!shall!not!be!registered!or!
transferred!to!Robert!Ong!until!complete!payment.!
Thereafter,!Ong!obtained!possession!of!the!vessesl.!He!likewise!obtained!copies!
of!unnotarized!deed!of!sale!without!the!condition.!
Ong!had!his!copies!notarized,!presented!to!the!PCG!which!issued!him!a! PCG: Philippine Coast Guard
Certificate!of!Ownership!and!a!Certificate!of!Philippine!Registry,!
Ong%acquired%a%loan%from%petitioner!evidenced!by!a!promissory!note,!and!as!
security!for!the!loan,!Ong!executed!a!chattel%mortgage%over%the%vessel.!
Ong!defaulted.!
Ang!Tay!and!Dy!filed!a!case!for!rescission!and!replevin.!Trial!court!rendered!
decision!in!favor!of!them.!
Petitioner!filed!a!separate!case!for!replevin!and!damages!against!Ong!and!Ang.!
Trial%court%declared%the%chattel%mortgage%null%&%void.%
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Issue:%
1. Whether!the!transaction!between!petitioner!and!Robert!Ong!was!a!simple!loan!
with!chattel!mortgage.!
2. Whether!the!chattel!mortgage!is!null!&!void.!
3. Whether!petitioner!is!a!mortgagee!in!good!faith!

!
Held:%
1. The!true!nature!of!the!transaction!between!petitioner!and!Ong!is!a!simple!
loan!with!chattel!mortgage.!Paragraph!3!of!the!contract!was!filled!up!by!
mistake.!!

2. Accordingly,!the!chattel!mortgage!contract!is!valid!and!subsisting.!
3. A!mortgagee!has!a!right!to!rely!in!good!faith!on!the!certificate!of!title!of!
the!mortgagor!to!the!property!given!as!security!and!in!the!absence!of!any!
sign!that!might!arouse!suspicion,!has!no!obligation!to!undertake!further!
investigation.!Although!the!rule!generally!pertains!to!real!property,!it!may!
also!be!applied!by!analogy!to!personal!property.!

*!The!special!affidavit!of!good!faith!is!required!only!for!the!purpose!of!
transforming!an!already!valid!mortgage!into!a!“preferred!mortgage”.!
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Union%Motor%Corporation%v.%CA,%Jardine%–Manila%Finance,%Spouses%Bernal%
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Facts:%
Respondent!Bernal!spouses!purchased!from!petitioner!Union!Motor!one!
Cimarron!Jeepney!to!be!paid!in!installments.!
Spouses!executed!promissory!note!and!a!deed!of!chattel!mortgage!in!favor!of!
petitioner.!
Petitioner!entered!into!a!contract!of!assignment!of!promissory!note!and!chattel!
mortgage!with!Jardine.!
To!effectuate!the!sale,!respondent!spouses!were!required!to!sign!different!
documents.!Although!respondent!spouses!have!not!yet!physically!possessed!the!
vehicle,!Sosmena!required!them!to!sign!the!receipt!as!a!condition!for!the!delivery!
of!the!vehicle.!
Respondent!spouses!paid!without!having!the!possession!of!the!vehicle!until!they!
discontinued!paying!on!account!of!nonSdelivery.!
Jardine!filed!a!complaint!for!a!sum!of!!money!against!respondent!spouses,!
petitioner!Union!was!included!as!alternative!defendant.!
!
Issues:%
1. Whether!there!was!delivery!of!the!vehicle,!physical!or!constructive?!
2. Whether!there!was!a!valid!chattel!mortgage?!

!
Held:%
!
1.!There!was!neither!physical!nor!constructive!delivery.!The!vehicle!was!not!
under!the!control!and!enjoyment!of!the!respondent!spouses.!
Documents!signed!by!them!were!requirements!in!order!that!their!purchased!be!
approved.!
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2.!Consequently!the!said!accessory!contract!of!chattel!mortgage!has!no!legal!
effect!whatsoever!inasmuch!as!the!respondent!spouses!are!not!the!absolute!
owners!thereof,!ownership%of%the%mortgagor%being%an%essential%requirement%
of%a%valid%mortgage%contract.%
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Davao%Saw%Mill%v.%Castillo%
No.%40411,%August%7,%1935%
Malcolm!J.:!
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Facts:%%
Davao!Saw!Mill!Co.!is!the!holder!of!a!lumber!concession!in!Davao.!It!constructed!
a!building,!where!the!operation!of!the!mill!is!conducted,!in!land!it!leased.!The!
lease!contract!contains!a!stipulation!that!“at!the!end!of!the!contract!the!building!
and!all!the!improvements!introduced!by!the!Davao!Saw!shall!be!passed!on!to!the!
owner!of!the!land…!however!machineries!and!accessories!are!not!included!in!the!
improvements!which!will!pass!to!the!owner!of!the!land!upon!the!expiration!of!
the!lease”.!!
However,!during!the!effectivity!of!the!lease!agreement,!a!judgment!was!rendered!
in!favor!of!Davao!Light!and!Power!Co.!against!Davao!Saw!wherein!the!court!
ordered!the!properties(machineries!introduced!by!Davao!saw!mill)!in!question!
to!be!levied.!The!sale!was!consummated!and!Davao!light!being!the!highest!
bidder.!It!must!be!noted!that!no!third!party!complaint!was!filed!nor!was!there!an!
opposition!in!the!sale.!
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!
Issue:%
!Whether!or!not!the!properties!levied!are!considered!Real!or!Personal!
properties.!
!
!
Held%:%
They!are!personal!properties.!The!supreme!court!said!that!machinery!not!
intended!by!the!owner!of!any!building!or!land!for!use!in!connection!therewith,!
but!intended!by!a!lessee!for!use!in!a!building!erected!on!the!land!by!the!lessee!
are!considered!personal!property.!Machineries!which!is!movable!in!its!nature!
only!becomes!immovable!when!placed!in!a!plant!by!the!owner!of!the!property!or!
plant,!but!not!when!so!placed!by!the!tenant!unless!such!person!acted!as!the!agent!
of!the!owner!
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Strochecker%vs.%Ramirez%
G.R.%No.%18700%,%September%26,%1922%
Romualdez!J.:!
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Facts:%
The!appealed!case!raises!the!question,!which!of!the!two!mortgagors,!Fidelity!&!
Surety!co!or!Ildefonso!Ramirez!should!be!given!preference.Ramirez!contends!
that!he!must!be!given!preference!because!the!first!mortgage!to!Fidelity!&!Surety!
co!was!not!valid!because!the!subject!matter!(one!half!interest!in!the!bussiness)!
thereof!is!not!capable!of!being!mortgage,!and!the!description!of!the!property!is!
not!sufficient.!!
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Issue:%%
whether!or!not!“one!half!interest!in!the!business”!is!a!personal!property!capable!
of!being!subjected!to!chattel!mortgage.!
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!
Held:%%
Yes.!The!SC!said!“With!regard!to!the!nature!of!the!property!thus!mortgaged,!
which!is!oneShalf!interest!in!the!business!above!described,!such!interest!is!a!
personal!property!capable!of!appropriation!and!not!included!in!the!enumeration!
of!real!properties!in!article!335!of!the!Civil!Code,!and!may!be!the!subject!of!
mortgage.!All!personal!property!may!be!mortgaged.”!
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MAKATI%LEASING%AND%FINANCE%CORP.%vs.%WEAREVER%TEXTILE%MILLS%INC.%
G.R.%No.%L`58469,%May%16,%1983%
%
Facts:%
Wearever!textile!Mills!obtained!financial!accomodations!from!Makati!Leasing!
and!Finance!Corporation.!To!secure!it,!it!executed!a!chattel!mortgage!over!a!
machinery.!Since!Wearever!defaulted,!Makati!Leasing!filed!for!foreclosure!of!the!
machineries.!The!lower!court!ruled!in!favor!of!Makati!Leasing.!The!sheriff!then!
went!to!the!Wearever,!however,!since!the!machinery!was!bolted!on!the!floor,!he!
was!only!able!to!remove!the!main!drive!of!the!motor!of!machinery.!On!appeal,!
Court!of!Appeals!reversed!the!ruling!of!the!trial!court!and!ordered!the!return!of!
the!main!drive!of!the!motor!machinery!on!the!ground!that!such!property,!being!
attached!to!the!ground!is!a!real!property!and!not!subject!a!chattel!mortgage.!
Hence,!this!appeal.!
!
Issue:%%
Whether!the!machinery!is!a!real!or!personal!property.!
!
Held:%%
It!is!a!personal!property.!
!
Examining!the!records!of!the!instant!case,!We!find!no!logical!justification!to!
exclude!the!rule!out,!as!the!appellate!court!did,!the!present!case!from!the!
application!of!the!abovequoted!pronouncement.!If!a!house!of!strong!materials,!
like!what!was!involved!in!the!above!Tumalad!case,!may!be!considered!as!
personal!property!for!purposes!of!executing!a!chattel!mortgage!thereon!as!long!
as!the!parties!to!the!contract!so!agree!and!no!innocent!third!party!will!be!
prejudiced!thereby,!there!is!absolutely!no!reason!why!a!machinery,!which!is!
movable!in!its!nature!and!becomes!immobilized!only!by!destination!or!purpose,!
may!not!be!likewise!treated!as!such.!This!is!really!because!one!who!has!so!agreed!
is!estopped!from!denying!the!existence!of!the!chattel!mortgage.!
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TSAI%vs.%COURT%OF%APPEALS%%
G.R.%No.%120098,%October%2,%2001%
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Facts:%
Ever!Textile!Mills!(Evertexotained!a!loan!on!the!year!1979!from!Philippine!Bank!
of!Communication!(PBCom).!To!secure!the!loan,!Evertex!executed!real!and!
chattel!mortgages!in!favor!of!PBCom.!A!second!loan!was!also!obtained!by!
Evertrex!which!was!also!covered!by!a!chattel!mortgage!executed!in!the!first!loan.!
Thereafter,!Evertex!purchased!machineries.!Evertex!was!declared!insolvent!and!
defaulted!in!payment,!PBCom!then!foreclosed!its!properties!including!the!
machineries!that!were!purchased!by!PBCom!after!the!execution!of!the!said!
mortgages.!The!properties!were!sold!to!Tsai.!However,!Evertex!filed!a!complaint!
for!annulment!of!sale!and!reconveyance!for!the!reason!that!the!machineries!sold!
to!Tsai!were!not!those!enumerated!in!the!mortgages.!Both!the!trial!court!and!
Court!of!Appeals!ruled!in!favor!of!Evertex.!Hence,!this!appeal.!
!
Issue:%
Whether!the!inclusion!of!the!machineries!in!the!foreclosed!properties!proper.!
!
!
Held:%
No.!Petitioners!contend!that!the!nature!of!the!disputed!machineries,!i.e.,!that!they!
were!heavy,!bolted!or!cemented!on!the!real!property!mortgaged!by!EVERTEX!to!
PBCom,!make!them!ipso'facto!immovable!under!Article!415!(3)!and!(5)!of!the!
New!Civil!Code.!This!assertion,!however,!does!not!settle!the!issue.!Mere!nuts!and!
bolts!do!not!foreclose!the!controversy.!We!have!to!look!at!the!parties'!intent.!
While!it!is!true!that!the!controverted!properties!appear!to!be!immobile,!a!perusal!
of!the!contract!of!Real!and!Chattel!Mortgage!executed!by!the!parties!herein!gives!
us!a!contrary!indication.!In!the!case!at!bar,!both!the!trial!and!the!appellate!courts!
reached!the!same!finding!that!the!true!intention!of!PBCOM!and!the!owner,!
EVERTEX,!is!to!treat!machinery!and!equipment!as!chattels.!
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Evangelista%vs.%%Alto%Surety%&%Ins.%Co.,%Inc.%
GR%L`11139% April%23,%1958%
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FACTS:!!
Santos!Evangelista!instituted!a!civil!case!against!Ricardo!Rivera!for!a!sum!of!
money.!Evangelista!was!able!to!obtain!a!writ!of!attachment,!which!was!levied!
upon!a!house,!built!by!Rivera!on!a!land!leased!to!him.!
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Evangelista!bought!the!house!at!public!auction!and!a!deed!of!sale!was!issued!to!
him!on!Oct.!22,!1952.!When!he!sought!the!possession!of!the!house,!Rivera!
refused!to!surrender!it,!on!the!ground!that!he!had!leased!the!property!from!Alto!
Insurance!and!the!latter!is!now!the!true!owner!of!said!property.!
