ALFREDO CHING, Petitioner, v. HON. COURT OF APPEALS, HON. ZOSIMO Z. ANGELES, RTC - BR.

58, MAKATI, METRO MANILA,

PEOPLE OF THE PHILIPPINES AND ALLIED BANKING CORPORATION, Respondents.

DECISION

BUENA, J.:

Confronting the Court in this instant petition for review on certiorari under Rule 45 is the task of resolving the issue of whether
the pendency of a civil action for damages and declaration of nullity of documents, specifically trust receipts, warrants the
suspension of criminal proceedings instituted for violation of Article 315 1(b) of the Revised Penal Code, in relation to P.D. 115,
otherwise known as the "Trust Receipts Law" .chanroblesvirtuallawlibrary

Petitioner Alfredo Ching challenges before us the decision 1 of the Court of Appeals promulgated on 27 January 1993 in CA G.R.
SP No. 28912, dismissing his "Petition for Certiorari and Prohibition with Prayer for Issuance of Temporary Restraining
Order/Preliminary Injunction", on the ground of lack of merit.

Assailed similarly is the resolution 2 of the Court of Appeals dated 28 June 1993 denying petitioner’s motion for
reconsideration.

As borne by the records, the controversy arose from the following facts:chanrob1es virtual 1aw library

On 04 February 1992, 3 petitioner was charged before the Regional Trial Court of Makati (RTC- Makati), Branch 58, with four
counts of estafa punishable under Article 315 par. 1(b) of the Revised Penal Code, in relation to Presidential Decree 115,
otherwise known as the "Trust Receipts Law" .

The four separate informations 4 which were couched in similar language except for the date, subject goods and amount
thereof, charged herein petitioner in this wise:jgc:chanrobles.com.ph

"That on or about the (18th day of May 1981; 3rd day of June 1981; 24th day of June 1981 and 24th day of June 1981), in the
Municipality of Makati, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused
having executed a trust receipt agreement in favor of Allied Banking Corporation in consideration of the receipt by the said
accused of goods described as ‘12 Containers (200 M/T) Magtar Brand Dolomites’; ‘18 Containers (Zoom M/T) Magtar Brand
Dolomites’; ‘High Fired Refractory Sliding Nozzle Bricks’; and ‘High Fired Refractory Sliding Nozzle Bricks’ for which there is now
due the sum of (P278,917.80; P419,719.20; P387,551.95; and P389,085.14 respectively) under the terms of which the accused
agreed to sell the same for cash with the express obligation to remit to the complainant bank the proceeds of the sale and/or to
turn over the goods, if not sold, on demand, but the accused, once in possession of said goods, far from complying with his
obligation and with grave abuse of confidence, did then and there, willfully, unlawfully and feloniously misappropriate,
misapply and convert to his own personal use and benefit the said goods and/or the proceeds of the sale thereof, and despite
repeated demands, failed and refused and still fails and refuses, to account for and/or remit the proceeds of sale thereof to the
Allied Banking Corporation to the damage and prejudice of the said complainant bank in the aforementioned amount of
(P278,917.80; P419,719.20; P387,551.95; and P389,085.14)."cralaw virtua1aw library

On 10 February 1992, an "Omnibus Motion 5 to Strike Out Information, or in the Alternative to Require Public Prosecutor to
Conduct Preliminary Investigation, and to Suspend in the Meantime Further Proceedings in these Cases," was filed by the
petitioner.

In an order dated 13 February 1992, the Regional Trial Court of Makati, Branch 58, acting on the omnibus motion, required the
prosecutor’s office to conduct a preliminary investigation and suspended further proceedings in the criminal cases.

On 05 March 1992, petitioner Ching, together with Philippine Blooming Mills Co. Inc., filed a case 6 before the Regional Trial
Court of Manila (RTC-Manila), Branch 53, for declaration of nullity of documents and for damages docketed as Civil Case No. 92-
60600, entitled "Philippine Blooming Mills, Inc. et. al. v. Allied Banking Corporation."cralaw virtua1aw library

On 07 August 1992, Ching filed a petition 7 before the RTC-Makati, Branch 58, for the suspension of the criminal proceedings on
the ground of prejudicial question in a civil action.

1
The prosecution then filed an opposition to the petition for suspension, against which opposition, herein petitioner filed a
reply. 8

On 26 August 1992, the RTC-Makati issued an order 9 which denied the petition for suspension and scheduled the arraignment
and pre-trial of the criminal cases. As a result, petitioner moved to reconsider 10 the order to which the prosecution filed an
opposition.

In an order 11 dated 04 September 1992, the RTC-Makati, before which the criminal cases are pending, denied petitioner’s
motion for reconsideration and set the criminal cases for arraignment and pre-trial.

Aggrieved by these orders 12 of the lower court in the criminal cases, petitioner brought before the Court of Appeals a petition
for certiorari and prohibition which sought to declare the nullity of the aforementioned orders and to prohibit the RTC-Makati
from conducting further proceedings in the criminal cases.

In denying the petition, 13 the Court of Appeals, in CA G.R. SP No. 28912, ruled:jgc:chanrobles.com.ph

". . . Civil Case No. 90-60600 pending before the Manila Regional Trial Court seeking(sic) the declaration of nullity of the trust
receipts in question is not a prejudicial question to Criminal Case Nos. 92-0934 to 37 pending before the respondent court
charging the petitioner with four counts of violation of Article 315, par. 1(b), RPC, in relation to PD 115 as to warrant the
suspension of the proceedings in the latter . . ."cralaw virtua1aw library

Consequently, petitioner filed a motion for reconsideration of the decision which the appellate court denied for lack of merit,
via a resolution 14 dated 28 June 1993.

Notwithstanding the decision rendered by the Court of Appeals, the RTC-Manila, Branch 53 in an order dated 19 November
1993 in Civil Case No. 92-60600, admitted petitioner’s amended complaint 15 which, inter alia, prayed the court for a
judgment:chanrob1es virtual 1aw library

x x x

"1. Declaring the ‘Trust Receipts,’ annexes D, F, H and J hereof, null and void, or otherwise annulling the same, for failure to
express the true intent and agreement of the parties;

"2. Declaring the transaction subject hereof as one of pure and simple loan without any trust receipt agreement and/or not one
involving a trust receipt, and accordingly declaring all the documents annexed hereto as mere loan documents . . ." (Emphasis
ours)

In its amended answer, 16 herein private respondent Allied Banking Corporation submitted in riposte that the transaction
applied for was a "letter of credit/trust receipt accommodation" and not a "pure and simple loan with the trust receipts as
mere additional or side documents", as asserted by herein petitioner in its amended complaint. 17

Through the expediency of Rule 45, petitioner seeks the intervention of this Court and prays:jgc:chanrobles.com.ph

"After due consideration, to render judgment reversing the decision and resolution, Annexes A and B hereof, respectively, and
ordering the suspension of Criminal Cases (sic) Nos. 92-0934 to 92-0937, inclusive, entitled "People of the Philippines v. Alfredo
Ching" pending before Branch 58 of the Regional Trial Court of Makati, Metro Manila, until final determination of Civil Case No.
92-600 entitled Philippine Blooming Mills Co. Inc. and Alfredo Ching v. Allied Banking Corporation" pending before Branch 53 of
the Regional Trial Court of Manila."cralaw virtua1aw library

The instant petition is bereft of merit.

We agree with the findings of the trial court, as affirmed by the Court of Appeals, that no prejudicial question exists in the
present case.

As defined, a prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved
therein, and the cognizance of which pertains to another tribunal. The prejudicial question must be determinative of the case

2
before the court but the jurisdiction to try and resolve the question must be lodged in another court or tribunal. 18

It is a question based on a fact distinct and separate from the crime but so intimately connected with it that it determines the
guilt or innocence of the accused, and for it to suspend the criminal action, it must appear not only that said case involves facts
intimately related to those upon which the criminal prosecution would be based but also that in the resolution of the issue or
issues raised in the civil case, the guilt or innocence of the accused would necessarily be determined. 19 It comes into play
generally in a situation where a civil action and a criminal action are both pending and there exists in the former an issue which
must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is
resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. 20

More simply, for the court to appreciate the pendency of a prejudicial question, the law, 21 in no uncertain terms, requires the
concurrence of two essential requisites, to wit:chanrob1es virtual 1aw library

a) The civil action involves an issue similar or intimately related to the issue raised in the criminal action; and

b) The resolution of such issue determines whether or not the criminal action may proceed.

Verily, under the prevailing circumstances, the alleged prejudicial question in the civil case for declaration of nullity of
documents and for damages, does not juris et de jure determine the guilt or innocence of the accused in the criminal action for
estafa. Assuming arguendo that the court hearing the civil aspect of the case adjudicates that the transaction entered into
between the parties was not a trust receipt agreement, nonetheless the guilt of the accused could still be established and his
culpability under penal laws determined by other evidence. To put it differently, even on the assumption that the documents
are declared null, it does not ipso facto follow that such declaration of nullity shall exonerate the accused from criminal
prosecution and liability.

Accordingly, the prosecution may adduce evidence to prove the criminal liability of the accused for estafa, specifically under
Article 315 1(b) of the Revised Penal Code which explicitly provides that said crime is committed:jgc:chanrobles.com.ph

". . . (b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received
by the offender in trust or on commission, or for administration, or any other obligation involving the duty to make delivery of
or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received
such money, goods, or other property."cralaw virtua1aw library

Applying the foregoing principles, the criminal liability of the accused for violation of Article 315 1(b) of the Revised Penal Code,
may still be shown through the presentation of evidence to the effect that: (a) the accused received the subject goods in trust
or under the obligation to sell the same and to remit the proceeds thereof to Allied Banking Corporation, or to return the
goods, if not sold; (b) that accused Ching misappropriated or converted the goods and/or the proceeds of the sale; (c) that
accused Ching performed such acts with abuse of confidence to the damage and prejudice of Allied Banking Corporation; and
(d) that demand was made by the bank to herein petitioner.

Presidential Decree 115, otherwise known as the "Trust Receipts Law", specifically Section 13 thereof,
provides:jgc:chanrobles.com.ph

"The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust
receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents
or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime
of estafa, punishable under the provisions of Article Three hundred fifteen, paragraph one (b) of Act Numbered Three thousand
eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code."cralaw virtua1aw library

We must stress though, that an act violative of a trust receipt agreement is only one mode of committing estafa under the
abovementioned provision of the Revised Penal Code. Stated differently, a violation of a trust receipt arrangement is not the
sole basis for incurring liability under Article 315 1(b) of the Code.

In Jimenez v. Averia, 22 where the accused was likewise charged with estafa, this Court had occasion to rule that a civil case
contesting the validity of a certain receipt is not a prejudicial question that would warrant the suspension of criminal
proceedings for estafa.chanroblesvirtuallawlibrary

In the abovementioned case, a criminal charge for estafa was filed in the Court of First Instance of Cavite against the two

3
accused. The information alleged that the accused, having received the amount of P20,000.00 from Manuel Jimenez for the
purchase of a fishing boat, with the obligation on the part of the former to return the money in case the boat was not
purchased, misappropriated the said amount to the damage and prejudice of Jimenez. 23

Before arraignment, the accused filed a civil case contesting the validity of a certain receipt signed by them. In the receipt, the
accused acknowledged having received the aforesaid sum, in addition to the amount of P240.00 as agent’s commission. The
complaint, however, alleged that the accused never received any amount from Jimenez and that the signatures on the
questioned receipt were secured by means of fraud, deceit and intimidation.

In ruling out the existence of prejudicial question, we declared:jgc:chanrobles.com.ph

". . . It will be readily seen that the alleged prejudicial question is not determinative of the guilt or innocence of the parties
charged with estafa, because even on the assumption that the execution of the receipt whose annulment they sought in the
civil case was vitiated by fraud, duress or intimidation, their guilt could still be established by other evidence showing, to the
degree required by law, that they had actually received from the complainant the sum of P20,000.00 with which to buy for him
a fishing boat, and that, instead of doing so, they misappropriated the money and refused or otherwise failed to return it to him
upon demand. . ."cralaw virtua1aw library

Furthermore, petitioner submits that the truth or falsity of the parties’ respective claims as regards the true nature of the
transactions and of the documents, shall have to be first determined by the Regional Trial Court of Manila, which is the court
hearing the civil case.

While this may be true, it is no less true that the Supreme Court may, on certain exceptional instances, resolve the merits of a
case on the basis of the records and other evidence before it, most especially when the resolution of these issues would best
serve the ends of justice and promote the speedy disposition of cases.

Thus, considering the peculiar circumstances attendant in the instant case, this Court sees the cogency to exercise its plenary
power:jgc:chanrobles.com.ph

"It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root
or branch to bear the seeds of future litigation. No useful purpose will be served if a case or the determination of an issue in a
case is remanded to the trial court only to have its decision raised again to the Court of Appeals and from there to the Supreme
Court (citing Board of Commissioners v. Judge Joselito de la Rosa and Judge Capulong, G.R. Nos. 95122-23).

"We have laid down the rule that the remand of the case or of an issue to the lower court for further reception of evidence is
not necessary where the Court is in position to resolve the dispute based on the records before it and particularly where the
ends of justice would not be subserved by the remand thereof (Escudero v. Dulay, 158 SCRA 69). Moreover, the Supreme Court
is clothed with ample authority to review matters, even those not raised on appeal if it finds that their consideration is
necessary in arriving at a just disposition of the case." 24

On many occasions, the Court, in the public interest and for the expeditious administration of justice, has resolved actions on
the merits instead of remanding them to the trial court for further proceedings, such as where the ends of justice would not be
subserved by the remand of the case.25cralaw:red

Inexorably, the records would show that petitioner signed and executed an application and agreement for a commercial letter
of credit to finance the purchase of imported goods. Likewise, it is undisputed that petitioner signed and executed trust receipt
documents in favor of private respondent Allied Banking Corporation.

In its amended complaint, however, which notably was filed only after the Court of Appeals rendered its assailed decision,
petitioner urges that the transaction entered into between the parties was one of "pure loan without any trust receipt
agreement." According to petitioner, the trust receipt documents were intended merely as "additional or side documents
covering the said loan" contrary to petitioner’s allegation in his original complaint that the trust receipts were executed as
collateral or security.

We do not agree. As Mr. Justice Story succinctly puts it: "Naked statements must be entitled to little weight when the parties
hold better evidence behind the scenes." 26

Hence, with affirmance, we quote the findings of the Court of Appeals:jgc:chanrobles.com.ph

4
"The concept in which petitioner signed the trust receipts, that is whether he signed the trust receipts as such trust receipts or
as a mere evidence of a pure and simple loan transaction is not decisive because precisely, a trust receipt is a security
agreement of an indebtedness."cralaw virtua1aw library

Contrary to petitioner’s assertions and in view of jurisprudence established in this jurisdiction, a trust receipt is not merely an
additional or side document to a principal contract, which in the instant case is alleged by petitioner to be a pure and simple
loan.

As elucidated in Samo v. People, 27 a trust receipt is considered a security transaction intended to aid in financing importers
and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and
who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.

Further, a trust receipt is a document in which is expressed a security transaction whereunder the lender, having no prior title
in the goods on which the lien is to be given and not having possession which remains in the borrower, lends his money to the
borrower on security of the goods which the borrower is privileged to sell clear of the lien with an agreement to pay all or part
of the proceeds of the sale to the lender. 28 It is a security agreement pursuant to which a bank acquires a "security interest" in
the goods. It secures an indebtedness and there can be no such thing as security interest that secures no obligation. 29

Clearly, a trust receipt partakes the nature of a security transaction. It could never be a mere additional or side document as
alleged by petitioner. Otherwise, a party to a trust receipt agreement could easily renege on its obligations thereunder, thus
undermining the importance and defeating with impunity the purpose of such an indispensable tool in commercial
transactions.

Of equal importance is the fact that in his complaint in Civil Case No. 92-60600, dated 05 March 1992, petitioner alleged that
the trust receipts were executed and intended as collateral or security. Pursuant to the rules, such particular allegation in the
complaint is tantamount to a judicial admission on the part of petitioner Ching to which he must be bound.

Thus, the Court of Appeals in its resolution dated 28 June 1993, correctly observed:jgc:chanrobles.com.ph

"It was petitioner himself who acknowledged the trust receipts as mere collateral and security for the payment of the loan but
kept on insisting that the real and true transaction was one of pure loan . . ."cralaw virtua1aw library

"In his present motion, the petitioner alleges that the trust receipts are evidence of a pure loan or that the same were
additional or side documents that actually stood as promissory notes and not a collateral or security agreement. He cannot
assume a position inconsistent with his previous allegations in his civil complaint that the trust receipts were intended as mere
collateral or security . . ."cralaw virtua1aw library

Perhaps, realizing such flaw, Petitioner, in a complete turn around, filed a motion to admit amended complaint before the RTC-
Manila. Among others, the amended complaint alleged that the trust receipts stood as additional or side documents, the real
transaction between the parties being that of a pure loan without any trust receipt agreement.

In an order dated 19 November 1993, the RTC-Manila, Branch 53, admitted the amended complaint. Accordingly, with the
lower court’s admission of the amended complaint, the judicial admission made in the original complaint was, in effect,
superseded.

Under the Rules, pleadings superseded or amended disappear from the record, lose their status as pleadings and cease to be
judicial admissions. While they may nonetheless be utilized against the pleader as extrajudicial admissions, they must, in order
to have such effect, be formally offered in evidence. If not offered in evidence, the admission contained therein will not be
considered. 30

Consequently, the original complaint, having been amended, lost its character as a judicial admission, which would have
required no proof, and became merely an extrajudicial admission, the admissibility of which, as evidence, required its formal
offer. 31

In virtue thereof, the amended complaint takes the place of the original. The latter is regarded as abandoned and ceases to
perform any further function as a pleading. The original complaint no longer forms part of the record. 32

5
Thus, in the instant case, the original complaint is deemed superseded by the amended complaint. Corollarily, the judicial
admissions in the original complaint are considered abandoned. Nonetheless, we must stress that the actuations of petitioner,
as sanctioned by the RTC-Manila, Branch 53 through its order admitting the amended complaint, demands stern rebuke from
this Court.

Certainly, this Court is not unwary of the tactics employed by the petitioner specifically in filing the amended complaint only
after the promulgation of the assailed decision of the Court of Appeals. It bears noting that a lapse of almost eighteen months
(from March 1992 to September 1993), from the filing of the original complaint to the filing of the amended complaint, is too
lengthy a time sufficient to enkindle suspicion and enflame doubts as to the true intentions of petitioner regarding the early
disposition of the pending cases.

Although the granting of leave to file amended pleadings is a matter peculiarly within the sound discretion of the trial court and
such discretion would not normally be disturbed on appeal, it is also well to mention that this rule is relaxed when evident
abuse thereof is apparent. 33

Hence, in certain instances we ruled that amendments are not proper and should be denied when delay would arise, 34 or
when the amendments would result in a change of cause of action or defense or change the theory of the case, 35 or would be
inconsistent with the allegations in the original complaint. 36

Applying the foregoing rules, Petitioner, by filing the amended complaint, in effect, altered the theory of his case. Likewise, the
allegations embodied in the amended complaint are inconsistent with that of the original complaint inasmuch as in the latter,
petitioner alleged that the trust receipts were intended as mere collateral or security, the principal transaction being one of
pure loan.

Yet, in the amended complaint, petitioner argued that the said trust receipts were executed as additional or side documents,
the transaction being strictly one of pure loan without any trust receipt arrangement. Obviously these allegations are in discord
in relation to each other and therefore cannot stand in harmony.

These circumstances, taken as a whole, lead this Court to doubt the genuine purpose of petitioner in filing the amended
complaint. Again, we view petitioner’s actuations with abhorrence and displeasure.

Moreover, petitioner contends that the transaction between Philippine Blooming Mills (PBM) and private respondent Allied
Banking Corporation does not fall under the category of a trust receipt arrangement claiming that the goods were not to be
sold but were to be used, consumed and destroyed by the importer PBM.

To our mind, petitioner’s contention is a stealthy attempt to circumvent the principle enunciated in the case of Allied Banking
Corporation v. Ordonez, 37 thus:jgc:chanrobles.com.ph

". . . In an attempt to escape criminal liability, private respondent claims P.D. 115 covers goods which are ultimately destined
for sale and not goods for use in manufacture. But the wording of Section 13 covers failure to turn over the proceeds of the sale
of the entrusted goods, or to return said goods if unsold or disposed of in accordance with the terms of the trust receipts.
Private respondent claims that at the time of PBM’s application for the issuance of the LC’s, it was not represented to the
petitioner that the items were intended for sale, hence, there was no deceit resulting in a violation of the trust receipts which
would constitute a criminal liability. Again we cannot uphold this contention. The non-payment of the amount covered by a
trust receipt is an act violative of the entrustee’s obligation to pay. There is no reason why the law should not apply to all
transactions covered by trust receipts, except those expressly excluded (68 Am. Jur. 125).

"The Court takes judicial notice of customary banking and business practices where trust receipts are used for importation of
heavy equipment, machineries and supplies used in manufacturing operations. We are perplexed by the statements in the
assailed DOJ resolution that the goods subject of the instant case are outside the ambit of the provisions of PD 115 albeit
covered by trust receipt agreements (17 February 1988 resolution) and that not all transactions covered by trust receipts may
be considered as trust receipt transactions defined and penalized under P.D. 115 (11 January 1988 resolution). A construction
should be avoided when it affords an opportunity to defeat compliance with the terms of a statute.

x x x

"The penal provision of P.D. 115 encompasses any act violative of an obligation covered by the trust receipt; it is not limited to

6
transactions in goods which are to be sold (retailed), reshipped, stored or processed as a component of a product ultimately
sold."cralaw virtua1aw library

An examination of P.D. 115 shows the growing importance of trust receipts in Philippine business, the need to provide for the
rights and obligations of parties to a trust receipt transaction, the study of the problems involved and the action by monetary
authorities, and the necessity of regulating the enforcement of rights arising from default or violations of trust receipt
agreements. The legislative intent to meet a pressing need is clearly expressed. 38

In fine, we reiterate that the civil action for declaration of nullity of documents and for damages does not constitute a
prejudicial question to the criminal cases for estafa filed against petitioner Ching.

WHEREFORE, premises considered, the assailed decision and resolution of the Court of Appeals are hereby AFFIRMED and the
instant petition is DISMISSED for lack of merit. Accordingly, the Regional Trial Court of Makati, Branch 58, is hereby directed to
proceed with the hearing and trial on the merits of Criminal Case Nos. 92-0934 to 92-0937, inclusive, and to expedite
proceedings therein, without prejudice to the right of the accused to due process.

SO ORDERED.chanro

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8
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
LAMBERTO C. PEREZ, NESTOR C. KUN, MA. ESTELITA P. ANGELES-PANLILIO, and NAPOLEON O. GARCIA, Respondents.

Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules of Court, assailing the decision2 dated January
20, 2005 of the Court of Appeals in CA-G.R. SP No. 76588. In the assailed decision, the Court of Appeals dismissed the criminal
complaint for estafa against the respondents, Lamberto C. Perez, Nestor C. Kun, Ma. Estelita P. Angeles-Panlilio and Napoleon
Garcia, who allegedly violated Article 315, paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of Presidential
Decree No. (P.D.) 115 – the "Trust Receipts Law."

Petitioner Land Bank of the Philippines (LBP) is a government financial institution and the official depository of the
Philippines.3 Respondents are the officers and representatives of Asian Construction and Development Corporation (ACDC), a
corporation incorporated under Philippine law and engaged in the construction business. 4

On June 7, 1999, LBP filed a complaint for estafa or violation of Article 315, paragraph 1(b) of the Revised Penal Code, in
relation to P.D. 115, against the respondents before the City Prosecutor’s Office in Makati City. In the affidavit-complaint5 of
June 7, 1999, the LBP’s Account Officer for the Account Management Development, Edna L. Juan, stated that LBP extended a
credit accommodation to ACDC through the execution of an Omnibus Credit Line Agreement (Agreement) 6 between LBP and
ACDC on October 29, 1996. In various instances, ACDC used the Letters of Credit/Trust Receipts Facility of the Agreement to
buy construction materials. The respondents, as officers and representatives of ACDC, executed trust receipts 7 in connection
with the construction materials, with a total principal amount of ₱52,344,096.32. The trust receipts matured, but ACDC failed to
return to LBP the proceeds of the construction projects or the construction materials subject of the trust receipts. LBP sent
ACDC a demand letter,8 dated May 4, 1999, for the payment of its debts, including those under the Trust Receipts Facility in the
amount of ₱66,425,924.39. When ACDC failed to comply with the demand letter, LBP filed the affidavit-complaint.

The respondents filed a joint affidavit9 wherein they stated that they signed the trust receipt documents on or about the same
time LBP and ACDC executed the loan documents; their signatures were required by LBP for the release of the loans. The trust
receipts in this case do not contain (1) a description of the goods placed in trust, (2) their invoice values, and (3) their maturity
dates, in violation of Section 5(a) of P.D. 115. Moreover, they alleged that ACDC acted as a subcontractor for government
projects such as the Metro Rail Transit, the Clark Centennial Exposition and the Quezon Power Plant in Mauban, Quezon. Its
clients for the construction projects, which were the general contractors of these projects, have not yet paid them; thus, ACDC
had yet to receive the proceeds of the materials that were the subject of the trust receipts and were allegedly used for these
constructions. As there were no proceeds received from these clients, no misappropriation thereof could have taken place.

On September 30, 1999, Makati Assistant City Prosecutor Amador Y. Pineda issued a Resolution10 dismissing the complaint. He
pointed out that the evidence presented by LBP failed to state the date when the goods described in the letters of credit were
actually released to the possession of the respondents. Section 4 of P.D. 115 requires that the goods covered by trust receipts
be released to the possession of the entrustee after the latter’s execution and delivery to the entruster of a signed trust receipt.
He adds that LBP’s evidence also fails to show the date when the trust receipts were executed since all the trust receipts are
undated. Its dispositive portion reads:

WHEREFORE, premises considered, and for insufficiency of evidence, it is respectfully recommended that the instant complaints
be dismissed, as upon approval, the same are hereby dismissed. 11

LBP filed a motion for reconsideration which the Makati Assistant City Prosecutor denied in his order of January 7, 2000.12

On appeal, the Secretary of Justice reversed the Resolution of the Assistant City Prosecutor. In his resolution of August 1,
2002,13 the Secretary of Justice pointed out that there was no question that the goods covered by the trust receipts were
received by ACDC. He likewise adopted LBP’s argument that while the subjects of the trust receipts were not mentioned in the
trust receipts, they were listed in the letters of credit referred to in the trust receipts. He also noted that the trust receipts
contained maturity dates and clearly set out their stipulations. He further rejected the respondents’ defense that ACDC failed to
remit the payments to LBP due to the failure of the clients of ACDC to pay them. The dispositive portion of the resolution reads:

WHEREFORE, the assailed resolution is REVERSED and SET ASIDE. The City Prosecutor of Makati City is hereby directed to file an
information for estafa under Art. 315 (1) (b) of the Revised Penal Code in relation to Section 13, Presidential Decree No. 115
against respondents Lamberto C. Perez, Nestor C. Kun, [Ma. Estelita P. Angeles-Panlilio] and Napoleon O. Garcia and to report
the action taken within ten (10) days from receipt hereof.14

9
The respondents filed a motion for reconsideration of the resolution dated August 1, 2002, which the Secretary of Justice
denied.15 He rejected the respondents’ submission that Colinares v. Court of Appeals16 does not apply to the case. He explained
that in Colinares, the building materials were delivered to the accused before they applied to the bank for a loan to pay for the
merchandise; thus, the ownership of the merchandise had already been transferred to the entrustees before the trust receipts
agreements were entered into. In the present case, the parties have already entered into the Agreement before the
construction materials were delivered to ACDC.

Subsequently, the respondents filed a petition for review before the Court of Appeals.

After both parties submitted their respective Memoranda, the Court of Appeals promulgated the assailed decision of January
20, 2005.17 Applying the doctrine in Colinares, it ruled that this case did not involve a trust receipt transaction, but a mere loan.
It emphasized that construction materials, the subject of the trust receipt transaction, were delivered to ACDC even before the
trust receipts were executed. It noted that LBP did not offer proof that the goods were received by ACDC, and that the trust
receipts did not contain a description of the goods, their invoice value, the amount of the draft to be paid, and their maturity
dates. It also adopted ACDC’s argument that since no payment for the construction projects had been received by ACDC, its
officers could not have been guilty of misappropriating any payment. The dispositive portion reads:

WHEREFORE, in view of the foregoing, the Petition is GIVEN DUE COURSE. The assailed Resolutions of the respondent Secretary
of Justice dated August 1, 2002 and February 17, 2003, respectively in I.S. No. 99-F-9218-28 are hereby REVERSED and SET
ASIDE.18

LBP now files this petition for review on certiorari, dated March 15, 2005, raising the following error:

THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND SET ASIDE THE RESOLUTIONS OF THE HONORABLE
SECRETARY OF JUSTICE BY APPLYING THE RULING IN THE CASE OF COLINARES V. COURT OF APPEALS, 339 SCRA 609, WHICH IS
NOT APPLICABLE IN THE CASE AT BAR.19

On April 8, 2010, while the case was pending before this Court, the respondents filed a motion to dismiss. 20 They informed the
Court that LBP had already assigned to Philippine Opportunities for Growth and Income, Inc. all of its rights, title and interests
in the loans subject of this case in a Deed of Absolute Sale dated June 23, 2005 (attached as Annex "C" of the motion). The
respondents also stated that Avent Holdings Corporation, in behalf of ACDC, had already settled ACDC’s obligation to LBP on
October 8, 2009. Included as Annex "A" in this motion was a certification21 issued by the Philippine Opportunities for Growth
and Income, Inc., stating that it was LBP’s successor-in-interest insofar as the trust receipts in this case are concerned and that
Avent Holdings Corporation had already settled the claims of LBP or obligations of ACDC arising from these trust receipts.

We deny this petition.

The disputed transactions are not trust receipts.

Section 4 of P.D. 115 defines a trust receipt transaction in this manner:

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning of this Decree, is any
transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree
as entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods,
documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the
entruster of a signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments
with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as
appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of,
in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any
of the following:

1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with
the purpose of ultimate sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of
manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or
processed form until the entrustee has complied fully with his obligation under the trust receipt; or (c) to load, unload, ship or
tranship or otherwise deal with them in a manner preliminary or necessary to their sale[.]

10
There are two obligations in a trust receipt transaction. The first is covered by the provision that refers to money under the
obligation to deliver it (entregarla) to the owner of the merchandise sold. The second is covered by the provision referring to
merchandise received under the obligation to return it (devolvera) to the owner. Thus, under the Trust Receipts Law, 22 intent to
defraud is presumed when (1) the entrustee fails to turn over the proceeds of the sale of goods covered by the trust receipt to
the entruster; or (2) when the entrustee fails to return the goods under trust, if they are not disposed of in accordance with the
terms of the trust receipts.23

In all trust receipt transactions, both obligations on the part of the trustee exist in the alternative – the return of the proceeds
of the sale or the return or recovery of the goods, whether raw or processed.24 When both parties enter into an agreement
knowing that the return of the goods subject of the trust receipt is not possible even without any fault on the part of the
trustee, it is not a trust receipt transaction penalized under Section 13 of P.D. 115; the only obligation actually agreed upon by
the parties would be the return of the proceeds of the sale transaction. This transaction becomes a mere loan, 25 where the
borrower is obligated to pay the bank the amount spent for the purchase of the goods.

Article 1371 of the Civil Code provides that "[i]n order to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered." Under this provision, we can examine the contemporaneous actions of the
parties rather than rely purely on the trust receipts that they signed in order to understand the transaction through their intent.

We note in this regard that at the onset of these transactions, LBP knew that ACDC was in the construction business and that
the materials that it sought to buy under the letters of credit were to be used for the following projects: the Metro Rail Transit
Project and the Clark Centennial Exposition Project.26 LBP had in fact authorized the delivery of the materials on the
construction sites for these projects, as seen in the letters of credit it attached to its complaint.27 Clearly, they were aware of
the fact that there was no way they could recover the buildings or constructions for which the materials subject of the alleged
trust receipts had been used. Notably, despite the allegations in the affidavit-complaint wherein LBP sought the return of the
construction materials,28 its demand letter dated May 4, 1999 sought the payment of the balance but failed to ask, as an
alternative, for the return of the construction materials or the buildings where these materials had been used. 29

The fact that LBP had knowingly authorized the delivery of construction materials to a construction site of two government
projects, as well as unspecified construction sites, repudiates the idea that LBP intended to be the owner of those construction
materials. As a government financial institution, LBP should have been aware that the materials were to be used for the
construction of an immovable property, as well as a property of the public domain. As an immovable property, the ownership
of whatever was constructed with those materials would presumably belong to the owner of the land, under Article 445 of the
Civil Code which provides:

Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong
to the owner of the land, subject to the provisions of the following articles.

Even if we consider the vague possibility that the materials, consisting of cement, bolts and reinforcing steel bars, would be
used for the construction of a movable property, the ownership of these properties would still pertain to the government and
not remain with the bank as they would be classified as property of the public domain, which is defined by the Civil Code as:

Article 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth.

In contrast with the present situation, it is fundamental in a trust receipt transaction that the person who advanced payment
for the merchandise becomes the absolute owner of said merchandise and continues as owner until he or she is paid in full, or
if the goods had already been sold, the proceeds should be turned over to him or to her.30

Thus, in concluding that the transaction was a loan and not a trust receipt, we noted in Colinares that the industry or line of
work that the borrowers were engaged in was construction. We pointed out that the borrowers were not importers acquiring
goods for resale.31 Indeed, goods sold in retail are often within the custody or control of the trustee until they are purchased. In
the case of materials used in the manufacture of finished products, these finished products – if not the raw materials or their
components – similarly remain in the possession of the trustee until they are sold. But the goods and the materials that are

11
used for a construction project are often placed under the control and custody of the clients employing the contractor, who can
only be compelled to return the materials if they fail to pay the contractor and often only after the requisite legal proceedings.
The contractor’s difficulty and uncertainty in claiming these materials (or the buildings and structures which they become part
of), as soon as the bank demands them, disqualify them from being covered by trust receipt agreements.