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Evangelista!instituted!an!action!against!Rivera!and!Alto!Insurance!for!the!
purpose!of!establishing!his!title!over!said!house.!
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Alto!allege!that!it!has!a!better!right!to!the!house,!because!the!sale!made!and!the!
definite!deed!of!sale!executed!in!its!favor!on!Sept.!29,!1950!and!May!10,!1952,!
precede!the!sale!to!Evangelista!on!Oct.!8,!1951!and!the!definite!deed!of!sale!in!his!
favor!on!Oct.!22,!1952.!
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CFI!rendered!judgment!in!favor!of!Evangelista.!On!appeal,!decision!was!reversed!
by!the!CA!on!the!ground!that!the!said!property!is!“ostensibly!a!personal!
property”!and!copies!of!the!writ!of!attachment!and!notice!of!attachment!are!not!
served!upon!Rivera!in!a!proper!manner.!
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ISSUE:!!
Whether!a!house,!constructed!by!the!lessee!of!the!land!on!which!it!is!built,!
should!be!dealt!with,!for!purposes!of!attachment,!as!immovable!property!or!as!
personal!property?!
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HELD:!!
It!is!a!real!property.!
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A!true!building!(not!merely!superimposed!on!the!soil)!is!immovable!or!real!
property,!whether!it!is!erected!by!the!owner!of!the!land!or!by!a!usufructuary!or!
lessee.!Parties!may!agree!in!a!deed!of!chattel!mortgage!to!consider!a!house!as!a!
personal!property!for!purposes!of!said!contract.!However,!this!view!is!good!only!
insofar!as!the!contracting!parties!are!concerned.!
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Sales!on!execution!affect!the!public!and!third!persons.!The!regulation!governing!
sales!on!execution!are!for!public!officials!to!follow.!The!mere!fact!that!a!house!
was!subject!of!a!chattel!mortgage!and!was!considered!as!personal!property!by!
the!parties!does!not!make!said!house!personal!property!for!purposes!of!the!
notice!to!be!given!for!its!sale!at!public!auction.!
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Manarang%and%Manarang%vs.%Ofilada%and%Esteban%
GR%L`8133,%May%18,%1956%
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FACTS:!!
Lucia!Manarang!obtained!a!loan!of!P200!from!Ernesto!Esteban,!and!to!secure!its!
payment!she!executed!a!chattel!mortgage!over!a!house!of!mixed!materials.!When!
Manarang! failed! to! pay! the! loan,! Esteban! brought! an! action! for! recovery.!
Judgment!was!rendered!in!favor!of!Esteban!and!execution!was!issued!against!the!
property!mortgaged.!
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Before!the!property!could!be!sold,!Manarang!offered!to!pay!P277!to!the!sheriff!
but! the! latter! refused! unless! additional! amount! of! P260! representing! the!
publication!of!the!notice!of!sale!be!paid!also.!!
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Manarang!brought!this!suit!to!compel!the!sheriff!to!accept!the!amount!of!P277.!
She!contended!that!the!house!should!be!considered!as!a!personal!property!and!
the!publication!of!the!notice!of!its!sale!at!public!auction!in!execution!considered!
unnecessary.!The!CFI!dismissed!her!petition.!
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ISSUE:!!
Does! the! fact! that! the! parties! entering! into! a! contract! regarding! a! house! which!
gave!said!property!the!consideration!of!a!personal!property,!bind!the!sheriff!in!
advertising!the!property’s!sale!at!public!auction!as!personal!property?!
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HELD:!!
NO.!
Sales!on!execution!affect!the!public!and!third!persons.!The!regulation!governing!
sales! on! execution! are! for! public! officials! to! follow.! The! form! of! proceedings!
prescribed! for! each! kind! of! property! is! suited! to! its! character,! not! to! the!
character!which!the!parties!have!given!to!it!or!desire!to!give!it.!
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Personal!properties!are!those!which!is!ordinarily!so!considered!is!meant.!
Real!property!means!property!which!is!generally!known!as!real!property.!
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The!mere!fact!that!a!house!was!subject!of!a!chattel!mortgage!and!was!considered!
as!personal!property!by!the!parties!does!not!make!said!house!personal!property!
for!purposes!of!the!notice!to!be!given!for!its!sale!at!public!auction.!
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Development%Bank%of%the%Philippines%vs.%Prudential%Bank%
G.R.%No.%143772,%November%22,%2005%
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Facts:%
Litex!opened!a!letter!credit!from!Prudential!Bank!for!some!machineries.!Later,!
Litex!obtained!a!loan!form!DBP,!securing!it!with!machineries!including!those!
covered!by!the!trust!receipt.!Litex!defaulted!but!for!the!mean!time,!Prudential!
told!DBP!that!it!was!the!owner!of!some!machineries.!However,!DBP!foreclosed!
the!properties!and!sold!it!to!Lyon!Textile!Mills.!Prudential!filed!a!case!against!
DBP.!Both!the!trial!court!and!Court!of!Appeals!ruled!in!favor!of!!Prudential.!
Hence,!this!appeal.!!
!
Issue:%
Whether!the!foreclosure!and!sale!of!the!properties!valid.!!
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Held:%
No.!!
Article!2085!(2)!of!the!Civil!Code!requires!that,!in!a!contract!of!pledge!or!
mortgage,!it!is!essential!that!the!pledgor!or!mortgagor!should!be!the!absolute!
owner!of!the!thing!pledged!or!mortgaged.!Article!2085!(3)!further!mandates!that!
the!person!constituting!the!pledge!or!mortgage!must!have!the!free!disposal!of!his!
property,!and!in!the!absence!thereof,!that!he!be!legally!authorized!for!the!
purpose.!
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!Litex!had!neither!absolute!ownership,!free!disposal!nor!the!authority!to!freely!
dispose!of!the!articles.!Litex!could!not!have!subjected!them!to!a!chattel!mortgage.!
Their!inclusion!in!the!mortgage!was!void!and!had!no!legal!effect.!There!being!no!
valid!mortgage,!there!could!also!be!no!valid!foreclosure!or!valid!auction!sale.!
Thus,!DBP!could!not!be!considered!either!as!a!mortgagee!or!as!a!purchaser!in!
good!faith.!
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 Section%2:%Unregistered%Chattel%Mortgage%is%Valid%

Filipinas%Marble%Corporation%vs%IAC,%

%G.R.%No.%L`68010,%May%30,%1986%

Facts:%%
Filipinas!Marble!Corporation!alleged!that!it!applied!for!a!loan!(chattel!mortgage)!
with!Development!Bank!of!the!Philippines!(DBP)!in!its!desire!to!develop!the!fun!
potentials!of!its!mining!claims!and!deposits.!It!was!granted!but!subject!to!several!
onerous!conditions!and!that!petitioner!should!enter!into!a!management!contract!
with!Bancom!for!a!period!of!three!years;!that!under!the!management!agreement,!
the!affairs!of!the!petitioner!were!placed!under!the!complete!control!of!DBP!and!
Bancom! including! the! disposition! and! disbursement! of! the! loan.! Respondents!
and! their! directors/officers! mismanaged! and! misspent! the! loan! leaving!
petitioner!desolate!and!devastated.!
Petitioner! contested! the! foreclosure! of! the! property! because! there! is! no!
loan!to!speak!of!because!of!failure!of!consideration.!!
RTC! &! CA! –! in! favor! of! Filipinas;! P.D.! 385! applies! only! where! it! is! clear!
that!there!was!a!loan!or!where!the!loan!is!not!denied.!!
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ISSUE:%%

Whether!or!not!the!chattel!mortgage!that!is!not!registered!is!null!and!void!under!
Art.!2125!of!CC!

HELD:%%
We!agree!with!the!petitioner!that!a!mortgage!is!a!mere!accessory!contract!
and,!thus,!its!validity!would!depend!on!the!validity!of!the!loan!secured!by!it.!We,!
however,! reject! the! petitioner's! argument! that! since! the! chattel! mortgage!
involved!was!not!registered,!the!same!is!null!and!void.!Article!2125!of!the!Civil!
Code! clearly! provides! that! the! nonSregistration! of! the! mortgage! does! not! affect!
the!immediate!parties.!It!states:%
Art.' 2125.' In' addition' to' the' requisites' stated' in' article' 2085,' it' is'
indispensable,' in' order' that' a' mortgage' may' be' validly' constituted' that' the'
document' in' which' it' appears' be' recorded' in' the' Registry' of' Property.' If' the'
instrument' is' not' recorded,' the' mortgage' is' nevertheless' binding' between' the'
parties.'
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The! petitioner! cannot! invoke! the! above! provision! to! nullify! the! chattel!
mortgage!it!executed!in!favor!of!respondent!DBP.!
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 Section%5:%Chattel%Mortgage%is%not%presumed%to%be%a%Public%Instrument.%
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Lilius,%et%al.%vs%The%Manila%Railroad%Company%
G.R.%No.%42551,%September%4,%1935%
!
FACTS:%!
In!this!case!Laura!Lindley!Shuman,!the!Manila!Wine!Merchants,!Ltd.,!the!
BPI! and! the! Manila! Motor! Co.,! Inc.,! have! appealed! from! an! order! of! the! CFI! of!
Manila! fixing! the! degree! of! preference! of! the! claimants! and! distributing! the!
proceeds!of!the!judgment!of!this!court!in!the!case!of!Lilius'vs.'Manila'Railroad'Co.'
There! was! a! total! of! twentySeight! claimants! to! these! funds,! whose! claims! were!
presented!and!decided!without!objection!in!the!original!case!in!the!lower!court.!
Aleko! Lilius! has! a! loan! (chattel! mortgage)! with! Manila! Motor,! when! the!
proceeds! was! distribute! Manila! Motor! is! not! one! of! the! preferred! creditors! of!
Lilius.!!
Manila!Motor!appealed!to!Supreme!Court!because!the!lower!court!erred!
in!not!holding!the!claim!of!Manila!Motor!Co.,!Inc.,!preferred!over!all!other!claims!
against!Aleko!E.!Lilius!evidenced!by!public!instruments!and!final!judgments.!
!
ISSUE:%%
Whether!or!not!the!Chattel!Mortgage!is!considered!to!be!a!Public!Intrument!
%
HELD:%!
Granting!that!a!mortgage!existed!between!the!Manila!Motor!Co.,!Inc.,!and!
Aleko! E.! Lilius,! this! does! not! warrant! the! conclusion! that! the! instrument!
evidencing! that! mortgage! is! a! public! document! entitled! to! preference! under!
article!1924!of!the!Civil!Code.!Under!section!5!of!Act!No.!1507!as!amended!by!Act!
No.!2496,!a!chattel!does!not!have!to!be!acknowledge!before!a!notary!public.!As!
against! creditors! and! subsequent! encumbrances,! the! law! does! require! an!
affidavit!of!good!faith!appended!to!the!mortgage!and!recorded!with!it.!A!chattel!
mortgage! may,! however,! be! valid! as! between! the! parties! without! such! an!
affidavit!of!good!faith.! It!will!thus!be!seen!that!under!the!law,!a!valid!mortgage!
may!exist!between!the!parties!without!its!being!evidenced!by!a!public!document.!!
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PHILIPPINE%REFINING%CO.%INC.%v.%JARQUE%%
G.R.%No.%L`41506%,%March%25,%1935%
MALCOLM,%J.:%
%
FACTS:!!!
There! were! a! total! of! four! (4)! chattel! mortgages! executed! by! Jarque.! The! first!
three!were!in!favor!of!the!Phils.!Refining!Co.!Inc.!while!the!fourth!was!in!favor!of!
Ramon!Aboitiz,!which!was!the!only!chattel!mortgage!appended!with!affidavit!of!
good!faith!and!registered!the!same!in!the!RD.!!Thereafter,!Jarque!!was!declared!as!
an!insolvent!debtor!by!the!RTC!of!Cebu,!with!the!result!that!an!assignment!of!all!
the!properties!of!the!insolvent!was!executed!in!favor!of!Jose!Corominas.!
On!these!facts,!the!judge!declined!to!order!the!foreclosure!of!the!mortgages,!but!
on! the! contrary! sustained! the! special! defenses! of! fatal! defectiveness! of! the!
mortgages.!Hence,!this!petition.!
%
ISSUE:!!
Whether! the! chattel! mortgages! executed! without! an! affidavit! of! good! faith! is!
enforceable!to!a!third!person.!!
%
HELD:!!
NO.! The! chattel! mortgages! executed! without! an! affidavit! of! good! faith! is!
unenforceable!to!a!third!person.!!