Based on these premises, we cannot consider the agreements between the parties in this case to be trust receipt transactions
because (1) from the start, the parties were aware that ACDC could not possibly be obligated to reconvey to LBP the materials
or the end product for which they were used; and (2) from the moment the materials were used for the government projects,
they became public, not LBP’s, property.

Since these transactions are not trust receipts, an action for estafa should not be brought against the respondents, who are
liable only for a loan. In passing, it is useful to note that this is the threat held against borrowers that Retired Justice Claudio
Teehankee emphatically opposed in his dissent in People v. Cuevo,32 restated in Ong v. CA, et al.:33

The very definition of trust receipt x x x sustains the lower court’s rationale in dismissing the information that the contract
covered by a trust receipt is merely a secured loan. The goods imported by the small importer and retail dealer through the
bank’s financing remain of their own property and risk and the old capitalist orientation of putting them in jail for estafa for
non-payment of the secured loan (granted after they had been fully investigated by the bank as good credit risks) through the
fiction of the trust receipt device should no longer be permitted in this day and age.

As the law stands today, violations of Trust Receipts Law are criminally punishable, but no criminal complaint for violation of
Article 315, paragraph 1(b) of the Revised Penal Code, in relation with P.D. 115, should prosper against a borrower who was not
part of a genuine trust receipt transaction.

Misappropriation or abuse of confidence is absent in this case.

Even if we assume that the transactions were trust receipts, the complaint against the respondents still should have been
dismissed. The Trust Receipts Law punishes the dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of another, regardless of whether the latter is the owner or not. The law does not singularly seek to enforce payment
of the loan, as "there can be no violation of [the] right against imprisonment for non-payment of a debt."34

In order that the respondents "may be validly prosecuted for estafa under Article 315, paragraph 1(b) of the Revised Penal
Code,35 in relation with Section 13 of the Trust Receipts Law, the following elements must be established: (a) they received the
subject goods in trust or under the obligation to sell the same and to remit the proceeds thereof to [the trustor], or to return
the goods if not sold; (b) they misappropriated or converted the goods and/or the proceeds of the sale; (c) they performed such
acts with abuse of confidence to the damage and prejudice of Metrobank; and (d) demand was made on them by [the trustor]
for the remittance of the proceeds or the return of the unsold goods."36

In this case, no dishonesty or abuse of confidence existed in the handling of the construction materials.

In this case, the misappropriation could be committed should the entrustee fail to turn over the proceeds of the sale of the
goods covered by the trust receipt transaction or fail to return the goods themselves. The respondents could not have failed to
return the proceeds since their allegations that the clients of ACDC had not paid for the projects it had undertaken with them at
the time the case was filed had never been questioned or denied by LBP. What can only be attributed to the respondents would
be the failure to return the goods subject of the trust receipts.

We do not likewise see any allegation in the complaint that ACDC had used the construction materials in a manner that LBP had
not authorized. As earlier pointed out, LBP had authorized the delivery of these materials to these project sites for which they
were used. When it had done so, LBP should have been aware that it could not possibly recover the processed materials as they
would become part of government projects, two of which (the Metro Rail Transit Project and the Quezon Power Plant Project)
had even become part of the operations of public utilities vital to public service. It clearly had no intention of getting these
materials back; if it had, as a primary government lending institution, it would be guilty of extreme negligence and
incompetence in not foreseeing the legal complications and public inconvenience that would arise should it decide to claim the
materials. ACDC’s failure to return these materials or their end product at the time these "trust receipts" expired could not be
attributed to its volition. No bad faith, malice, negligence or breach of contract has been attributed to ACDC, its officers or
representatives. Therefore, absent any abuse of confidence or misappropriation on the part of the respondents, the criminal
proceedings against them for estafa should not prosper.

12
In Metropolitan Bank,37 we affirmed the city prosecutor’s dismissal of a complaint for violation of the Trust Receipts Law. In
dismissing the complaint, we took note of the Court of Appeals’ finding that the bank was interested only in collecting its
money and not in the return of the goods. Apart from the bare allegation that demand was made for the return of the goods
(raw materials that were manufactured into textiles), the bank had not accompanied its complaint with a demand letter. In
addition, there was no evidence offered that the respondents therein had misappropriated or misused the goods in question.

The petition should be dismissed because the OSG did not file it and the civil liabilities have already been settled.

The proceedings before us, regarding the criminal aspect of this case, should be dismissed as it does not appear from the
records that the complaint was filed with the participation or consent of the Office of the Solicitor General (OSG). Section 35,
Chapter 12, Title III, Book IV of the Administrative Code of 1987 provides that:

Section 35. Powers and Functions. — The Office of the Solicitor General shall represent the Government of the Philippines, its
agencies and instrumentalities and its officials and agents in any litigation, proceedings, investigation or matter requiring the
services of lawyers. x x x It shall have the following specific powers and functions:

(1) Represent the Government in the Supreme Court and the Court of Appeals in all criminal proceedings; represent the
Government and its officers in the Supreme Court, the Court of Appeals and all other courts or tribunals in all civil actions and
special proceedings in which the Government or any officer thereof in his official capacity is a party. (Emphasis provided.)

In Heirs of Federico C. Delgado v. Gonzalez,38 we ruled that the preliminary investigation is part of a criminal proceeding. As all
criminal proceedings before the Supreme Court and the Court of Appeals may be brought and defended by only the Solicitor
General in behalf of the Republic of the Philippines, a criminal action brought to us by a private party alone suffers from a fatal
defect. The present petition was brought in behalf of LBP by the Government Corporate Counsel to protect its private interests.
Since the representative of the "People of the Philippines" had not taken any part of the case, it should be dismissed.1âwphi1

On the other hand, if we look at the mandate given to the Office of the Government Corporate Counsel, we find that it is
limited to the civil liabilities arising from the crime, and is subject to the control and supervision of the public prosecutor.
Section 2, Rule 8 of the Rules Governing the Exercise by the Office of the Government Corporate Counsel of its Authority, Duties
and Powers as Principal Law Office of All Government Owned or Controlled Corporations, filed before the Office of the National
Administration Register on September 5, 2011, reads:

Section 2. Extent of legal assistance – The OGCC shall represent the complaining GOCC in all stages of the criminal proceedings.
The legal assistance extended is not limited to the preparation of appropriate sworn statements but shall include all aspects of
an effective private prosecution including recovery of civil liability arising from the crime, subject to the control and supervision
of the public prosecutor.

Based on jurisprudence, there are two exceptions when a private party complainant or offended party in a criminal case may
file a petition with this Court, without the intervention of the OSG: (1) when there is denial of due process of law to the
prosecution, and the State or its agents refuse to act on the case to the prejudice of the State and the private offended
party;39 and (2) when the private offended party questions the civil aspect of a decision of the lower court. 40

In this petition, LBP fails to allege any inaction or refusal to act on the part of the OSG, tantamount to a denial of due process.
No explanation appears as to why the OSG was not a party to the case. Neither can LBP now question the civil aspect of this
decision as it had already assigned ACDC’s debts to a third person, Philippine Opportunities for Growth and Income, Inc., and
the civil liabilities appear to have already been settled by Avent Holdings Corporation, in behalf of ACDC. These facts have not
been disputed by LBP. Therefore, we can reasonably conclude that LBP no longer has any claims against ACDC, as regards the
subject matter of this case, that would entitle it to file a civil or criminal action.

WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005 decision of the Court of Appeals in CA-G.R. SP No. 76588.
No costs.

SO ORDERED

13
14
HUR TIN YANG, PETITIONER
vs.
PEOPLE OF THE PHILIPPINES, RESPONDENT.

RESOLUTION

VELASCO JR., J.:

This is a motion for reconsideration of our February 1, 2012 Minute Resolution1 sustaining the July 28, 2010 Decision2 and
December 20, 2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. CR No. 30426, finding petitioner Hur Tin Yang guilty
beyond reasonable doubt of the crime of Estafa under A11icle 315, paragraph 1 (b) of the Revised Penal Code (RPC) in relation
to Presidential Decree No. 115 (PD 115) or the Trust Receipts Law.

In twenty-four (24) consolidated Informations, all dated March 15, 2002, petitioner Hur Tin Yang was charged at the instance of
the same complainant with the crime of Estafa under Article 315, par. 1(b) of the RPC,4 in relation to PD 115,5 docketed as
Criminal Case Nos. 04-223911 to 34 and raffled to the Regional Trial Court of Manila, Branch 20. The 24 Informations––differing
only as regards the alleged date of commission of the crime, date of the trust receipts, the number of the letter of credit, the
subject goods and the amount––uniformly recite:

That on or about May 28, 1998, in the City of Manila, Philippines, the said accused being then the authorized officer of
SUPERMAX PHILIPPINES, INC., with office address at No. 11/F, Global Tower, Gen Mascardo corner M. Reyes St., Bangkal,
Makati City, did then and there willfully, unlawfully and feloniously defraud the METROPOLITAN BANK AND TRUST COMPANY
(METROBANK), a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines,
represented by its Officer in Charge, WINNIE M. VILLANUEVA, in the following manner, to wit: the said accused received in trust
from the said Metropolitan Bank and Trust Company reinforcing bars valued at ₱1,062,918.84 specified in the undated Trust
Receipt Agreement covered by Letter of Credit No. MG-LOC 216/98 for the purpose of holding said merchandise/goods in trust,
with obligation on the part of the accused to turn over the proceeds of the sale thereof or if unsold, to return the goods to the
said bank within the specified period agreed upon, but herein accused once in possession of the said merchandise/goods, far
from complying with his aforesaid obligation, failed and refused and still fails and refuses to do so despite repeated demands
made upon him to that effect and with intent to defraud and with grave abuse of confidence and trust, misappropriated,
misapplied and converted the said merchandise/goods or the value thereof to his own personal use and benefit, to the damage
and prejudice of said METROPOLITAN BANK AND TRUST COMPANY in the aforesaid amount of ₱1,062,918.84, Philippine
Currency.

Contrary to law.6

Upon arraignment, petitioner pleaded "not guilty." Thereafter, trial on the merits then ensued.

The facts of these consolidated cases are undisputed:

Supermax Philippines, Inc. (Supermax) is a domestic corporation engaged in the construction business. On various occasions in
the month of April, May, July, August, September, October and November 1998, Metropolitan Bank and Trust Company
(Metrobank), Magdalena Branch, Manila, extended several commercial letters of credit (LCs) to Supermax. These commercial
LCs were used by Supermax to pay for the delivery of several construction materials which will be used in their construction
business. Thereafter, Metrobank required petitioner, as representative and Vice-President for Internal Affairs of Supermax, to
sign twenty-four (24) trust receipts as security for the construction materials and to hold those materials or the proceeds of the
sales in trust for Metrobank to the extent of the amount stated in the trust receipts.

When the 24 trust receipts fell due and despite the receipt of a demand letter dated August 15, 2000, Supermax failed to pay or
deliver the goods or proceeds to Metrobank. Instead, Supermax, through petitioner, requested the restructuring of the loan.
When the intended restructuring of the loan did not materialize, Metrobank sent another demand letter dated October 11,
2001. As the demands fell on deaf ears, Metrobank, through its representative, Winnie M. Villanueva, filed the instant criminal
complaints against petitioner.