Since!the!term!"personal!property"!includes!vessels,!they!are!subject!to!mortgage!
agreeably! to! the! provisions! of! the! Chattel! Mortgage! Law.! Indeed,! it! has!
heretofore! been! accepted! without! discussion! that! a! mortgage! on! a! vessel! is! in!
nature!a!chattel!mortgage.!!
The! only! difference! between! a! chattel! mortgage! of! a! vessel! and! a! chattel!
mortgage! of! other! personalty! is! that! it! is! not! now! necessary! for! a! chattel!
mortgage!of!a!vessel!to!be!noted!n!the!registry!of!the!register!of!deeds,!but!it!is!
essential!that!a!record!of!documents!affecting!the!title!to!a!vessel!be!entered!in!
the!record!of!the!Collector!of!Customs!at!the!port!of!entry.!Otherwise!a!mortgage!
on! a! vessel! is! generally! like! other! chattel! mortgages! as! to! its! requisites! and!
validity.!!
The! Chattel! Mortgage! Law! in! its! section! 5,! in! describing! what! shall! be! deemed!
sufficient!to!constitute!a!good!chattel!mortgage,!includes!the!requirement!of!an!
affidavit! of! good! faith! appended! to! the! mortgage! and! recorded! therewith.! The!
absence!of!the!affidavit!vitiates!a!mortgage!as!against!creditors!and!subsequent!
encumbrancers.! As! a! consequence! a! chattel! mortgage! of! a! vessel! wherein! the!
affidavit! of! good! faith! required! by! the! Chattel! Mortgage! Law! is! lacking,! is!
unenforceable!against!third!persons.!
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ACME%v.%CA%
G.R.%No.%103576.%%August%22,%1996%
VITUG,%J.:%
%
FACTS:!!
President!of!Acme!executed!in!behalf!of!the!company!a!chattel!mortgage!in!favor!
Producers! Bank! of! the! Philippines! as! a! security! for! the! two! corporate! loans! he!
obtained! from! the! latter,! both! obligations! were! eventually! satisfied! by! the!
former.! However,! when! the! bank! extended! another! corporate! loan! to! Acme!
covered! by! four! promissory! notes.! Unfortunately,! the! latter! failed! to! pay! such!
obligation! due! to! financial! constraints! that! cause! the! bank! to! extraSjudicially!
foreclose!the!mortgage!property.!!
Acme!then!filed!an!injunction,!which!was!denied!by!the!court.!The!Foreclosure,!
then,! proceeded.! Feeling! aggrieved,! Acme! appealed! with! the! CA! but! was! later!
denied.! On! its! first! petition! with! this! court! was! denied.! Hence,! this! second!
petition.!!
!
ISSUE:!!
Whether!the!clause!in!a!chattel!mortgage!that!purports!to!extend!its!coverage!to!
obligations!yet!to!be!contracted!is!valid!and!effective.!
%
HELD:!!
NO.! The! clause! in! a! chattel! mortgage! that! purports! to! extend! its! coverage! to!
obligations!yet!to!be!contracted!is!not!valid!and!effective.!
A!chattel!mortgage,!however,!can!only!cover!obligations!existing!at!the!time!the!
mortgage!is!constituted.!!Although!a!promise!expressed!in!a!chattel!mortgage!to!
include!debts!that!are!yet!to!be!contracted!can!be!a!binding!commitment!that!can!
be!compelled!upon,!the!security!itself,!however,!does!not!come!into!existence!or!
arise! until! after! a! chattel! mortgage! agreement! covering! the! newly! contracted!
debt! is! executed! either! by! concluding! a! fresh! chattel! mortgage! or! by! amending!
the!old!contract!conformably!with!the!form!prescribed!by!the!Chattel!Mortgage!
Law.!Refusal!on!the!part!of!the!borrower!to!execute!the!agreement!so!as!to!cover!
the! afterSincurred! obligation! can! constitute! an! act! of! default! on! the! part! of! the!
borrower! of! the! financing! agreement! whereon! the! promise! is! written! but,! of!
course,!the!remedy!of!foreclosure!can!only!cover!the!debts!extant!at!the!time!of!
constitution!and!during!the!life!of!the!chattel!mortgage!sought!to!be!foreclosed.!
A!chattel!mortgage,!as!hereinbefore!so!intimated,!must!comply!substantially!with!
the! form! prescribed! by! the! Chattel! Mortgage! Law! itself.! ! One! of! the! requisites,!
under!Section!5!thereof,!is!an!affidavit!of!good!faith.!!While!it!is!not!doubted!that!
if!such!an!affidavit!is!not!appended!to!the!agreement,!the!chattel!mortgage!would!
still!be!valid!between!the!parties!(not!against!third!persons!acting!in!good!faith),!
the! fact,! however,! that! the! statute! has! provided! that! the! parties! to! the! contract!
must!execute!an!oath!makes!it!obvious!that!the!debt!referred!to!in!the!law!is!a!
current,!not!an!obligation!that!is!yet!merely!contemplated.!!!
The! significance! of! the! ruling! to! the! instant! problem! would! be! that! since! the!
1978!chattel!mortgage!had!ceased!to!exist!coincidentally!with!the!full!payment!of!
the! P3,000,000.00! loan,! there! no! longer! was! any! chattel! mortgage! that! could!
cover!the!new!loans!that!were!concluded!thereafter.!
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Section%7%
Strochecker%vs.%Ramirez%
%
Facts:%
!Appellant!Ramirez!questions!the!preference!of!the!mortgage!in!favor!of!Fidelity!
and!Surety!Co.!over!his!own!mortgage!interest,!arguing!that!the!mortgage!is!not!
valid!because!the!description!of!said!property!is!insufficient.!
!
Issue:%
Whether!the!mortgage!to!F&S!Co.!was!valid?!
!
Held:%
Yes,!the!description!was!sufficient!and!should!be!only!in!such!nature!that:!the!
description!of!the!mortgaged!property!shall!be!such!as!to!enable!parties!to!the!
mortgage,!or!any!other!person!after!reasonable!inquiry!and!investigation,!to!
identify!the!same.!
“half!interest!in!the!drug!business!known!as!Antigua!Botica!Ramirez”!was!
deemed!sufficient.!
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Giberson%vs.%A.N.%Jureidini%
%
Facts:!!
Jureidini,!Motoomul’s!creditor,!became!aware!of!the!debtor’s!financial!problem,!
caused!the!delivery!of!a!store,!its!receivables,!and!stocks!owned!by!Motoomul!to!
it.!Upon!Involuntary!Insolvency!Proceedings!the!other!creditors!of!Motoomul!
questions!the!validity!of!the!Mortgage!exacuted!between!Jureidini!and!
Motoomul.!
!
Issue:%
Whether!the!mortgage!was!valid?!
!
Held:%
The!trial!judge!properly!held!that!there!was!impossible!identification!in!this!case!
where!it!was!only!described!as:!
! “1.!A!store!No.!79!on!Magakkanes!St.,!Cebu,!formerly!belongin!to!T.!
Thakurdas!with!all!the!merchandise,!effects,!wares!ad!other!bazaar!goods!
contained!therein.!
! 2.!A!store!No.!19!on!Real!St.,!Iloilo!Panay,!P.I.!formerly!belonging!to!
Guillermo!Asayas,!with!all!the!merchandise,!effects,!wares!and!other!bazaar!
goods!contained!therein.”!
(Note!that!in!a!Bazaar!goods!are!constantly!disposed!of!and!replaced!with!new!
supplies!in!connection!with!the!business,!thereby!impossible!for!identification!
with!respect!to!last!paragraph!of!sec.!7!of!the!law.)!
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! A chattel mortgage shall be deemed to cover only
the property described therein and not like or
! substituted property thereafter acquired by the
! mortgagor and placed in the same depository as
! the property originally mortgaged, anything in the
! mortgage to the contrary notwithstanding.
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SALDANA%vs.%PHILIPPINE%GUARANTY%COMPANY,%INC.%%
Facts:%
%Josefina!de!Aleazar,!to!secure!an!indebtedness!worth!P15,000,!executed!a!
chattel! mortgage! in! favor! of! Buenaventura! Saldana! covering! some! of! her!
properties! including! a! building! and! “all! other! furniture,! fixtures! or! equipment!
found!in!the!said!premises”!used!in!her!restaurant!business.!After!the!execution!
of! said! mortgage,! San! Juan! de! Dios! Hospital! obtained,! in! another! civil! case,! a!
judgment!against!Alazar.!A!writ!of!attachment!was!served!upon!her,!where!some!
of! the! properties! covered! by! the! earlier! mortgage! were! levied! upon! .! Saldana!
filed!a!thirdSparty!claim!asserting!that!the!aboveSdescribed!properties!levied!are!
subject!to!his!chattel!mortgage.!The!sheriff!then!released!some!of!the!properties!
from! the! levy.! In! order! to! proceed! with! the! execution! sale,! San! Juan! de! Dios!
hospital! executed! an! indemnity! bond! to! answer! for! any! damages! that! plaintiff!
might!suffer.!Said!properties!were!sold!to!San!Juan!De!Dios!as!the!highest!bidder.!
Saldana! filed! a! complaint! for! damages! against! Philippine! Guaranty! Company!
with!the!trial!court,!which!dismissed!the!complaint!for!lack!of!sufficient!cause!of!
action.!!
!
Issue:%%
Whether!or!not!the!phrase!"and!all!other!furniture,!fixtures!and!equipment!found!
in! the! said! premises",! validly! and! sufficiently! covered! within! its! terms! the!
personal! properties! disposed! of! in! the! auction! sale,! as! to! warrant! an! action! for!
damages!by!the!plaintiff!mortgagee,!Saldana.!!
!
Held:%%
Yes.! Section! 7! of! the! Chattel! Mortgage! Law! does! not! demand! a! minute! and!
specific!description!of!every!chattel!mortgaged!in!the!deal!of!mortgage!but!only!
requires!that!the!description!of!the!properties!be!such!as!to!enable!the!parties!in!
the!mortgage,!or!any!other!person,!after!reasonable!inquiry!and!investigation!to!
identify! the! same.! A! general! description! will! suffice.! The! specifications! in! the!
chattel!mortgage!contract!complied!with!the!reasonable!description!rule!that!the!
said!law!requires.!
!The!phrase!in!question!is!found!after!an!enumeration!of!other!specific!articles.!It!
can! thus! be! reasonably! inferred! therefrom! that! the! "furniture,! fixture! and!
equipment"! referred! to! are! properties! of! like! nature,! similarly! situated! or!
similarly!used!in!the!restaurant!of!the!mortgagor.!
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Section%14:%%
PNB%vs.%MANILA%INVESTMENT%AND%CONSTRUCTION,%INC.%
%
Facts:%
Judgment!in!a!civil!case!between!herein!petitioner!and!respondent!was!rendered!
against!respondent,!Manila!Investment!and!other!defendants,!requiring!them!to!
pay! a! certain! amount! of! money.! In! case! of! nonSpayment,! the! decision! provided!
for! the! sale! at! public! auction! of! the! personal! properties! covered! by! the! chattel!
mortgage! executed! by! the! defendants! in! favor! of! PNB.! When! the! decision! had!
become! executory,! the! parties! agreed! to! having! the! mortgaged! personal!
properties! sold! at! public! auction! at! a! private! sale.! The! proceeds! obtained!
amounted! to! P259,941.70,! and! were! applied! to! the! partial! satisfaction! of! said!
judgment!(P382,388.47!was!still!unsatisfied).!!5!years!later,!PNB!filed!an!action!
to! revive! the! judgment.! Manila! invested! insisted! on! the! fact! that! a! private! sale!
had!already!been!held!and!that!the!proceeds!must!be!accounted!by!PNB!to!them!
in! order! that! the! same! may! be! applied! to! the! judgment,! but! PNB! has! not!
rendered! proper! accounting! to! them.! The! trial! court! rendered! a! judgment!
ordering!Manila!Investment!to!pay!the!deficiency.!Manila!investment!claims!that!
PNB! is! not! entitled! to! a! deficiency! and! that! the! private! sale! of! the! mortgaged!
personal!properties!was!null!and!void.!!
%
Issue:%
1. Whether! or! not! the! private! sale! of! the! mortgaged! properties! were! null!
and!void!
2. Whether!or!not!PNB!is!entitled!to!the!deficiency!of!P382,388.47!

Held:%
1. No.!The!disposition!of!the!mortgaged!properties!in!a!private!sale!was!by!
agreement! between! the! parties.! Manila! Investment! is! estopped! from!
questioning!it!except!on!the!ground!of!fraud!or!duress.!!