For his defense, while admitting signing the trust receipts, petitioner argued that said trust receipts were demanded by
Metrobank as additional security for the loans extended to Supermax for the purchase of construction equipment and
materials. In support of this argument, petitioner presented as witness, Priscila Alfonso, who testified that the construction
materials covered by the trust receipts were delivered way before petitioner signed the corresponding trust receipts.7 Further,

15
petitioner argued that Metrobank knew all along that the construction materials subject of the trust receipts were not intended
for resale but for personal use of Supermax relating to its construction business.8

The trial court a quo, by Judgment dated October 6, 2006, found petitioner guilty as charged and sentenced him as follows:

His guilt having been proven and established beyond reasonable doubt, the Court hereby renders judgment CONVICTING
accused HUR TIN YANG of the crime of estafa under Article 315 paragraph 1 (a) of the Revised Penal Code and hereby imposes
upon him the indeterminate penalty of 4 years, 2 months and 1 day of prision correccional to 20 years of reclusion temporal
and to pay Metropolitan Bank and Trust Company, Inc. the amount of Php13,156,256.51 as civil liability and to pay cost.

SO ORDERED.9

Petitioner appealed to the CA. On July 28, 2010, the appellate court rendered a Decision, upholding the findings of the RTC that
the prosecution has satisfactorily established the guilt of petitioner beyond reasonable doubt, including the following critical
facts, to wit: (1) petitioner signing the trust receipts agreement; (2) Supermax failing to pay the loan; and (3) Supermax failing
to turn over the proceeds of the sale or the goods to Metrobank upon demand. Curiously, but significantly, the CA also found
that even before the execution of the trust receipts, Metrobank knew or should have known that the subject construction
materials were never intended for resale or for the manufacture of items to be sold.10

The CA ruled that since the offense punished under PD 115 is in the nature of malum prohibitum, a mere failure to deliver the
proceeds of the sale or goods, if not sold, is sufficient to justify a conviction under PD 115. The fallo of the CA Decision reads:

WHEREFORE, in view of the foregoing premises, the appeal filed in this case is hereby DENIED and, consequently, DISMISSED.
The assailed Decision dated October 6, 2006 of the Rregional Trial Court, Branch 20, in the City of Manila in Criminal Cases Nos.
04223911 to 223934 is hereby AFFIRMED.

SO ORDERED.

Petitioner filed a Motion for Reconsideration, but it was denied in a Resolution dated December 20, 2010. Not satisfied,
petitioner filed a petition for review under Rule 45 of the Rules of Court. The Office of the Solicitor General (OSG) filed its
Comment dated November 28, 2011, stressing that the pieces of evidence adduced from the testimony and documents
submitted before the trial court are sufficient to establish the guilt of petitioner. 11

On February 1, 2012, this Court dismissed the Petition via a Minute Resolution on the ground that the CA committed no
reversible error in the assailed July 28, 2010 Decision. Hence, petitioner filed the present Motion for Reconsideration
contending that the transactions between the parties do not constitute trust receipt agreements but rather of simple loans.

On October 3, 2012, the OSG filed its Comment on the Motion for Reconsideration, praying for the denial of said motion and
arguing that petitioner merely reiterated his arguments in the petition and his Motion for Reconsideration is nothing more than
a mere rehash of the matters already thoroughly passed upon by the RTC, the CA and this Court.12

The sole issue for the consideration of the Court is whether or not petitioner is liable for Estafa under Art. 315, par. 1(b) of the
RPC in relation to PD 115, even if it was sufficiently proved that the entruster (Metrobank) knew beforehand that the goods
(construction materials) subject of the trust receipts were never intended to be sold but only for use in the entrustee’s
construction business.

The motion for reconsideration has merit.

In determining the nature of a contract, courts are not bound by the title or name given by the parties. The decisive factor in
evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but
by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement. As such, therefore,
documentary and parol evidence may be submitted and admitted to prove such intention. 13

In the instant case, the factual findings of the trial and appellate courts reveal that the dealing between petitioner and
Metrobank was not a trust receipt transaction but one of simple loan. Petitioner’s admission––that he signed the trust receipts
on behalf of Supermax, which failed to pay the loan or turn over the proceeds of the sale or the goods to Metrobank upon
demand––does not conclusively prove that the transaction was, indeed, a trust receipts transaction. In contrast to the
nomenclature of the transaction, the parties really intended a contract of loan. This Court––in Ng v. People14 and Land Bank of
the Philippines v. Perez,15 cases which are in all four corners the same as the instant case––ruled that the fact that the entruster

16
bank knew even before the execution of the trust receipt agreements that the construction materials covered were never
intended by the entrustee for resale or for the manufacture of items to be sold is sufficient to prove that the transaction was a
simple loan and not a trust receipts transaction.

The petitioner was charged with Estafa committed in what is called, under PD 115, a "trust receipt transaction," which is
defined as:

Section 4. What constitutes a trust receipts transaction.—A trust receipt transaction, within the meaning of this Decree, is any
transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree
as entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods,
documents or instruments, releases the same to the possession of the entrustee upon the latter’s execution and delivery to the
entruster of a signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments
with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as
appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of,
in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any
of the following:

1. In the case of goods or documents: (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with
the purpose of ultimate sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of
manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or
processed form until the entrustee has complied full with his obligation under the trust receipt; or (c) to load, unload, ship or
transship or otherwise deal with them in a manner preliminary or necessary to their sale; or

2. In the case of instruments: (a) to sell or procure their sale or exchange; or (b) to deliver them to a principal; or (c) to effect
the consummation of some transactions involving delivery to a depository or register; or (d) to effect their presentation,
collection or renewal.

Simply stated, a trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of
the sale, or if the merchandise is not sold, to return the merchandise to the entruster. There are, therefore, two obligations in a
trust receipt transaction: the first refers to money received under the obligation involving the duty to turn it over (entregarla)
to the owner of the merchandise sold, while the second refers to the merchandise received under the obligation to "return" it
(devolvera) to the owner.16 A violation of any of these undertakings constitutes Estafa defined under Art. 315, par. 1(b) of the
RPC, as provided in Sec. 13 of PD 115, viz:

Section 13. Penalty Clause.—The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or
instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or
to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust
receipt shall constitute the crime of estafa, punishable under the provisions of Article Three hundred fifteen, paragraph one (b)
of Act Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. x x x
(Emphasis supplied.)

Nonetheless, when both parties enter into an agreement knowing fully well that the return of the goods subject of the trust
receipt is not possible even without any fault on the part of the trustee, it is not a trust receipt transaction penalized under Sec.
13 of PD 115 in relation to Art. 315, par. 1(b) of the RPC, as the only obligation actually agreed upon by the parties would be the
return of the proceeds of the sale transaction. This transaction becomes a mere loan, where the borrower is obligated to pay
the bank the amount spent for the purchase of the goods. 17

In Ng v. People, Anthony Ng, then engaged in the business of building and fabricating telecommunication towers, applied for a
credit line of PhP 3,000,000 with Asiatrust Development Bank, Inc. Prior to the approval of the loan, Anthony Ng informed
Asiatrust that the proceeds would be used for purchasing construction materials necessary for the completion of several steel
towers he was commissioned to build by several telecommunication companies. Asiatrust approved the loan but required
Anthony Ng to sign a trust receipt agreement. When Anthony Ng failed to pay the loan, Asiatrust filed a criminal case for Estafa
in relation to PD 115 or the Trust Receipts Law. This Court acquitted Anthony Ng and ruled that the Trust Receipts Law was
created to "to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the
importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of

17
the merchandise imported or purchased." Since Asiatrust knew that Anthony Ng was neither an importer nor retail dealer, it
should have known that the said agreement could not possibly apply to petitioner, viz:

The true nature of a trust receipt transaction can be found in the "whereas" clause of PD 115 which states that a trust receipt is
to be utilized "as a convenient business device to assist importers and merchants solve their financing problems." Obviously,
the State, in enacting the law, sought to find a way to assist importers and merchants in their financing in order to encourage
commerce in the Philippines.

[A] trust receipt is considered a security transaction intended to aid in financing importers and retail dealers who do not have
sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit
except through utilization, as collateral, of the merchandise imported or purchased. Similarly, American Jurisprudence
demonstrates that trust receipt transactions always refer to a method of "financing importations or financing sales." The
principle is of course not limited in its application to financing importations, since the principle is equally applicable to domestic
transactions. Regardless of whether the transaction is foreign or domestic, it is important to note that the transactions
discussed in relation to trust receipts mainly involved sales.

Following the precept of the law, such transactions affect situations wherein the entruster, who owns or holds absolute title or
security interests over specified goods, documents or instruments, releases the subject goods to the possession of the
entrustee. The release of such goods to the entrustee is conditioned upon his execution and delivery to the entruster of a trust
receipt wherein the former binds himself to hold the specific goods, documents or instruments in trust for the entruster and to
sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds
to the extent of the amount owing to the entruster or the goods, documents or instruments themselves if they are unsold. x x x
[T]he entruster is entitled "only to the proceeds derived from the sale of goods released under a trust receipt to the entrustee."

Considering that the goods in this case were never intended for sale but for use in the fabrication of steel communication
towers, the trial court erred in ruling that the agreement is a trust receipt transaction.

xxxx

To emphasize, the Trust Receipts Law was created to "to aid in financing importers and retail dealers who do not have sufficient
funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except
through utilization, as collateral, of the merchandise imported or purchased." Since Asiatrust knew that petitioner was neither
an importer nor retail dealer, it should have known that the said agreement could not possibly apply to petitioner. 18

Further, in Land Bank of the Philippines v. Perez, the respondents were officers of Asian Construction and Development
Corporation (ACDC), a corporation engaged in the construction business. On several occasions, respondents executed in favor
of Land Bank of the Philippines (LBP) trust receipts to secure the purchase of construction materials that they will need in their
construction projects. When the trust receipts matured, ACDC failed to return to LBP the proceeds of the construction projects
or the construction materials subject of the trust receipts. After several demands went unheeded, LBP filed a complaint for
Estafa or violation of Art. 315, par. 1(b) of the RPC, in relation to PD 115, against the respondent officers of ACDC. This Court,
like in Ng, acquitted all the respondents on the postulate that the parties really intended a simple contract of loan and not a
trust receipts transaction, viz:

When both parties enter into an agreement knowing that the return of the goods subject of the trust receipt is not possible
even without any fault on the part of the trustee, it is not a trust receipt transaction penalized under Section 13 of P.D. 115; the
only obligation actually agreed upon by the parties would be the return of the proceeds of the sale transaction. This transaction
becomes a mere loan, where the borrower is obligated to pay the bank the amount spent for the purchase of the goods.

xxxx

Thus, in concluding that the transaction was a loan and not a trust receipt, we noted in Colinares that the industry or line of
work that the borrowers were engaged in was construction. We pointed out that the borrowers were not importers acquiring
goods for resale. Indeed, goods sold in retail are often within the custody or control of the trustee until they are purchased. In
the case of materials used in the manufacture of finished products, these finished products – if not the raw materials or their
components – similarly remain in the possession of the trustee until they are sold. But the goods and the materials that are
used for a construction project are often placed under the control and custody of the clients employing the contractor, who can
only be compelled to return the materials if they fail to pay the contractor and often only after the requisite legal proceedings.

18
The contractor’s difficulty and uncertainty in claiming these materials (or the buildings and structures which they become part
of), as soon as the bank demands them, disqualify them from being covered by trust receipt agreements. 19

Since the factual milieu of Ng and Land Bank of the Philippines are in all four corners similar to the instant case, it behooves this
Court, following the principle of stare decisis,20 to rule that the transactions in the instant case are not trust receipts
transactions but contracts of simple loan. The fact that the entruster bank, Metrobank in this case, knew even before the
execution of the alleged trust receipt agreements that the covered construction materials were never intended by the
entrustee (petitioner) for resale or for the manufacture of items to be sold would take the transaction between petitioner and
Metrobank outside the ambit of the Trust Receipts Law.

For reasons discussed above, the subject transactions in the instant case are not trust receipts transactions.1âwphi1 Thus, the
consolidated complaints for Estafa in relation to PD 115 have really no leg to stand on.

The Court’s ruling in Colinares v. Court of Appeals21 is very apt, thus:

The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats
of criminal prosecution should they be unable to pay it may be unjust and inequitable. if not reprehensible. Such agreements
are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved. The resort to this scheme
leaves poor and hapless borrowers at the mercy of banks and is prone to misinterpretation x x x.

Unfortunately, what happened in Colinares is exactly the situation in the instant case. This reprehensible bank practice
described in Colinares should be stopped and discouraged. For this Court to give life to the constitutional provision of non-
imprisonment for nonpayment of debts,22 it is imperative that petitioner be acquitted of the crime of Estafa under Art. 315, par.
1 (b) ofthe RPC, in relation to PD 115.

WHEREFORE, the Resolution dated February 1, 2012, upholding theCA's Decision dated July 28, 2010 and Resolution dated
December 20, 2010 in CA-G.R. CR No. 30426, is hereby RECONSIDERED. Petitioner Hur Tin Yang is ACQUITTED of the charge of
violating Art. 315, par. 1 (b) of the RPC, in relation to the pertinent provision of PD 115 in Criminal Case Nos. 04-223911 to 34.

SO ORDERED.

19
20
ANTHONY L. NG, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

VELASCO, JR.

The Case

This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the August 29, 2003 Decision1cЃa and
July 25, 2006 Resolution of the Court of Appeals (CA) in CA-G.R. CR No. 25525, which affirmed the Decision2cЃa of the Regional
Trial Court (RTC), Branch 95 in Quezon City, in Criminal Case No. Q-99-85133 for Estafa under Article 315, paragraph 1(b) of the
Revised Penal Code (RPC) in relation to Section 3 of Presidential Decree No. (PD) 115 or the Trust Receipts Law.

The Facts

Sometime in the early part of 1997, petitioner Anthony Ng, then engaged in the business of building and fabricating
telecommunication towers under the trade name "Capitol Blacksmith and Builders," applied for a credit line of PhP 3,000,000
with Asiatrust Development Bank, Inc. (Asiatrust). In support of Asiatrust's credit investigation, petitioner voluntarily submitted
the following documents: (1) the contracts he had with Islacom, Smart, and Infocom; (2) the list of projects wherein he was
commissioned by the said telecommunication companies to build several steel towers; and (3) the collectible amounts he has
with the said companies.3cräläwvirtualibräry

On May 30, 1997, Asiatrust approved petitioner's loan application. Petitioner was then required to sign several documents,
among which are the Credit Line Agreement, Application and Agreement for Irrevocable L/C, Trust Receipt
Agreements,4cЃa and Promissory Notes. Though the Promissory Notes matured on September 18, 1997, the two (2)
aforementioned Trust Receipt Agreements did not bear any maturity dates as they were left unfilled or in blank by
Asiatrust.5cЃa

After petitioner received the goods, consisting of chemicals and metal plates from his suppliers, he utilized them to fabricate
the communication towers ordered from him by his clients which were installed in three project sites, namely: Isabel, Leyte;
Panabo, Davao; and Tongonan.

As petitioner realized difficulty in collecting from his client Islacom, he failed to pay his loan to Asiatrust. Asiatrust then
conducted a surprise ocular inspection of petitioner's business through Villarva S. Linga, Asiatrust's representative appraiser.
Linga thereafter reported to Asiatrust that he found that approximately 97% of the subject goods of the Trust Receipts were
"sold-out and that only 3 % of the goods pertaining to PN No. 1963 remained." Asiatrust then endorsed petitioner's account to
its Account Management Division for the possible restructuring of his loan. The parties thereafter held a series of conferences
to work out the problem and to determine a way for petitioner to pay his debts. However, efforts towards a settlement failed
to be reached.

On March 16, 1999, Remedial Account Officer Ma. Girlie C. Bernardez filed a Complaint-Affidavit before the Office of the City
Prosecutor of Quezon City. Consequently, on September 12, 1999, an Information for Estafa, as defined and penalized under
Art. 315, par. 1(b) of the RPC in relation to Sec. 3, PD 115 or the Trust Receipts Law, was filed with the RTC. The said Information
reads:

That on or about the 30th day of May 1997, in Quezon City, Philippines, the above-named petitioner, did then and there
willfully, unlawfully, and feloniously defraud Ma. Girlie C. Bernardez by entering into a Trust Receipt Agreement with said
complainant whereby said petitioner as entrustee received in trust from the said complainant various chemicals in the total
sum of P4.5 million with the obligation to hold the said chemicals in trust as property of the entruster with the right to sell the
same for cash and to remit the proceeds thereof to the entruster, or to return the said chemicals if unsold; but said petitioner
once in possession of the same, contrary to his aforesaid obligation under the trust receipt agreement with intent to defraud
did then and there misappropriated, misapplied and converted the said amount to his own personal use and benefit and
despite repeated demands made upon him, said petitioner refused and failed and still refuses and fails to make good of his
obligation, to the damage and prejudice of the said Ma. Girlie C. Bernardez in the amount of P2,971,650.00, Philippine
Currency.

CONTRARY TO LAW.

21
Upon arraignment, petitioner pleaded not guilty to the charges. Thereafter, a full-blown trial ensued.

During the pendency of the abovementioned case, conferences between petitioner and Asiatrust's Remedial Account Officer,
Daniel Yap, were held. Afterward, a Compromise Agreement was drafted by Asiatrust. One of the requirements of the
Compromise Agreement was for petitioner to issue six (6) postdated checks. Petitioner, in good faith, tried to comply by issuing
two or three checks, which were deposited and made good. The remaining checks, however, were not deposited as the
Compromise Agreement did not push through.

For his defense, petitioner argued that: (1) the loan was granted as his working capital and that the Trust Receipt Agreements
he signed with Asiatrust were merely preconditions for the grant and approval of his loan; (2) the Trust Receipt Agreement
corresponding to Letter of Credit No. 1963 and the Trust Receipt Agreement corresponding to Letter of Credit No. 1964 were
both contracts of adhesion, since the stipulations found in the documents were prepared by Asiatrust in fine print; (3)
unfortunately for petitioner, his contract worth PhP 18,000,000 with Islacom was not yet paid since there was a squabble as to
the real ownership of the latter's company, but Asiatrust was aware of petitioner's receivables which were more than sufficient
to cover the obligation as shown in the various Project Listings with Islacom, Smart Communications, and Infocom; (4) prior to
the Islacom problem, he had been faithfully paying his obligation to Asiatrust as shown in Official Receipt Nos. 549001, 549002,
565558, 577198, 577199, and 594986,6cЃa thus debunking Asiatrust's claim of fraud and bad faith against him; (5) during the
pendency of this case, petitioner even attempted to settle his obligations as evidenced by the two United Coconut Planters
Bank Checks7cЃa he issued in favor of Asiatrust; and (6) he had already paid PhP 1.8 million out of the PhP 2.971 million he
owed as per Statement of Account dated January 26, 2000.

Ruling of the Trial Court

After trial on the merits, the RTC, on May 29, 2001, rendered a Decision, finding petitioner guilty of the crime of Estafa. The
fallo of the Decision reads as follows:

WHEREFORE, judgment is hereby rendered finding the petitioner, Anthony L. Ng GUILTY beyond reasonable doubt for the crime
of Estafa defined in and penalized by Article 315, paragraph 1(b) of the Revised Penal Code in relation to Section 3 of
Presidential Decree 115, otherwise known as the Trust Receipts Law, and is hereby sentenced to suffer the indeterminate
penalty of from six (6) years, eight (8) months, and twenty one (21) days of prision mayor, minimum, as the minimum penalty,
to twenty (20) years of reclusion temporal maximum, as the maximum penalty.

The petitioner is further ordered to return to the Asiatrust Development Bank Inc. the amount of Two Million, Nine Hundred
Seventy One and Six Hundred Fifty Pesos (P2,971,650.00) with legal rate of interest computed from the filing of the information
on September 21,1999 until the amount is fully paid.

IT IS SO ORDERED.

In rendering its Decision, the trial court held that petitioner could not simply argue that the contracts he had entered into with
Asiatrust were void as they were contracts of adhesion. It reasoned that petitioner is presumed to have read and understood
and is, therefore, bound by the provisions of the Letters of Credit and Trust Receipts. It said that it was clear that Asiatrust had
furnished petitioner with a Statement of Account enumerating therein the precise figures of the outstanding balance, which he
failed to pay along with the computation of other fees and charges; thus, Asiatrust did not violate Republic Act No. 3765 (Truth
in Lending Act). Finally, the trial court declared that petitioner, being the entrustee stated in the Trust Receipts issued by
Asiatrust, is thus obliged to hold the goods in trust for the entruster and shall dispose of them strictly in accordance with the
terms and conditions of the trust receipts; otherwise, he is obliged to return the goods in the event of non-sale or upon
demand of the entruster, failing thus, he evidently violated the Trust Receipts Law.

Ruling of the Appellate Court

Petitioner then elevated the case to the CA by filing a Notice of Appeal on August 6, 2001. In his Appellant's Brief dated March
25, 2002, petitioner argued that the court a quo erred: (1) in changing the name of the offended party without the benefit of an
amendment of the Information which violates his right to be informed of the nature and cause of accusation against him; (2) in
making a finding of facts not in accord with that actually proved in the trial and/or by the evidence provided; (3) in not
considering the material facts which if taken into account would have resulted in his acquittal; (4) in being biased, hostile, and
prejudiced against him; and (5) in considering the prosecution's evidence which did not prove the guilt of petitioner beyond
reasonable doubt.

22
On August 29, 2003, the CA rendered a Decision affirming that of the RTC, the fallo of which reads:

WHEREFORE, the foregoing considered, the instant appeal is DENIED. The decision of the Regional Trial Court of Quezon City,
Branch 95 dated May 29, 2001 is AFFIRMED.

SO ORDERED.

The CA held that during the course of the trial, petitioner knew that the complainant Bernardez and the other co-witnesses are
all employees of Asiatrust and that she is suing in behalf of the bank. Since petitioner transacted with the same employees for
the issuance of the subject Trust Receipts, he cannot feign ignorance that Asiatrust is not the offended party in the instant case.
The CA further stated that the change in the name of the complainant will not prejudice and alter the fact that petitioner was
being charged with the crime of Estafa in relation to the Trust Receipts Law, since the information clearly set forth the essential
elements of the crime charged, and the constitutional right of petitioner to be informed of the nature and cause of his
accusations is not violated.8cräläwvirtualibräry

As to the alleged error in the appreciation of facts by the trial court, the CA stated that it was undisputed that petitioner
entered into a trust receipt agreement with Asiatrust and he failed to pay the bank his obligation when it became due.
According to the CA, the fact that petitioner acted without malice or fraud in entering into the transactions has no bearing,
since the offense is punished as malum prohibitum regardless of the existence of intent or malice; the mere failure to deliver
the proceeds of the sale or the goods if not sold constitutes the criminal offense.