2. Yes.!In!case!of!a!sale!under!a!foreclosure!of!chattel!mortgage,!there!is!no!
question! that! the! mortgagee! or! creditor! may! maintain! an! action! for!
deficiency.! The! Chattel! Mortgage! Law! allows! a! private! sale,! and! the!
amount!received!at!the!time!of!the!sale!is!only!a!payment!pro'tanto'and!an!
action!may!be!maintained!for!a!deficiency!in!the!debt.!!

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Salvacion%Riosa%vs.%Stilianpilos!
!!
Facts:%
1.!The!respondent!sold!to!petitioner!for!2000,!which!was!not!then!paid,!a!used!
Chevrolet!sedan!car.!The!petitioner!turned!over!the!sed!car!to!the!respondent!in!
partial!payment!of!the!installment.!
2.!To!secure!the!payments!of!said!note,!petitioner!executed!a!deed!of!mortgage!
under!the!provisions!of!the!chattel!mortgage!law.!
3.! Petitioner! failed! to! make! good! his! obligation.! Accordingly,! the! sheriff,! at! the!
respondent’s! instance,! took! possession! of! the! mortgaged! Chevrolet! car! for! the!
purpose!of!selling!it!at!public!auction!as!provided!by!law!notifying!the!petitioner!
by!registered!mail!of!what!he!intended!to!do!so>!
$.! The! sale! was! effected! in! the! municipality! of! legaspi! city,! Albay,! not! that! of!
Tabaco!where!the!petitioner!resided!at!the!time!where!the!car!had!been!taken.!
5.!petitioner!contended!the!legality!of!such!sale!since!it!is!in!contravention!with!
section!14!of!the!Chattel!mortgage!law!.!
!!
Issue:%%
WON!the!sale!of!Chevrolet!car!in!question!was!in!accordance!with!the!clause!and!
with!the!law,!in!view!of!the!waiver!made!by!the!petitioner.!
!!
HELD:%
1.!It!seems!clear!that!the!purpose!of!the!law!in!providing!for!the!requisites!and!
procedure!to!be!followed!before!proceeding!to!the!sale!of!the!mortgaged!chattel!
under!sec!14!is!plainly!to!protect!the!rights!of!the!mortgagor.!
2.! Nothing! that! took! place! in! the! case! can! be! said! to! have! affected! the! public!
interest!of!that!of!third!person.!
3.! All! that! is! affected! was! the! interest! of! the! mortgagor.! In! view! thereof,! the!
remedy!petition!for!certiorari!does!not!lie!and!will!not!prosper!since!it!is!clearly!
provided!by!the!that!a!person!may!waive!any!right!conferred!upon!him!by!law,!
unless! prohibited! by! law! because! it! is! against! public! interest! or! prejudicial! to!
third!person.!
4.!The!court!failed!to!find!in!the!waiver!contained!therein!anything!which!might!
be!against!public!interest!or!prejudicial!to!third!person.!
5.!If!the!sale!was!effected!in!Legaspi!where!the!respondent!had!his!main!office,!
not! in! tobacco! where! the! petitioner! resided,! it! was! because! the! latter! so!
expressly!agreed!and!consented!thereto.!
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DANIEL% L.% BORDON% II% AND% FRANCISCO% L.% BORBON,% petitioners,* vs.%
SERVICEWIDE%SPECIALISTS,%INC.%&%HON.%COURT%OF%APPEALS!
%!
Facts:!
1.%Daniel!L.!Borbon!and!Francisco!Borbon!signed!a!promissory!note!which!states!
that! “For! value! received! (installment! price! of! the! chattel/s! purchased),! I/We!
jointly!and!severally!promised!to!pay!Pangasinan!Auto!Mart,!Inc.!or!order,!at!its!
office!at!NMI!Bldg.!Buendia!Avenue,!Makati,!MM!the!sum!of!One!Hundred!Twenty!
Two!Thousand!Eight!Hundred!Fifty!Six!only!(P122,856.00),!Philippine!Currency,!
to!be!payable!without!need!of!notice!or!demand,!in!installments!of!the!amounts!
following!and!at!the!dates!hereinafter!set!forth,!to!wit:!!P10,238.00!monthly!for!
Twelve! (12)! months! due! and! payable! on! the! 7! day! of! each! month! starting!
January,! 1985,! provided! that! a! late! payment! charge! of! 3%! per! month! shall! be!
added!on!each!unpaid!installment!from!due!date!thereof!until!fully!paid”!
2.!! To! secure! the! Promissory! Note,! the! defendants! executed! a! Chattel! Mortgage!
on!(1)!Brand!new!1984!Isuzu.!
3.!The!rights!of!Pangasinan!Auto!Mart,!Inc.!was!later!assigned!to!Filinvest!Credit!
Corporation! on,! with! notice! to! the! defendants.! On! March! 21,! 1985,! Filinvest!
Credit!Corporation!assigned!all!its!rights,!interest!and!title!over!the!Promissory!
Note!and!the!chattel!mortgage!to!the!plaintiff.!
4.! Because! the! defendants! did! not! pay! their! monthly! installments,! Filinvest!
demanded!from!the!defendants!the!payment!of!their!installments!due!on!January!
29,!1985!by!telegram.!
5.! The! defendants! claim! that! what! they! intended! to! buy! from! Pangasinan! Auto!
Mart!was!a!jeepney!type!Isuzu!K.!C.!Cab.!!The!vehicle!that!they!bought!was!not!
delivered.!Instead,!through!misrepresentation!and!machination,!the!Pangasinan!
Motor,! Inc.! delivered! an! Isuzu! crew! cab,! as! this! is! the! unit! available! at! their!
warehouse.!! Later! the! representative! of! Pangasinan! Auto! Mart,! Inc.! (assignor)!
told!the!defendants!that!their!available!stock!is!an!Isuzu!Cab!but!minus!the!rear!
body,! which! the! defendants! agreed! to! deliver! with! the! understanding! that! the!
Pangasinan!Auto!Mart,!Inc.!will!refund!the!defendants!the!amount!of!P10,000.00!
to! have! the! rear! body! completed.! The! defendants! claim! that! they! are! not! in!
default!of!their!obligation!because!the!Pangasinan!Auto!Mart!was!first!guilty!of!
not! fulfilling! its! obligation! in! the! contract.!! The! defendants! claim! that! neither!
party!incurs!delay!if!the!other!does!not!comply!with!his!obligation.!!
!
HELD:%
1.! When! the! seller! assigns! his! credit! to! another! person,! the! latter! is! likewise!
bound! by! the! same! law.!! Accordingly,! when! the! assignee! forecloses! on! the!
mortgage,! there! can! be! no! further! recovery! of! the! deficiency,! and! the! sellerS
mortgagee!is!deemed!to!have!renounced!any!right!thereto.!
2.! In! the! event! the! sellerSmortgagee! first! seeks,! instead,! the! enforcement! of! the!
additional!mortgages,!guarantees!or!other!security!arrangements,!he!must!then!
be!held!to!have!lost!by!waiver!or!nonSchoice!his!lien!on!the!chattel!mortgage!of!
the!personal!property!sold!by!any!mortgaged!back!to!him,!although,!similar!to!an!
action!for!specific!performance,!he!may!still!levy!on!it.!
3.!It!is!only!when!there!has!been!a!foreclosure!of!the!chattel!mortgage!that!the!
vendeeSmortgagor! would! be! permitted! to! escape! from! a! deficiency! liability.!!
Thus,!if!the!case!is!one!for!specific!performance,!even!when!this!action!is!selected!
after!the!vendee!has!refused!to!surrender!the!mortgaged!property!to!permit!an!
extrajudicial! foreclosure,! that! property! may! still! be! levied! on! execution! and! an!
alias! writ! may! be! issued! if! the! proceeds! thereof! are! insufficient! to! satisfy! the!
judgment! credit.! So,! also,! a! mere! demand! to! surrender! the! object! which! is! not!
heeded!by!the!mortgagor!will!not!amount!to!a!foreclosure,!but!the!repossession!
thereof!by!the!vendorSmortgagee!would!have!the!effect!of!foreclosure.!!
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Filipinas%Investment%vs.%Ridad%
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• Plaintiffs!purchased!from!Supreme!Sales!and!Development!Corporation!
(Supreme)!2!brand!new!Ford!Consul!Sedans,!for!P26,887!payable!in!24!
monthly!installments.!
• To!secure!payment!thereof,!plaintiffs!executed!a!promissory!note!
covering!the!purchase!price!and!a!deed!of!chattel!mortgage!on!the!two!
vehicles!purchased!and!also!on!another!car!(Chevrolet)!and!plaintiff’s!
franchise!or!certificate!of!public!convenience!granted!by!the!defunct!
Public!Service!Commission!for!the!operation!of!a!taxi!fleet.!
• With!the!conformity!of!plaintiffs,!the!vendor!Supreme!assigned!its!rights,!
title!and!interest!to!the!promissory!note!and!chattel!mortgage!to!the!
defendant!Filipinas!Investment!and!Finance!Corporation.!
• Plaintiffs!failed!to!pay!their!monthly!installments.!Filipinas!foreclosed!the!
chattel!mortgage!extraSjudicially.!!
• During!the!public!auction,!of!which!the!plaintiffs!were!not!notified,!the!2!
Ford!Consul!cars!were!bought!by!defendant!Filipinas,!who!was!as!the!
highest!bidder.!During!another!public!auction,!the!rest!of!the!properties!!
(including!the!taxi!franchise)!subject!of!the!chattel!mortgage!were!sold,!
and!bought!by!defendant!Filipinas!also.!
• Filipinas!subsequently!sold!the!taxi!franchise!to!defendant!Jose!D.!
Sebastian,!who!filed!with!the!Public!Service!Commission!an!application!
for!approval!of!said!sale.!
• Plaintiffs!then!filed!an!action!for!annulment!of!contract!before!the!CFI,!
against!Filipinas,!Sebastian,!and!Sheriff!San!Agustin.!
• CFI!ruling:!The!chattel!mortgage!was!null!and!void!in!so!far!as!the!taxi!
franchise!and!the!used!Chevrolet!car!were!concerned,!and!the!sale!at!
public!auction!of!the!taxicab!franchise!was!to!be!of!no!legal!effect.!The!
Certificate!of!Sale!issued!by!the!Sheriff!of!Manila!in!favor!of!Filipinas!
concerning!the!taxi!franchise!was!cancelled!and!set!aside.!The!assignment!
made!by!Filipinas!in!favor!of!Jose!Sebastian!was!also!declared!void!and!of!
no!legal!effect.!
• The!CA!certified!the!defendants’!appeal!to!the!SC.!
%
Issue:%%
Is!the!chattel!mortgage!and!its!subsequent!sale!valid?!NO!
%
Ratio:%
1) Article!1484!of!the!Civil!Code!is!applicable.!Under!this!article,!the!vendor!
of!personal!property!the!purchase!price!of!which!is!payable!in!
installments,!has!the!right,!should!the!vendee!default!in!the!payment!of!
two!or!more!of!the!agreed!installments,!to!exact!fulfillment!by!the!
purchaser!of!the!obligation,!or!to!cancel!the!sale,!or!to!foreclose!the!
mortgage!on!the!purchased!personal!property,!if!one!was!constituted.!The!
vendor!can!only!choose!one!option.!
2) If!the!vendor!avails!himself!of!the!right!to!foreclose!the!mortgage,!the!law!
prohibits!him!from!further!bringing!an!action!against!the!vendee!for!the!
purpose!of!recovering!whatever!balance!of!the!debt!secured!is!not!
satisfied!by!the!foreclosure!sale.!
 3) Purpose!of!the!law!is!to!prevent!mortgagees!from!seizing!the!mortgaged!
property,!buying!it!at!foreclosure!sale!for!a!low!price!and!the!bringing!suit!
against!the!mortgagor!for!a!deficiency!judgment.!
a. Without!the!law,!the!mortgagorSbuyer!would!find!himself!without!
the!property!and!still!owing!practically!the!full!amount!of!his!
original!debt.!
4) In!this!case,!defendant!Filipinas!chose!to!foreclose!the!mortgage!upon!
default!of!plaintiffs,!and!bought!the!vehicles!at!the!public!auction!as!the!
highest!bidder.!
a. Filipinas!is!deemed!to!have!renounced!any!and!all!rights!which!it!
might!otherwise!have!under!the!promissory!note!and!the!chattel!
mortgage!as!well!as!the!payment!of!the!unpaid!balance.!
5) The!lower!court!rightly!declared!the!nullity!of!the!chattel!mortgage!in!so!
far!as!the!taxi!franchise!and!the!Chevrolet!were!concerned,!under!the!
authority!of!the!ruling!in!the!case!of!Levy'Hermanos,'Inc.'v'Pacific'
Commercial'Co.,'et'al.!
6) The!vendor’s!right!to!foreclose!is!limited!only!on!the!thing!sold.!
7) The!vendor!of!personal!property!sold!on!installment!is!precluded,!after!
foreclosing!the!chattel!mortgage!on!the!thing!sold,!from!having!a!recourse!
against!the!additional!security!put!up!by!a!third!party!to!guarantee!the!
purchaser’s!performance!of!his!obligation.!(Cruz'v'Filipinos'Investment'&'
Finance'Corporation)!
a. Otherwise,!if!the!vendee!could!still!be!compelled!to!pay!the!balance!
of!the!purchase!price,!the!vendee!will!be!made!to!bear!the!payment!
of!the!balance!despite!the!earlier!foreclosure.!!
!
Judgment!appealed!from!is!affirmed.!
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Cases%on%the%Law%on%Secrecy%Bank%Deposits:%
JOSEPH%VICTOR%G.%EJERCITO%v.%SANDIGANBAYAN%G.R.%Nos.%157294`95,%30%
November%2006,%%
!
Facts:%
Plunder!being!thus!analogous!to!bribery,!the!exception!to!RA!1405,!otherwise!
known!as!the!Bank!Secrecy!Law,!applicable!in!cases!of!bribery!must!also!apply!to!
cases!of!plunder.!!The!“fruit!of!the!poisonous!tree”!principle,!which!states!that!
once!the!primary!source!(the!“tree”)!is!shown!to!have!been!unlawfully!obtained,!
any!secondary!or!derivative!evidence!(the!“fruit”)!derived!from!it!is!also!
inadmissible,!does!not!apply!in!cases!of!unlawful!examination!of!bank!accounts.!!
RA!1405!does!not!provide!for!the!application!of!this!rule.!!At!all!events,!the!
Ombudsman!is!not!barred!from!requiring!the!production!of!documents!based!
solely!on!information!obtained!by!it!from!sources!independent!of!its!previous!
inquiry.!!!!
!
Joseph!Victor!G.!Ejercito!is!the!owner!of!Trust!Account!No.!858!which!was!
originally!opened!at!Urban!Bank!but!which!is!now!maintained!at!Export!and!
Industry!Bank,!which!is!the!purchaser!and!owner!now!of!the!former!Urban!Bank!
and!Urbancorp!Investment,!Inc.!!He!is!also!the!owner!of!Savings!Account!No.!
0116S17345S9!which!was!originally!opened!at!Urban!Bank!but!which!is!now!
maintained!at!Export!and!Industry!Bank,!the!purchaser!and!owner!of!the!former!
Urban!Bank!and!Urbancorp!Investment,!Inc.!!!
!
In!Criminal!Case!No.!26558,!People!v.!Estrada,!et!al.,!for!plunder,!the!Special!
Prosecution!Panel!filed!before!the!Sandiganbayan!a!Request!for!Issuance!of!
Subpoena!Duces!Tecum!for!the!issuance!of!a!subpoena!directing!the!President!of!
Export!and!Industry!Bank!(EIB,!formerly!Urban!Bank)!or!his/her!authorized!
representative!to!produce!during!the!hearings!scheduled,!documents!relating!to!
these!accounts!including!statement!of!accounts!under!the!name!of!Jose!Velarde.!
The!request!was!granted!by!the!Sandiganbayan.!
!
Ejercito!filed!various!motions!to!quash!the!various!Subpoenas!Duces!Tecum/Ad!
Testificandum!previously!issued.!!In!his!Motion!to!Quash,!he!claimed!that!his!
bank!accounts!are!covered!by!R.A.!No.!1405!(The!Secrecy!of!Bank!Deposits!Law)!
and!do!not!fall!under!any!of!the!exceptions!stated!therein.!!He!further!claimed!
that!the!specific!identification!of!documents!in!the!questioned!subpoenas,!
including!details!on!dates!and!amounts,!could!only!have!been!made!possible!by!
an!earlier!illegal!disclosure!thereof!by!the!EIB!and!the!Philippine!Deposit!
Insurance!Corporation!(PDIC)!in!its!capacity!as!receiver!of!the!then!Urban!Bank.!!
The!disclosure!being!illegal,!he!concluded,!the!prosecution!in!the!case!may!not!be!
allowed!to!make!use!of!the!information.!!!!!
!
The!Sandiganbayan!denied!the!motions!of!Ejercito.!
!
Ejercito!filed!the!present!petition!for!certiorari!under!Rule!65!assailing!the!
Sandiganbayan!Resolutions!denying!his!Motions!to!Quash!Subpoenas!Duces!
Tecum/Ad!Testificandum,!and!Resolution!denying!his!Motion!for!
Reconsideration!of!the!first!two!resolutions.!!!!!
!
People!posits!that!Trust!Account!No.!858!may!be!inquired!into,!not!merely!
because!it!falls!under!the!exceptions!to!the!coverage!of!R.A.!1405,!but!because!it!
is!not!even!contemplated!therein.!!To!People,!the!law!applies!only!to!“deposits”!
which!strictly!means!the!money!delivered!to!the!bank!by!which!a!creditorSdebtor!
relationship!is!created!between!the!depositor!and!the!bank.!!!!
%
ISSUES:%%
1.)Whether!Trust!Account!No.!858!and!Savings!Account!No.!0116S17345S9!are!
excepted!from!the!protection!of!R.A.!1405;!!
!
2.)!Whether!The!“extremelySdetailed”!information!contained!in!the!Special!
Prosecution!Panel's!requests!for!subpoena!was!obtained!through!a!prior!illegal!
disclosure!of!Ejercito's!bank!accounts!
!
!
HELD:%%
1.)!Yes!the!accounts!are!excepted!from!the!protection!of!1405!and!thus!can!be!
sunpoed.!!
!
Plunder!is!excepted!from!the!protection!of!RA!1405!otherwise!known!as!The!
Secrecy!of!Bank!Deposits!Law.!!!
!
R.A.!1405!is!broad!enough!to!cover!Trust!Account!No.!858.!!However,!the!
protection!afforded!by!the!law!is!not!absolute.!!There!being!recognized!
exceptions!thereto,!as!aboveSquoted!Section!2!provides.!!In!the!present!case,!two!
exceptions!apply,!to!wit:!!(1)!the!examination!of!bank!accounts!is!upon!order!of!a!
competent!court!in!cases!of!bribery!or!dereliction!of!duty!of!public!officials,!and!
(2)!the!money!deposited!or!invested!is!the!subject!matter!of!the!litigation.!!!
!
Ejercito!contends!that!since!plunder!is!neither!bribery!nor!dereliction!of!duty,!his!
accounts!are!not!excepted!from!the!protection!of!R.A.!1405.!Philippine!National!
Bank!v.!Gancayco!holds!otherwise:!!!
!
Cases!of!unexplained!wealth!are!similar!to!cases!of!bribery!or!dereliction!of!duty!
and!no!reason!is!seen!why!these!two!classes!of!cases!cannot!be!excepted!from!
the!rule!making!bank!deposits!confidential.!The!policy!as!to!one!cannot!be!
different!from!the!policy!as!to!the!other.!This!policy!expresses!the!notion!that!a!
public!office!is!a!public!trust!and!any!person!who!enters!upon!its!discharge!does!
so!with!the!full!knowledge!that!his!life,!so!far!as!relevant!to!his!duty,!is!open!to!
public!scrutiny.!!!
!
Undoubtedly,!cases!for!plunder!involve!unexplained!wealth.!!The!crime!of!
bribery!and!the!overt!acts!constitutive!of!plunder!are!crimes!committed!by!
public!officers,!and!in!either!case!the!noble!idea!that!“a!public!office!is!a!public!
trust!and!any!person!who!enters!upon!its!discharge!does!so!with!the!full!
knowledge!that!his!life,!so!far!as!relevant!to!his!duty,!is!open!to!public!scrutiny”!
applies!with!equal!force.!!!
!
Hence,!these!accounts!are!no!longer!protected!by!the!Secrecy!of!Bank!Deposits!
Law,!there!being!two!exceptions!to!the!said!law!applicable!in!this!case,!namely:!
(1)the!examination!of!bank!accounts!is!upon!order!of!a!competent!court!in!cases!
of!bribery!or!dereliction!of!duty!of!public!officials,!and!(2)the!money!deposited!
or!invested!is!the!subject!matter!of!the!litigation.!Exception!(1)!applies!since!the!
plunder!case!pending!against!former!President!Estrada!is!analogous!to!bribery!
or!dereliction!of!duty,!while!exception!(2)!applies!because!the!money!deposited!
in!Ejercito's!bank!accounts!is!said!to!form!part!of!the!subject!matter!of!the!same!
plunder!case.!!!!!!!
!
2.)!No.!The!“extremelySdetailed”!information!was!obtained!by!the!Ombudsman!
from!sources!independent!of!its!previous!inquiry.!!!
!
In!a!further!attempt!to!show!that!the!subpoenas!issued!by!the!Sandiganbayan!are!
invalid!and!may!not!be!enforced,!Ejercito!contends!that!the!information!found!
therein,!given!their!“extremely!detailed”!character,!could!only!have!been!
obtained!by!the!Special!Prosecution!Panel!through!an!illegal!disclosure!by!the!
bank!officials!concerned.!He!thus!claims!that,!following!the!“fruit!of!the!
poisonous!tree”!doctrine,!the!subpoenas!must!be!quashed.!!!!!
!
He!further!contends!that!even!if,!as!claimed!by!People,!the!“extremelySdetailed”!
information!was!obtained!by!the!Ombudsman!from!the!bank!officials!concerned!
during!a!previous!investigation!of!the!charges!against!President!Estrada,!such!
inquiry!into!his!bank!accounts!would!itself!be!illegal.!How!the!Ombudsman!
conducted!his!inquiry!into!the!bank!accounts!of!Ejercito!is!recounted!by!the!
People!of!the!Philippines.!!At!all!events,!even!if!the!challenged!subpoenas!are!
quashed,!the!Ombudsman!is!not!barred!from!requiring!the!production!of!the!
same!documents!based!solely!on!information!obtained!by!it!from!sources!
independent!of!its!previous!inquiry.!!The!Ombudsman!may!conduct!on!its!own!
the!same!inquiry!into!the!subject!bank!accounts!that!it!earlier!conducted!last!
FebruarySMarch!2001,!there!being!a!plunder!case!already!pending!against!
former!President!Estrada.!!To!quash!the!challenged!subpoenas!would,!therefore,!
be!pointless!since!the!Ombudsman!may!obtain!the!same!documents!by!another!
route.!!Upholding!the!subpoenas!avoids!an!unnecessary!delay!in!the!
administration!of!justice.!!!
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Mellon%vs%Magsino%%
%
Facts:!!
Dolores!Ventosa!requested!the!transfer!of!$1000!from!the!First!National!Bank!of!
West!Virginia,!USA!to!Victoria!Javier!in!Manila!through!the!Prudential!Bank.!
Accordingly,!the!First!National!Bank!requested!the!petitioner,!Mellon!Bank,!to!
effect!the!transfer.!Unfortunately,!the!wire!sent!by!Mellon!Bank!to!Manufacturers!
Hanover!Bank,!a!correspondent!of!Prudential!Bank,!indicated!the!amount!
transferred!as!“US!$1,000,000.00”!instead!of!US!$1,000.00.!Hence,!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!in!Prudential!Bank!and!deposited!$999,943.!Immediately,!thereafter,!
Javier!and!her!husband!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.!One!of!the!things!they!
bought!was!real!property!in!California,!USA!which!was!the!subject!of!an!action!
for!recovery!by!Mellon!Bank.!Later,!it!filed!a!case!in!the!Philippines!for!the!
recovery!of!the!whole!amount,!including!the!purchase!price!of!the!real!property!
located!in!the!US.!With!regard!to!the!subject!matter,!Erlinda!Baylosis!of!the!
Philippine!Veteran’s!Bank!and!Pilologo!Red,!Jr.!of!Hongkong!and!Shanghai!
Banking!Corporation!were!required!to!give!testimonies!with!regard!to!the!
deposits!and!checks!issued!by!the!private!respondents!Javier,!et.!al..!These!
testimonies!were!questioned!for!being!immaterial!and!irrelevant!as!well!as!
covered!by!RA!1405!on!confidentiality.!
!
Issue:!Whether!or!not!the!testimonies!of!the!banks!violated!RA!1405?!!
!
Held:%
Private!respondents’!protestations!that!to!allow!the!questioned!testimonies!to!
remain!on!record!would!be!in!violation!of!the!provisions!of!RA!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!the!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.!!!!!!!!!!!