With regard to the failure of the RTC to consider the fact that petitioner's outstanding receivables are sufficient to cover his
indebtedness and that no written demand was made upon him hence his obligation has not yet become due and demandable,
the CA stated that the mere query as to the whereabouts of the goods and/or money is tantamount to a
demand.9cräläwvirtualibräry

Concerning the alleged bias, hostility, and prejudice of the RTC against petitioner, the CA said that petitioner failed to present
any substantial proof to support the aforementioned allegations against the RTC.

After the receipt of the CA Decision, petitioner moved for its reconsideration, which was denied by the CA in its Resolution
dated July 25, 2006. Thereafter, petitioner filed this Petition for Review on Certiorari. In his Memorandum, he raised the
following issues:

Issues:

1. The prosecution failed to adduce evidence beyond a reasonable doubt to satisfy the 2nd essential element that there was
misappropriation or conversion of subject money or property by petitioner.

2. The state was unable to prove the 3rd essential element of the crime that the alleged misappropriation or conversion is to
the prejudice of the real offended property.

3. The absence of a demand (4th essential element) on petitioner necessarily results to the dismissal of the criminal case.

The Court's Ruling

We find the petition to be meritorious.

Essentially, the issues raised by petitioner can be summed up into one'whether or not petitioner is liable for Estafa under Art.
315, par. 1(b) of the RPC in relation to PD 115.

It is a well-recognized principle that factual findings of the trial court are entitled to great weight and respect by this Court,
more so when they are affirmed by the appellate court. However, the rule is not without exceptions, such as: (1) when the
conclusion is a finding grounded entirely on speculations, surmises, and conjectures; (2) the inferences made are manifestly
mistaken; (3) there is grave abuse of discretion; and (4) the judgment is based on misapprehension of facts or premised on the
absence of evidence on record.10cЃa Especially in criminal cases where the accused stands to lose his liberty by virtue of his
conviction, the Court must be satisfied that the factual findings and conclusions of the lower courts leading to his conviction
must satisfy the standard of proof beyond reasonable doubt.

23
In the case at bar, petitioner was charged with Estafa under Art. 315, par. 1(b) of the RPC in relation to PD 115. The RPC defines
Estafa as:

ART. 315. Swindling (estafa).'Any person who shall defraud another by any of the means mentioned hereinbelow x x x

1. With unfaithfulness or abuse of confidence, namely:

a. x x x

b. By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by
the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery
of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having
received such money, goods, or other property x x x. 11

Based on the definition above, the essential elements of Estafa are: (1) that money, goods or other personal property is
received by the offender in trust or on commission, or for administration, or under any obligation involving the duty to make
delivery of or to return it; (2) that there be misappropriation or conversion of such money or property by the offender, or denial
on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; and (4) there is
demand by the offended party to the offender.12cräläwvirtualibräry

Likewise, Estafa can also be committed in what is called a "trust receipt transaction" under PD 115, which is defined as:

Section 4. What constitutes a trust receipts transaction.'A trust receipt transaction, within the meaning of this Decree, is any
transaction by and between a person referred to in this Decree as the entruster, and another person referred to in this Decree
as entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods,
documents or instruments, releases the same to the possession of the entrustee upon the latter's execution and delivery to the
entruster of a signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments
with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as
appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of,
in accordance with the terms and conditions specified in the trust receipt, or for other purposes substantially equivalent to any
of the following:

1. In the case of goods or documents: (a) to sell the goods or procure their sale; or (b) to manufacture or process the goods with
the purpose of ultimate sale: Provided, That, in the case of goods delivered under trust receipt for the purpose of
manufacturing or processing before its ultimate sale, the entruster shall retain its title over the goods whether in its original or
processed form until the entrustee has complied full with his obligation under the trust receipt; or (c) to load, unload, ship or
transship or otherwise deal with them in a manner preliminary or necessary to their sale; or

2. In the case of instruments: (a) to sell or procure their sale or exchange; or (b) to deliver them to a principal; or (c) to effect
the consummation of some transactions involving delivery to a depository or register; or (d) to effect their presentation,
collection or renewal.

The sale of good, documents or instruments by a person in the business of selling goods, documents or instruments for profit
who, at the outset of transaction, has, as against the buyer, general property rights in such goods, documents or instruments,
or who sells the same to the buyer on credit, retaining title or other interest as security for the payment of the purchase price,
does not constitute a trust receipt transaction and is outside the purview and coverage of this Decree.

In other words, a trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of
the sale, or if the merchandise is not sold, to return the merchandise to the entruster. There are, therefore, two obligations in a
trust receipt transaction: the first refers to money received under the obligation involving the duty to turn it over (entregarla)
to the owner of the merchandise sold, while the second refers to the merchandise received under the obligation to "return" it
(devolvera) to the owner.13cЃa A violation of any of these undertakings constitutes Estafa defined under Art. 315, par. 1(b) of
the RPC, as provided in Sec. 13 of PD 115, viz:

Section 13. Penalty Clause.'The failure of an entrustee to turn over the proceeds of the sale of the goods, documents or
instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or
to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust

24
receipt shall constitute the crime of estafa, punishable under the provisions of Article Three hundred fifteen, paragraph one (b)
of Act Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. x x x
(Emphasis supplied.)

A thorough examination of the facts obtaining in the instant case, however, reveals that the transaction between petitioner and
Asiatrust is not a trust receipt transaction but one of simple loan.

PD 115 Does Not Apply

It must be remembered that petitioner was transparent to Asiatrust from the very beginning that the subject goods were not
being held for sale but were to be used for the fabrication of steel communication towers in accordance with his contracts with
Islacom, Smart, and Infocom. In these contracts, he was commissioned to build, out of the materials received, steel
communication towers, not to sell them.

The true nature of a trust receipt transaction can be found in the "whereas" clause of PD 115 which states that a trust receipt is
to be utilized "as a convenient business device to assist importers and merchants solve their financing problems." Obviously,
the State, in enacting the law, sought to find a way to assist importers and merchants in their financing in order to encourage
commerce in the Philippines.

As stressed in Samo v. People,14cЃa a trust receipt is considered a security transaction intended to aid in financing importers and
retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who
may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased. Similarly,
American Jurisprudence demonstrates that trust receipt transactions always refer to a method of "financing importations or
financing sales."15cЃa The principle is of course not limited in its application to financing importations, since the principle is
equally applicable to domestic transactions.16cЃa Regardless of whether the transaction is foreign or domestic, it is important to
note that the transactions discussed in relation to trust receipts mainly involved sales.

Following the precept of the law, such transactions affect situations wherein the entruster, who owns or holds absolute title or
security interests over specified goods, documents or instruments, releases the subject goods to the possession of the
entrustee. The release of such goods to the entrustee is conditioned upon his execution and delivery to the entruster of a trust
receipt wherein the former binds himself to hold the specific goods, documents or instruments in trust for the entruster and to
sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster
the proceeds to the extent of the amount owing to the entruster or the goods, documents or instruments themselves if they
are unsold. Similarly, we held in State Investment House v. CA, et al. that the entruster is entitled "only to the proceeds derived
from the sale of goods released under a trust receipt to the entrustee."17cЃa

Considering that the goods in this case were never intended for sale but for use in the fabrication of steel communication
towers, the trial court erred in ruling that the agreement is a trust receipt transaction.

In applying the provisions of PD 115, the trial court relied on the Memorandum of Asiatrust's appraiser, Linga, who stated that
the goods have been sold by petitioner and that only 3% of the goods remained in the warehouse where it was previously
stored. But for reasons known only to the trial court, the latter did not give weight to the testimony of Linga when he testified
that he merely presumed that the goods were sold, viz:

COURT (to the witness)

Q So, in other words, when the goods were not there anymore. You presumed that, that is already sold?

A Yes, your Honor.

Undoubtedly, in his testimony, Linga showed that he had no real personal knowledge or proof of the fact that the goods were
indeed sold. He did not notify petitioner about the inspection nor did he talk to or inquire with petitioner regarding the
whereabouts of the subject goods. Neither did he confirm with petitioner if the subject goods were in fact sold. Therefore, the
Memorandum of Linga, which was based only on his presumption and not any actual personal knowledge, should not have
been used by the trial court to prove that the goods have in fact been sold. At the very least, it could only show that the goods
were not in the warehouse.

25
Having established the inapplicability of PD 115, this Court finds that petitioner's liability is only limited to the satisfaction of his
obligation from the loan. The real intent of the parties was simply to enter into a simple loan agreement.

To emphasize, the Trust Receipts Law was created to "to aid in financing importers and retail dealers who do not have sufficient
funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except
through utilization, as collateral, of the merchandise imported or purchased." Since Asiatrust knew that petitioner was neither
an importer nor retail dealer, it should have known that the said agreement could not possibly apply to petitioner.

Moreover, this Court finds that petitioner is not liable for Estafa both under the RPC and PD 115.

Goods Were Not Received in Trust

The first element of Estafa under Art. 315, par. 1(b) of the RPC requires that the money, goods or other personal property must
be received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to
make delivery of, or to return it. But as we already discussed, the goods received by petitioner were not held in trust. They
were also not intended for sale and neither did petitioner have the duty to return them. They were only intended for use in the
fabrication of steel communication towers.

No Misappropriation of Goods or Proceeds

The second element of Estafa requires that there be misappropriation or conversion of such money or property by the
offender, or denial on his part of such receipt.

This is the very essence of Estafa under Art. 315, par. 1(b). The words "convert" and "misappropriated" connote an act of using
or disposing of another's property as if it were one's own, or of devoting it to a purpose or use different from that agreed upon.
To misappropriate for one's own use includes not only conversion to one's personal advantage, but also every attempt to
dispose of the property of another without a right.18cЃa

Petitioner argues that there was no misappropriation or conversion on his part, because his liability for the amount of the
goods subject of the trust receipts arises and becomes due only upon receipt of the proceeds of the sale and not prior to the
receipt of the full price of the goods.

Petitioner is correct. Thus, assuming arguendo that the provisions of PD 115 apply, petitioner is not liable for Estafa because
Sec. 13 of PD 115 provides that an entrustee is only liable for Estafa when he fails "to turn over the proceeds of the sale of the
goods x x x covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt x x x
in accordance with the terms of the trust receipt."

The trust receipt entered into between Asiatrust and petitioner states:

In case of sale I/we agree to hand the proceeds as soon as received to the BANK to apply against the relative acceptance (as
described above) and for the payment of any other indebtedness of mine/ours to ASIATRUST DEVELOPMENT
BANK.19cЃa (Emphasis supplied.)

Clearly, petitioner was only obligated to turn over the proceeds as soon as he received payment. However, the evidence reveals
that petitioner experienced difficulties in collecting payments from his clients for the communication towers. Despite this fact,
petitioner endeavored to pay his indebtedness to Asiatrust, which payments during the period from September 1997 to July
1998 total approximately PhP 1,500,000. Thus, absent proof that the proceeds have been actually and fully received by
petitioner, his obligation to turn over the same to Asiatrust never arose.

What is more, under the Trust Receipt Agreement itself, no date of maturity was stipulated. The provision left blank by
Asiatrust is as follows:

x x x and in consideration thereof, I/we hereby agree to hold said goods in Trust for the said Bank and as its property with
liberty to sell the same for its account within ________ days from the date of execution of the Trust Receipt x x x20

In fact, Asiatrust purposely left the space designated for the date blank, an action which in ordinary banking transactions would
be noted as highly irregular. Hence, the only way for the obligation to mature was for Asiatrust to demand from petitioner to
pay the obligation, which it never did.