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!
Onate%vs.%Abrogar%
%
FACTS:%!
On!December!23,!1991,!respondent!Sun!Life!Assurance!Company!of!Canada!(Sun!
Life)!filed!a!complaint!for!a!sum!of!money!with!a!prayer!for!the!immediate!
issuance!of!a!writ!of!attachment!against!petitioners!and!Noel!L.!Diño!at!Branch!
150!of!the!RTC!Makati,!presided!over!by!respondent!Judge.!The!following!day,!
December!24,!1991,!respondent!Judge!issued!an!order!granting!the!issuance!of!a!
writ!of!attachment,!which!was!actually!issued!on!December!27,!1991.!On!January!
3,!1992,!upon!Sun!Life’s!exSparte!motion,!the!trial!court!amended!the!writ!of!
attachment!to!reflect!the!alleged!amount!of!the!indebtedness.!That!same!day,!
Deputy!Sheriff!Flores,!accompanied!by!a!representative!of!Sun!Life,!attempted!to!
serve!summons!and!a!copy!of!the!amended!writ!of!attachment!upon!petitioners!
at!their!known!office!address!in!Makati!but!was!not!able!to!do!so!since!there!was!
no!responsible!officer!to!receive!the!same.!Nonetheless,!Sheriff!Flores!proceeded!
over!a!period!of!several!days!to!serve!notices!of!garnishment!upon!several!
commercial!banks!and!financial!institutions,!and!levied!on!attachment!a!
condominium!unit!and!a!real!property!belonging!to!petitioner!Oñate.!Summons!
was!eventually!served!upon!petitioners!on!January!9,!1992,!while!defendant!
Diño!was!served!with!summons!on!January!16,!1992.!!
!
On!January!21,!1992,!petitioners!filed!an!“Urgent!Motion!to!Discharge/Dissolve!
Writ!of!Attachment.”!That!same!day,!Sun!Life!filed!an!exSparte!motion!to!examine!
the!books!of!accounts!and!ledgers!of!petitioner!Brunner!Development!
Corporation!(Brunner)!at!the!Urban!Bank,!Legaspi!Village!Branch,!and!to!obtain!
copies!thereof,!which!motion!was!granted!by!respondent!Judge.!The!examination!
of!said!account!took!place!on!January!23,!1992.!Petitioners!filed!a!motion!to!
nullify!the!proceedings!taken!thereat!since!they!were!not!present.!On!January!30,!
1992,!petitioners!and!their!coSdefendants!filed!a!memorandum!in!support!of!the!
motion!to!discharge!attachment.!Also!on!that!same!day,!Sun!Life!filed!another!
motion!for!examination!of!bank!accounts,!this!time!seeking!the!examination!of!
Account!No.!0041S0277S03!with!the!Bank!of!Philippine!Islands!(BPI)!—!which,!
incidentally,!petitioners!claim!not!to!be!owned!by!them!—!and!the!records!of!
Philippine!National!Bank!(PNB)!with!regard!to!checks!payable!to!Brunner.!Sun!
Life!asked!the!court!to!order!both!banks!to!comply!with!the!notice!of!
garnishment.!On!February!6,!1992,!respondent!Judge!issued!an!order!(1)!
denying!petitioners’!and!the!coSdefendants’!motion!to!discharge!the!amended!
writ!of!attachment,!(2)!approving!Sun!Life’s!additional!attachment,!(3)!granting!
Sun!Life’s!motion!to!examine!the!BPI!account,!and!(4)!denying!petitioners’!
motion!to!nullify!the!proceedings!of!January!23,!1992.!
%
ISSUE:%%
whether!or!not!respondent!Judge!had!acted!with!grave!abuse!of!discretion!
amounting!to!lack!or!in!excess!of!jurisdiction!in!allowing!the!examination!of!the!
bank!records!though!no!notice!was!given!to!them.!!
!
HELD:%
Petitioners!assail!the!acts!of!respondent!Judge!in!allowing!the!examination!of!
Urban!Banks’!records!and!in!ordering!that!the!examination!of!the!bank!records!
of!BPI!and!PNB!as!invalid!since!no!notice!of!said!examinations!were!ever!given!
them.!It!is!clear!from!the!provision!of!Section!10,!Rule!57!(ROC)!that!notice!need!
only!be!given!to!the!garnishee,!but!the!person!who!is!holding!property!or!credits!
belonging!to!the!defendant.!The!provision!does!not!require!that!notice!be!
furnished!the!defendant!himself,!except!when!there!is!a!need!to!examine!said!
defendant!“for!the!purpose!of!giving!information!respecting!his!
property.!Furthermore,!Section!10!Rule!57!is!not!incompatible!with!Republic!Act!
No.!1405,!as!amended,!(Bank!Deposits!Secrecy!Law)!for!Section!2!therefor!
provides!an!exception!“in!cases!where!the!money!deposited!or!invested!is!the!
subject!matter!of!the!litigation.”!The!examination!of!the!bank!records!is!not!a!
fishing!expedition,!but!rather!a!method!by!which!Sun!Life!could!trace!the!
proceeds!of!the!check!it!paid!to!petitioners!
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UNION%BANK%OF%THE%PHILIPPINES%vs.COURT%OF%APPEALS%and%ALLIED%
BANK%CORPORATION%
%G.R.%No.%134699,%December%23,%1999%
%
%FACTS:%
A!check!in!the!amount!of!One!Million!Pesos!was!drawn!against!Account!No.!
0111S01854S8!with!Allied!Bank!payable!to!the!order!of!one!Jose!Ch.!Alvarez.!The!
payee!deposited!the!check!with!petitioner!Union!Bank!who!credited!the!
P1,000,000.00!to!the!account!of!Mr.!Alvarez.!When!the!check!was!presented!for!
payment,!a!clearing!discrepancy!was!committed!by!Union!Bank's!clearing!staff!
when!the!amount!of!One!Million!Pesos!was!erroneously!"underSencoded"!to!One!
Thousand!Pesos!only.!Thus!Union!Bank!notified!Allied!Bank!of!the!discrepancy!
by!way!of!a!charge!slip!for!Nine!Hundred!NinetySNine!Thousand!Pesos.!The!
latter,!however,!refused!to!accept!the!charge!slip.!
Thereafter,!Union!Bank!filed!in!the!Regional!Trial!Court!a!petition!for!the!
examination!of!Account!No.!111S01854S8!but!dismissed!Union!Bank’s!petition!
saying!that!the!case!of!the!petitioner!does!not!fall!under!any!of!the!foregoing!
exceptions!to!warrant!a!disclosure!or!inquiry!into!the!ledgers/books!of!account!
of!Allied!Checking!Account!No.!111S01854S8.!!
The!Court!of!Appeals!affirmed!the!dismissal!of!the!petition,!ruling!that!the!case!
was!not!one!where!the!money!deposited!is!the!subject!matter!of!the!litigation!
because!according!to!Sec.!2!of!Republic!Act!No.!1405,!the!law!only!allows!the!
disclosure!of!bank!deposits!in!cases!where!the!money!deposited!is!the!subject!
matter!of!the!litigation!and!such!is!not!the!case!at!bar.!!
!
ISSUE:%
Whether!or!not!the!money!deposited!is!the!subject!matter!of!the!litigation!
thereby!warranting!the!disclosure!of!the!bank!deposit.!
!
HELD:%%
No.!It!does!not!appear!that!petitioner!is!seeking!reimbursement!from!the!account!
of!the!drawer!which!should!be!the!subject!matter!of!the!litigation!to!warrant!the!
disclosure!of!the!bank!deposit.!!
Although!petitioner!points!to!its!prayer!in!its!complaint!to!show!that!it!sought!
reimbursement!from!the!drawer's!account.!The!prayer,!however,!does!not!
specifically!state!that!it!was!seeking!recovery!of!the!amount!from!the!depositor's!
account.!Petitioner!merely!asked!that!judgment!be!rendered!in!favor!of!plaintiff!
against!defendant!sentencing!it!to!pay!plaintiff!the!sum!of!P990,!000.00.!
In!short,!petitioner!is!fishing!for!information!so!it!can!determine!the!culpability!
of!private!respondent!and!the!amount!of!damages!it!can!recover!from!the!latter.!
It!does!not!seek!recovery!of!the!very!money!contained!in!the!deposit.!The!subject!
matter!of!the!dispute!may!be!the!amount!of!P999,000.00!that!petitioner!seeks!
from!private!respondent!as!a!result!of!the!latter's!alleged!failure!to!inform!the!
former!of!the!discrepancy;!but!it!is!not!the!P999,000.00!deposited!in!the!
drawer's!account.!By!the!terms!of!R.A.!No.!1405,!the!"money!deposited"!itself!
should!be!the!subject!matter!of!the!litigation.!
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%
MARQUEZ%VS.%DESIERTO%
G.R.%No.%135882,%June%27,%2001%
%
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!thePhilippines,!Julia!Vargas!
Branch,!where!she!is!the!branch!manager.!The!accounts!to!be!inspected!were!
involvedin!a!case!pending!with!the!Ombudsman!entitled,!FactSFinding!and!
Intelligence!Bureau!(FFIB)!v.!AmadoLagdameo,!et!al.!
The!basis!of!the!Ombudsman!ordering!an!in!camera!inspection!of!the!accounts!is!
a!trail!managers!checkspurchased!by!one!George!Trivinio,!a!respondent!in!OMBS
097S0411,!pending!with!the!office!of!the!Ombudsmanby!virtue!of!its!power!to!
investigate!and!to!require!the!production!and!inspection!of!records!and!
documentsgranted!to!it!by!RA!No.6770.!
The!Ombudsman!issued!an!order!directing!petitioner!to!produce!the!bank!
documents!relative!to!accounts!inissue!in!line!of!her!persistent!refusal!to!comply!
with!Ombudsman's!order!which!they!sais!as!an!unjustified,!andis!merely!
intended!to!delay!the!investigation!of!the!case;!constitutes!disobedience!of!or!
resistance!to!a!lawfulorder!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!thatcompliance!with!the!Ombudsman’s!orders!would!be!
in!violation!of!RA.!No.!1405.But!petitioner’s!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!onsecrecy!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.!What’s!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!AntiSWiretapping!Law,!the!Secrecy!of!Bank!Deposits!Act,!and!the!
Intellectual!Property!Code!`!!
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CHINA%BANKING%CORPORATION%vs.%Ortega%
G.R.%No.%L`34964%January%31,%1973%
%
FACTS:%%
Vicente!Acaban!filed!a!complaint!against!Bautista!Logging!Co.,!Inc.,!B!&!B!Forest!
Development!Corporation!and!Marino!Bautista!for!the!collection!of!a!sum!of!
money.!Upon!motion!of!the!plaintiff!the!trial!court!declared!the!defendants!in!
default!for!failure!to!answer!within!the!reglementary!period,!and!authorized!the!
Branch!Clerk!of!Court!and/or!Deputy!Clerk!to!receive!the!plaintiff's!evidence.!
Judgment!by!default!was!rendered!against!the!defendants.!
To!satisfy!the!judgment,!the!plaintiff!sought!the!garnishment!of!the!bank!deposit!
of!the!defendant!B!&!B!Forest!Development!Corporation!with!the!China!Banking!
Corporation.!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.!In!reply,!the!bank's!cashier!invited!the!attention!of!the!Deputy!Sheriff!to!
the!provisions!of!Republic!Act!No.!1405!which,!it!was!alleged,!prohibit!the!
disclosure!of!any!information!relative!to!bank!deposits.!Thereupon!the!plaintiff!
filed!a!motion!to!cite!Tan!Kim!Liong!for!contempt!of!court.!
Trial!court!denied!the!plaintiff's!motion.!However,!Tan!Kim!Liong!was!ordered!
"to!inform!the!Court!within!five!days!from!receipt!of!this!order!whether!or!not!
there!is!a!deposit!in!the!China!Banking!Corporation!of!defendant!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!this!Court."!Tan!Kim!Liong!
moved!to!reconsider!but!was!turned!down.!Resisting!the!two!orders,!the!China!
Banking!Corporation!and!Tan!Kim!Liong!instituted!the!instant!petition.!
!
ISSUE:%%%
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.!!
!
HELD:%%
The!lower!court!did!not!order!an!examination!of!or!inquiry!into!the!deposit!of!B!
&!B!Forest!Development!Corporation,!as!contemplated!in!the!law.!It!merely!
required!Tan!Kim!Liong!to!inform!the!court!whether!or!not!the!defendant!B!&!B!
Forest!Development!Corporation!had!a!deposit!in!the!China!Banking!Corporation!
only!for!purposes!of!the!garnishment!issued!by!it,!so!that!the!bank!would!hold!
the!same!intact!and!not!allow!any!withdrawal!until!further!order.!!!
It!is!sufficiently!clear!from!the!foregoing!discussion!of!the!conference!committee!
report!of!the!two!houses!of!Congress!that!the!prohibition!against!examination!of!
or!inquiry!into!a!bank!deposit!under!Republic!Act!1405!does!not!preclude!its!
being!garnished!to!insure!satisfaction!of!a!judgment.!Indeed!there!is!no!real!
inquiry!in!such!a!case,!and!if!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.!
%
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Cases%on%the%Foreign%Currency%Deposit%Law%
Cancio%vs.%Court%of%Tax%Appeals%
%
FACTS:%
! Rosa!Cancio,!!bound!for!Hong!Kong,!was!apprehended!by!the!AVSECOM!
with!USD120,900.00!in!cash,!USD600.00!in!two!travelers!checks,!and!
Php1,500.00!!while!clearing!through!the!PreSboarding!area!of!MIA.!!Such!
apprehension!was!effected!because!Mrs.!Cancio!did!not!declare!her!
currency!when!she!passed!the!Customs!inspection!area.!
 Said!currencies!were!placed!and!concealed!inside!two!carton!
boxes!for!local!chocolates,!securely!!wrapped!and!taped!with!tin!
foilSback!paper.!
 Since!Mrs.!Cancio!failed!to!present!the!required!Central!Bank!
Authority,!such!currencies!were!accordingly'confiscated.!!Hence!
seizure!proceedings!were!held.!
! At!the!hearing!of!the!case,!Mrs.!Cancio!presented!(1)!a!certified!xerox!
copy!of!her!bank!book!for!foreign!currency!deposit!with!PCI!Bank,!(2)!
dollar!remittances!in!telegraphic!transfers!from!abroad!for!deposits!in!her!
account,!and!(3)!withdrawal!cards!which!tended!!to!show!that!she!was!a!
foreign!currency!depositor!pursuant!to!the!provisions!of!RA!6426,!as!
implemented!by!CB!Circular!343.!
 She!claimed!that!because!her!foreign!currency!deposit!could!not!be!
withdrawn!at!one!time,!she!made!her!withdrawals!on!several!
occasions.!
 She!further!claimed!that!from!HK,!she!and!her!family!intended!to!
proceed!to!the!US!for!medical!treatment!of!her!heart!ailment!
 And!that!the!US!currency!they!were!carrying!and!confiscated!from!
them!were!intended!principally!for!such!medical!purpose!and!for!
other!expenses,!and!that!such!were!concealed!and!hidden!for!
security!reasons.!
! By!reason!of!the!forfeiture!decreed!by!respondent!Commissioner!of!
Customs!of!both!the!foreign!and!local!currencies!due!to!petitioner's!
failure!to!present!a!Central!Bank!authority!to!bring!said!currencies!out!of!
the!country,!petitioner!appealed!to!respondent!CTA.!
 The!CTA!affirmed!the!forfeiture!of!the!US!currency!for!having!
violated!CB!Circular!Nos.!264!and!534in!relation!to!Section!2530(f)!
of!the!Tariff!and!Customs!Code.!
 The!forfeiture!of!the!Php1,500.00!was!reversed!on!the!ground!that!
since!petitioner!was!travelling!with!her!husband!and!3!children,!
said!amount!did!not!exceed!the!Php500.00!that!each!traveller!is!
allowed!to!bring!out!of!the!country!without!a!CB!permit!pursuant!
to!paragraph!4!of!CB!Circular!No.!383.!
%
ISSUE:%%
WON!respondent!court!had!committed!reversible!error!in!upholding!the!
forfeiture!of!the!foreign!currencies!in!question.!
!
HELD:%Yes.%
%
RATIO:!
! It!is!true!that!in!so!far!as!the!exportation!or!taking!out!of!foreign!currency!
from!the!country!is!concerned,!Central!Bank!Circular!No.!265,!issued!on!
November!20,!1968,!particularly!paragraph!3!thereof.!!Similarly,!Central!
bank!Circular!No.!534,!issued!on!July!19,!1976,!reiterates!and!provides!in!
Sec.!3!thereof!as!follows:!
Sec.!3.!Unless!specifically!authorized!by!the!Central!Bank!or!allowed!under!
existing!international!agreements!or!Central!Bank!regulations,!no!person!shall!
take!or!transmit!or!attempt!to!take!or!transmit!foreign!exchange,!in!any!form!out!
of!the!Philippines!only,!through!other!persons,!through!the!mails,!or!through!
international!carriers.!
! Peculiar!to!the!present!controversy!is!the!fact!that,!as!stated!previously,!
petitioner!is!a!foreign!currency!depositor.!!Relevant!and!applicable!to!her!
is!the!following!provision!of!the!"Foreign!Currency!Deposit!Act!of!the!
Philippines"!(Republic!Act!No.!6426,!as!amended),!which!took!effect!upon!
its!approval!on!April!4,1972:!
SEC.!5.!Withdrawability!and!transferability!of!deposits.!—!There!shall!be!no!
restriction!on!the!withdrawal!by!the!depositor!of!his!deposit!or!on!the!
transferability!of!the!same!abroad!except!those!arising!from!the!contract!
between!the!depositor!and!the!bank.!
 Under!the!foregoing!provision,!the!transferability!abroad!of!
foreign!currency!deposits!is!unrestricted.!!Only!one!exception!is!
provided!for!therein,!which!is,!any!restriction!"!from!the!contract!
between!the!depositor!and!the!bank."!Neither!is!a!Central!Bank!
authority!required!for!the!transferability!abroad!of!foreign!
currency!deposits.!
! The!IRR!of!said!Act,!however,!provides!in!Sec.!11!that!“Subject!only!to!the!
terms!of!the!contract!between!the!bank!and!the!depositor,!the!latter!shall!
have!ageneral!license!to!withdraw!his!deposit,!notwithstanding!any!
change!in!policy!or!regulations.”!
 Respondent!Court!has!taken!the!position!that!the!foregoing!
provision!its!the!right!of!the!depositor!to!that!of!withdrawal!and!
withholds!from!him!the!right!of!transferability!abroad.!
 SC:!!The!contention!of!respondent!court!is!untenable.!!In!a!CircularS
Letter!issued!by!the!Central!Bank,!it!is!provided!that!“...the!banks!
authorized!to!accept!foreign!currency!deposits!under!the!
provisions!of!RA!6426,!as!amended,!and!PD!1035!and!as!
implemented!by!Central!Bank!Circular!343!and!547,!are!hereby!
instructed!to!advise'their'foreign'currency'depositors'who'are'
withdrawing'funds'for'travel'purposes'to'carry'with'them'the'
certificate'of'withdrawal'that'the'banks'shall'issue.'The'travellers'
shall'present'the'certifications'to'the'Customs'and'Central'Bank'
personnel'at'the'MIA,'if'requested.”!
! It!is!a!fact!that!petitioner!couldnot!present!a!certificate!of!withdrawal!at!
the!MIA!when!she!was!about!to!depart.!That!being!so,!as!cited!by!the!
CircularSLetter!abovequoted,!it!is!the!authorized!depository!bank!which!
should!advise!its!depositors!to!carry!with!them!the!certificate!of!
withdrawal.!
  At!any!rate,!the!presentation!by!petitioner!of!her!foreign!currency!
bank!book!and!withdrawal!slips!is!considered!substantial!
compliance!for!purposes!of!this!case.!
! As!a!foreign!currency!depositor,!therefore,!petitioner!cannot!be!adjudged!
to!have!violated!the!aforestated!Central!Bank!Circulars.!It!follows!that!
neither!is!there!room!for!the!application!of!Section!2530(f)!of!the!Tariff!
and!Customs!Code,!as!amended,!which!provides!for!the!forfeiture!of!any!
article!and!other!objects,!the!exportation!of!which!is!effected!or!
attempted!contrary!to!law.!
! This!is!not!to!condone!petitioner's!failure!to!declare!the!foreign!currency!
she!was!carrying!out!of!the!country!but!just!to!stress!that!the!Foreign!
Currency!Deposit!Act!grants!petitioner!the!right!of!transferability!of!her!
funds!abroad!except!that!she!was!not!advised!by!her!bank!to!secure,!and!
consequently!was!unable!to!present,!the!necessary!certificate!of!
withdrawal!from!said!bank.!
! Indeed,!given!the!underlying!objective!of!the!Foreign!Currency!Deposit!
Act,!as!amended,!which!is!to!attract!and!invite!the!deposit!of!foreign!
currencies!which!are!acceptable!as!part!of!the!international!reserve!in!
duly!authorized!banks!in!order!that!they!may!be!put!into!the!stream!of!
the!banking!system,!it!would!be!to!defeat!the!very!purpose!of!the!law!to!
place!undue!restrictions!on!the!transferability!of!such!funds.!The!
countervailing!effect!would!be!to!discourage!prospective!foreign!currency!
depositors!to!the!detriment!of!the!banking!system.!
!
RESPONDENT!CTA!DECISION!SET!ASIDE!in!so!far!as!it!upheld!the!forfeiture!by!
Customs!Commissioner!of!US!currencies,!and!AFFIRMED!in!so!far!as!it!reversed!
the!forfeiture!of!Phil.!purrency.!
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Intengan%vs.%Court%of%Appeals%
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Facts:%
On!September!21,!1993,!Citibank!filed!a!complaint!for!violation!of!section!31!in!
relation!to!section!144!of!the!Corporation!Code!against!two!(2)!of!its!officers,!
Dante!L.!Santos!and!Marilou!Genuino.!Attached!to!the!complaint!was!an!affidavit!
executed!by!private!respondent!Vic!Lim,!a!viceSpresident!of!CitibankAs!evidence,!
Lim!annexed!bank!records!purporting!to!establish!the!deception!practiced!by!
Santos!and!Genuino.!Some!of!the!documents!pertained!to!the!dollar!deposits!of!
petitioners!Carmen!Ll.!Intengan,!Rosario!Ll.!Neri,!and!Rita!P.!Brawner.In!turn,!
private!respondent!Joven!Reyes,!viceSpresident/business!manager!of!the!Global!
Consumer!Banking!Group!of!Citibank,!admits!to!having!authorized!Lim!to!state!
the!names!of!the!clients!involved!and!to!attach!the!pertinent!bank!records,!
including!those!of!petitioners’Petitioners!aver!that!respondents!violated!RA!
1405.!
!
Issue:%%
Whether!or!not!Respondents!are!liable!for!violation!of!Secrecy!of!Bank!Deposits!
Act,!RA!1405.!
!
Held:%%
No.!The!accounts!in!question!are!U.S.!dollar!deposits;!consequently,!the!
applicable!law!is!not!Republic!Act!No.!1405!but!Republic!Act!(RA)!No.!6426,!
known!as!the!“Foreign!Currency!Deposit!Act!of!the!Philippines,”!However,!
applying!Act!No.!3326,!the!offense!prescribes!in!eight!years,!therefore,!per!
available!records,!private!respondents!may!no!longer!be!haled!before!the!courts!
for!violation!of!Republic!Act!No.!6426.!!
!
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Van%Twest%v.%ca%
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FACTS:%
Alexander!van!Twest!and!Gloria!Anacle!to!opened!a!joint!foreign!currency!
savings!account!with!Inter!bank!to!hold!funds!which!belonged!entirely!and!
exclusively!toVanTwest,to!facilitate!the!funding!of!certain!business!
undertakingsof!both!of!them!and!which!funds!were!to!be!temporarily!(held)!
intrust!by!Gloria!Aanacleto!who!shall!turnover!the!same!to!plaintiff!upon!
demand!
SVanTwest!further!alleged!that!withdrawals!from!the!account!we!!real!ways!
made!through!their!in!signatures!that!when!his!business!relationship!with!Gloria!
Anacle!to!turned!sour,!the!latter!unilaterally!closed!their!joint!account,!withdrew!
the!remaining!balance!of!and!placed!the!money!in!her!own!personal!account!
with!the!same!bank.!
SVanTwest!thus!soughtan!injunctive!writ!to!prevent!Gloria!Anacle!to!from!with!
drawing!the!money!at!any!time!and!there!by!defeatVan!Twest's!main!and!
pending!action.!
SThe!RTC!granted!the!writ!of!preliminary!injunction.!
SCA!reversed!the!order!holding!that!Anacletois!a!co!owner!of!the!funds!who!
could!unilaterally!control!the!application!thereof.!
SHence,!petition!for!review!seeking!there!instatement!of!writ!of!preliminary!
injunction.!
SAnacleto!contends!for!the!first!time!that!the!personal!currency!deposit!she!is!
maintaining!is!exempt!from!process!issued!by!courts!pursuant!to!RA!6426.!
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ISSUE:%
SWhether!or!not!Anacleto!may!invoke!RA!6426.!
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HELD:%
SAnacleto's!contentions!do!not!persuade.Her!belated!in!vocation!of!the!
provisions!of!R.A.No.6426!as!amended!violates!basic!procedural!dueprocess!by!
interposing!anew!matter!before!this!Cour!tthe!consideration!of!which!would!
further!delay!a!final!disposition!on!the!propriety!of!petitioner!of!petitioner's!
application!foran!injunctive!writ.!
On!a!substantive,!the!Court!holds!that!the!privileges!extended!by!the!statute!cited!
by!private!respondent!are!actually!enjoyed,!and!are!invocable!only,!by!the!
petitioner,!both!because!private!respondent's!transactions!fall!outside!the!ambit!
of!the!statute,!and!because!petitioner!is!the!owner!of!the!foreign!exchange!fund!
subject!of!this!case.!!
This!conclusion!is!anchored!on!the!consistent!and!contemporaneous!
administrative!construction!by!the!Central!Bank!of!the!basic!!statute,as!
manifested!in!
the!relevant!circulars!issued!by!it!in!implementation!of!that!law,!which!are!
entitled!to!great!respect!by!the!courts.!
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China%Banking%Corporation%v.%CA,%G.R.%No.%140687,%December%18,%2006%
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I.%%%%THE%FACTS%
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A!complaint!for!recovery!of!sums!of!money!and!annulment!of!sales!of!real!
properties!and!shares!of!stock!was!filed!by!Jose!Gotianuy!against!his!sonSinSlaw,!
George!Dee,!and!his!daughter,!Mary!Margaret!Dee.!Jose!Gotianuy!accused!his!
daughter!Mary!Margaret!Dee!of!stealing,!among!his!other!properties,!US!dollar!
deposits!with!Citibank!N.A.!amounting!to!not!less!than!P35,000,000.00!and!
US$864,000.00.!Mary!Margaret!Dee!received!these!amounts!from!Citibank!N.A.!
through!checks!which!she!allegedly!deposited!at!China!Banking!Corporation!
(China!Bank).!!
!
Jose!Gotianuy!died!during!the!pendency!of!the!case!before!the!trial!court.!He!was!
substituted!by!his!other!daughter,!Elizabeth!Gotianuy!Lo.!The!latter!presented!
six!US!Dollar!checks!withdrawn!by!Mary!Margaret!Dee!from!Jose!Gotianuy’s!US!
dollar!placement!with!Citibank.!In!the!course!of!the!trial,!the!lower!court!ordered!
two!employees!of!petitioner!China!Bank!to!testify!and!disclose!in!whose!name!
the!dollar!fund!was!deposited.!The!CA!affirmed!the!trial!court’s!order;!thus,!
China!Bank!appealed!to!the!Supreme!Court.!
!
II.%%%%THE%ISSUE%
!
May!the!Citibank!dollar!checks!with!Jose!Gotianuy!and/or!Mary!Margaret!Dee!as!
payees,!which!were!deposited!with!petitioner!China!Bank,!be!looked!into!
notwithstanding!the!law!on!secrecy!of!foreign!currency!deposits?!Corollarily,!
may!Jose!Gotianuy!be!considered!a!depositor!who!is!entitled!to!seek!an!inquiry!
over!the!said!foreign!currency!deposits?!
!
III.%%%THE%RULING%
!
[The!Supreme!Court!DENIED!the!petition,!AFFIRMED!the!decision!of!the!CA!pro!
hac!vice,!and!REMANDED!the!case!to!the!trial!court!for!continuation!of!hearing!
with!utmost!dispatch!consistent!with!this!ruling.]!
!
YES,!the!Citibank!dollar!checks!with!Jose!Gotianuy!and/or!Mary!Margaret!Dee!as!
payees,!which!were!deposited!with!petitioner!China!Bank,!may!be!looked!into!
notwithstanding!the!law!on!secrecy!of!foreign!currency!deposits.!
!
Sec.!8!of!R.A.!6426,!the!Foreign!Currency!Deposit!Act,!provides!that!all!
authorized!foreign!currency!deposits!are!considered!absolutely!confidential!in!
nature!and!may!not!be!inquired!into.!Under!the!same!provision,!there!is!only!one!
exception!to!this!rule,!that!is,!when!disclosure!is!allowed!upon!the!written!
permission!of!the!depositor.!
!
In!this!case,!Jose!Gotianuy!was!considered!by!the!Court!as!a!coSdepositor!of!Mary!
Margaret!Dee.!The!Court!reasoned!that!since!Jose!Gotianuy!is!the!named!coS
payee!of!Mary!Margaret!Dee!in!the!subject!checks,!which!were!deposited!in!
China!Bank,!then!Jose!Gotianuy!is!likewise!a!depositor!thereof.!On!that!basis,!no!
written!consent!from!Mary!Margaret!Dee!is!necessary!for!the!examination!of!the!
foreign!currency!deposits.!As!the!owner!of!the!funds!unlawfully!taken!and!which!
are!undisputably!now!deposited!with!China!Bank,!Jose!Gotianuy!has!the!right!to!
inquire!into!the!said!deposits.!
!
A!depositor,!in!cases!of!bank!deposits,!is!one!who!pays!money!into!the!bank!in!
the!usual!course!of!business,!to!be!placed!to!his!credit!and!subject!to!his!check!or!
the!beneficiary!of!the!funds!held!by!the!bank!as!trustee.!On!this!score,!the!
observations!of!the!Court!of!Appeals!are!worth!reiterating:!
!
Furthermore,!it!is!indubitable!that!the!Citibank!checks!were!drawn!against!the!
foreign!currency!account!with!Citibank,!NA.!The!monies!subject!of!said!checks!
originally!came!from!the!late!Jose!Gotianuy,!the!owner!of!the!account.!Thus,!he!
also!has!legal!rights!and!interests!in!the!CBC!account!where!said!monies!were!
deposited.!More!importantly,!the!Citibank!checks!(Exhibits!"AAA"!to!"AAAS5")!
readily!demonstrate!(sic)!that!the!late!Jose!Gotianuy!is!one!of!the!payees!of!said!
checks.!Being!a!coSpayee!thereof,!then!he!or!his!estate!can!be!considered!as!a!coS
depositor!of!said!checks.!Ergo,!since!the!late!Jose!Gotianuy!is!a!coSdepositor!of!
the!CBC!account,!then!his!request!for!the!assailed!subpoena!is!tantamount!to!an!
express!permission!of!a!depositor!for!the!disclosure!of!the!name!of!the!account!
holder.!The!April!16,!1999!Order!perforce!must!be!sustained.!(Emphasis!
supplied.)!
!
In!the!complaint!of!Jose!Gotianuy,!he!alleged!that!his!US!dollar!deposits!with!
Citibank!were!illegally!taken!from!him.!On!the!other!hand,!China!Bank!employee!
Cristuta!Labios!testified!that!Mary!Margaret!Dee!came!to!China!Bank!and!
deposited!the!money!of!Jose!Gotianuy!in!Citibank!US!dollar!checks!to!the!dollar!
account!of!her!sister!Adrienne!Chu.!This!fortifies!the!Court’s!conclusion!that!an!
inquiry!into!the!said!deposit!at!China!Bank!is!justified.!At!the!very!least,!Jose!
Gotianuy!as!the!owner!of!these!funds!is!entitled!to!a!hearing!on!the!whereabouts!
of!these!funds.!
!
All!things!considered!and!in!view!of!the!distinctive!circumstances!attendant!to!
the!present!case,!the!Court!was!constrained!to!render!a!limited!pro!hac!vice!
ruling.!Clearly!it!was!not!the!intent!of!the!legislature!when!it!enacted!the!law!on!
secrecy!on!foreign!currency!deposits!to!perpetuate!injustice.!This!Court!is!of!the!
view!that!the!allowance!of!the!inquiry!would!be!in!accord!with!the!rudiments!of!
fair!play,!the!upholding!of!fairness!in!our!judicial!system!and!would!be!an!
avoidance!of!delay!and!timeSwasteful!and!circuitous!way!of!administering!
justice.!
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Salvacion%v.%Central%Bank,%278%SCRA%27%(1997)%
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FACTS:%
SGreg!Bartelli,!an!American!tourist!coaxed!and!lured!Karen!Salvacion,!12!years!
old!to!go!with!him!to!his!apartment!and!raped!her!there!for!several!times.S
However,!Bartelli!was!able!to!escape!from!jail!and!avoid!punishment.SThe!
criminal!cases!were!archived!pending!the!arrest!of!Bartelli.SOn!the!other!hand,!
Karen!received!a!favorable!judgment!in!the!civil!case!for!damageSAfter!the!
decision!of!the!trial!court!become!final,!Karen!tried!to!execute!on!Bartelli’s!dollar!
account!with!China!Banking!Corporation.SAccordingly,!the!sheriff!served!a!Notice!
of!Garnishment!on!China!Banking.SChina!Banking!invoked!Section!113!of!
CB!Circular!960!to!the!effect!that!the!dollar!deposits!of!Bartelli!are!exempt!from!
attachment,!garnishment,!or!any!other!order!or!process!of!any!court,!legislative!
body,!government!agency!or!any!administrative!body!whatsoever.SUpon!inquiry!
with!CB!on!whether!Sec!113!of!CB!Circular!960!has!any!exception,!CB!responded!
that!the!provisions!ABSOLUTE,!the!purpose!being!to!encourage!dollar!accounts!
within!the!country’s!banking!system!which!would!help!in!the!development!of!the!
economy!and!that!there!is!no!intention!to!render!futile!the!basic!rights!of!a!
person,!but!it!is!the!law!though!the!law!maybe!harsh!as!some!perceive!it.!
Compliance!is!still!enjoined.SHence,!this!petition!for!declaratory!relief.!
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ISSUE:%
SWhether!or!not!the!peculiar!circumstances!of!the!case!warrants!the!execution!
on!the!foreign!currency!account!despite!the!exemption!from!court!processes!
under!RA!6426.!
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HELD:%
SThe!provisions!of!Sec!113!of!CB!circular!960!and!PD!1246,!in!so!far!as!it!amends!
Section!8!of!RA!6426!are!inapplicable!to!this!case!because!of!its!peculiar!
circumstances.!CBC!is!required!to!comply!with!the!writ!of!execution!and!release!
to!Karen!the!dollar!deposit!of!Bartelli!in!such!amount!would!satisfy!the!
judgment.!
SProvisions!of!The!application!of!the!law!depend!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!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!.“Ninguno!non!deue!
enriquecerse!tortizerzmente!con!damo!de!otro.”!Simply!stated,!when!the!statute!
is!silent!or!ambiguous,!this!is!one!of!those!fundamental!solutions!that!would!
respond!to!the!vehement!urge!of!conscience.!
SIt!is!worth!mentioning!that!R.A.!No.!6426!was!enacted!in!1983!or!at!a!time!when!
the!country’s!economy!was!in!a!shambles;!when!foreign!investments!were!
minimal!and!presumably,!this!was!the!reason!why!said!statute!was!enacted.!But!
the!realities!of!the!present!times!show!that!the!country!has!recovered!
economically;!and!even!if!not,!the!questioned!law!still!denies!those!entitled!to!
due!process!of!law!for!being!unreasonable!and!oppressive.!The!intention!of!the!
questioned!law!may!be!good!when!enacted.!The!law!failed!to!anticipate!the!
iniquitous!effects!producing!outright!injustice!and!inequality!such!as!as!the!case!
before!us.SIt!would!be!unthinkable,!that!the!questioned!Section!113!of!Central!
Bank!No.!960!would!be!used!as!a!device!by!accused!Greg!Bartelli!for!wrongdoing,!
and!in!so!doing,!acquitting!the!guilty!at!the!expense!of!the!innocent.SCall!it!what!
it!may!–!but!is!there!no!conflict!of!legal!policy!here?!Dollar!against!
Peso?!Upholding!the!final!and!executory!judgment!of!the!lower!court!against!the!
Central!Bank!Circular!protecting!the!foreign!depositor?!Shielding!or!protecting!
the!dollar!deposit!of!a!transient!alien!depositor!against!injustice!to!a!national!and!
victim!of!a!crime?!This!situation!calls!for!fairness!against!legal!tyranny.!
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