26
Again, it also makes the Court wonder as to why Asiatrust decided to leave the provisions for the maturity dates in the Trust
Receipt agreements in blank, since those dates are elemental part of the loan. But then, as can be gleaned from the records of
this case, Asiatrust also knew that the capacity of petitioner to pay for his loan also hinges upon the latter's receivables from
Islacom, Smart, and Infocom where he had ongoing and future projects for fabrication and installation of steel communication
towers and not from the sale of said goods. Being a bank, Asiatrust acted inappropriately when it left such a sensitive bank
instrument with a void circumstance on an elementary but vital feature of each and every loan transaction, that is, the maturity
dates. Without stating the maturity dates, it was impossible for petitioner to determine when the loan will be due.

Moreover, Asiatrust was aware that petitioner was not engaged in selling the subject goods and that petitioner will use them
for the fabrication and installation of communication towers. Before granting petitioner the credit line, as aforementioned,
Asiatrust conducted an investigation, which showed that petitioner fabricated and installed communication towers for well-
known communication companies to be installed at designated project sites. In fine, there was no abuse of confidence to speak
of nor was there any intention to convert the subject goods for another purpose, since petitioner did not withhold the fact that
they were to be used to fabricate steel communication towers to Asiatrust. Hence, no malice or abuse of confidence and
misappropriation occurred in this instance due to Asiatrust's knowledge of the facts.

Furthermore, Asiatrust was informed at the time of petitioner's application for the loan that the payment for the loan would be
derived from the collectibles of his clients. Petitioner informed Asiatrust that he was having extreme difficulties in collecting
from Islacom the full contracted price of the towers. Thus, the duty of petitioner to remit the proceeds of the goods has not yet
arisen since he has yet to receive proceeds of the goods. Again, petitioner could not be said to have misappropriated or
converted the proceeds of the transaction since he has not yet received the proceeds from his client, Islacom.

This Court also takes judicial notice of the fact that petitioner has fully paid his obligation to Asiatrust, making the claim for
damage and prejudice of Asiatrust baseless and unfounded. Given that the acceptance of payment by Asiatrust necessarily
extinguished petitioner's obligation, then there is no longer any obligation on petitioner's part to speak of, thus precluding
Asiatrust from claiming any damage. This is evidenced by Asiatrust's Affidavit of Desistance21cЃa acknowledging full payment of
the loan.

Reasonable Doubt Exists

In the final analysis, the prosecution failed to prove beyond reasonable doubt that petitioner was guilty of Estafa under Art.
315, par. 1(b) of the RPC in relation to the pertinent provision of PD 115 or the Trust Receipts Law; thus, his liability should only
be civil in nature.

While petitioner admits to his civil liability to Asiatrust, he nevertheless does not have criminal liability. It is a well-established
principle that person is presumed innocent until proved guilty. To overcome the presumption, his guilt must be shown by proof
beyond reasonable doubt. Thus, we held in People v. Mariano22cЃa that while the principle does not connote absolute
certainty, it means the degree of proof which produces moral certainty in an unprejudiced mind of the culpability of the
accused. Such proof should convince and satisfy the reason and conscience of those who are to act upon it that the accused is
in fact guilty. The prosecution, in this instant case, failed to rebut the constitutional innocence of petitioner and thus the latter
should be acquitted.

At this point, the ruling of this Court in Colinares v. Court of Appeals is very apt, thus:

The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats
of criminal prosecution should they be unable to pay it may be unjust and inequitable, if not reprehensible. Such agreements
are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved. The resort to this scheme
leaves poor and hapless borrowers at the mercy of banks, and is prone to misinterpretation x x x.23

Such is the situation in this case.

Asiatrust's intention became more evident when, on March 30, 2009, it, along with petitioner, filed their Joint Motion for Leave
to File and Admit Attached Affidavit of Desistance to qualify the Affidavit of Desistance executed by Felino H. Esquivas, Jr.,
attorney-in-fact of the Board of Asiatrust, which acknowledged the full payment of the obligation of the petitioner and the
successful mediation between the parties.

From the foregoing considerations, we deem it unnecessary to discuss and rule upon the other issues raised in the appeal.

27
WHEREFORE, the CA Decision dated August 29, 2003 affirming the RTC Decision dated May 29, 2001 is SET ASIDE. Petitioner
ANTHONY L. NG is hereby ACQUITTED of the charge of violation of Art. 315, par. 1(b) of the RPC in relation to the pertinent
provision of PD 115.

SO ORDERED.

28
THE COSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), petitioner
vs.
THE COURT OF APPEALS, CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and SPOUSE, respondents.

YNARES-SANTIAGO, J.:

The instant petition for review seeks to partially set aside the July 26, 1993 Decision1 of respondent Court of Appeals in CA-GR.
CV No. 29950, insofar as it orders petitioner to reimburse respondent Continental Cement Corporation the amount of P490,
228.90 with interest thereon at the legal rate from July 26, 1988 until fully paid. The petition also seeks to set aside the March
8, 1994 Resolution2 of respondent Court of Appeals denying its Motion for Reconsideration.

The facts are as follows:

On July 13, 1982, respondents Continental Cement Corporation (hereinafter, respondent Corporation) and Gregory T. Lim
(hereinafter, respondent Lim) obtained from petitioner Consolidated Bank and Trust Corporation Letter of Credit No. DOM-
23277 in the amount of P 1,068,150.00 On the same date, respondent Corporation paid a marginal deposit of P320,445.00 to
petitioner. The letter of credit was used to purchase around five hundred thousand liters of bunker fuel oil from Petrophil
Corporation, which the latter delivered directly to respondent Corporation in its Bulacan plant. In relation to the same
transaction, a trust receipt for the amount of P 1,001,520.93 was executed by respondent Corporation, with respondent Lim as
signatory.

Claiming that respondents failed to turn over the goods covered by the trust receipt or the proceeds thereof, petitioner filed a
complaint for sum of money with application for preliminary attachment3 before the Regional Trial Court of Manila. In answer
to the complaint, respondents averred that the transaction between them was a simple loan and not a trust receipt transaction,
and that the amount claimed by petitioner did not take into account payments already made by them. Respondent Lim also
denied any personal liability in the subject transactions. In a Supplemental Answer, respondents prayed for reimbursement of
alleged overpayment to petitioner of the amount of P490,228.90.

At the pre-trial conference, the parties agreed on the following issues:

1) Whether or not the transaction involved is a loan transaction or a trust receipt transaction;

2) Whether or not the interest rates charged against the defendants by the plaintiff are proper under the letter of credit, trust
receipt and under existing rules or regulations of the Central Bank;

3) Whether or not the plaintiff properly applied the previous payment of P300,456.27 by the defendant corporation on July 13,
1982 as payment for the latter’s account; and

4) Whether or not the defendants are personally liable under the transaction sued for in this case. 4

On September 17, 1990, the trial court rendered its Decision,5 dismissing the Complaint and ordering petitioner to pay
respondents the following amounts under their counterclaim: P490,228.90 representing overpayment of respondent
Corporation, with interest thereon at the legal rate from July 26, 1988 until fully paid; P10,000.00 as attorney's fees; and costs.

Both parties appealed to the Court of Appeals, which partially modified the Decision by deleting the award of attorney's fees in
favor of respondents and, instead, ordering respondent Corporation to pay petitioner P37,469.22 as and for attorney's fees and
litigation expenses.

Hence, the instant petition raising the following issues:

1. WHETHER OR NOT THE RESPONDENT APPELLATE COURT ACTED INCORRECTLY OR COMMITTED REVERSIBLE ERROR IN
HOLDING THAT THERE WAS OVERPAYMENT BY PRIVATE RESPONDENTS TO THE PETITIONER IN THE AMOUNT OF P490,228.90
DESPITE THE ABSENCE OF ANY COMPUTATION MADE IN THE DECISION AND THE ERRONEOUS APPLICATION OF PAYMENTS
WHICH IS IN VIOLATION OF THE NEW CIVIL CODE.

2. WHETHER OR NOT THE MANNER OF COMPUTATION OF THE MARGINAL DEPOSIT BY THE RESPONDENT APPELLATE COURT IS
IN ACCORDANCE WITH BANKING PRACTICE.

29
3. WHETHER OR NOT THE AGREEMENT AMONG THE PARTIES AS TO THE FLOATING OF INTEREST RATE IS VALID UNDER
APPLICABLE JURISPRUDENCE AND THE RULES AND REGULATIONS OF THE CENTRAL BANK.

4. WHETHER OR NO THE RESPONDENT APPELLATE COUR GRIEVOUSLY ERRED IN NOT CONSIDERING THE TRANSACTION AT BAR
AS A TRUST RECEIPT TRANSACTION ON THE BASIS OF THE JUDICIAL ADMISSIONS OF THE PRIVATE RESPONDENTS AND FOR
WHICH RESPONDENTS ARE LIABLE THEREFOR.

5. WHETHER OR NOT THE RESPONDENT APPELLATE COURT GRIEVOUSLY ERRED IN NOT HOLDING PRIVATE RESPONDENT
SPOUSES LIABLE UNDER THE TRUST RECEIPT TRANSACTION.6

The petition must be denied.

On the first issue respecting the fact of overpayment found by both the lower court and respondent Court of Appeals, we stress
the time-honored rule that findings of fact by the Court of Appeals especially if they affirm factual findings of the trial court will
not be disturbed by this Court, unless these findings are not supported by evidence. 7

Petitioner decries the lack of computation by the lower court as basis for its ruling that there was an overpayment made. While
such a computation may not have appeared in the Decision itself, we note that the trial court's finding of overpayment is
supported by evidence presented before it. At any rate, we painstakingly reviewed and computed the payments together with
the interest and penalty charges due thereon and found that the amount of overpayment made by respondent Bank to
petitioner, i.e., P263,070.13, was more than what was ordered reimbursed by the lower court. However, since respondents did
not file an appeal in this case, the amount ordered reimbursed by the lower court should stand.

Moreover, petitioner's contention that the marginal deposit made by respondent Corporation should not be deducted outright
from the amount of the letter of credit is untenable. Petitioner argues that the marginal deposit should be considered only
after computing the principal plus accrued interest and other charges. However, to sustain petitioner on this score would be to
countenance a clear case of unjust enrichment, for while a marginal deposit earns no interest in favour of the debtor-depositor,
the bank is not only able to use the same for its own purposes, interest-free, but is also able to earn interest on the money
loaned to respondent Corporation. Indeed, it would be onerous to compute interest and other charges on the face value of the
letter of credit which the petitioner issued, without first crediting or setting off the marginal deposit which the respondent
Corporation paid to it. Compensation is proper and should take effect by operation of law because the requisites in Article 1279
of the Civil Code are present and should extinguish both debts to the concurrent amount.8

Hence, the interests and other charges on the subject letter of credit should be computed only on the balance of P681,075.93,
which was the portion actually loaned by the bank to respondent Corporation.

Neither do we find error when the lower court and the Court of Appeals set aside as invalid the floating rate of interest
exhorted by petitioner to be applicable. The pertinent provision in the trust receipt agreement of the parties fixing the interest
rate states:

I, WE jointly and severally agree to any increase or decrease in the interest rate which may occur after July 1, 1981, when the
Central Bank floated the interest rate, and to pay additionally the penalty of 1% per month until the amount/s or instalments/s
due and unpaid under the trust receipt on the reverse side hereof is/are fully paid. 9

We agree with respondent Court of Appeals that the foregoing stipulation is invalid, there being no reference rate set either by
it or by the Central Bank, leaving the determination thereof at the sole will and control of petitioner. 1âwphi1.nêt

While it may be acceptable, for practical reasons given the fluctuating economic conditions, for banks to stipulate that interest
rates on a loan not be fixed and instead be made dependent upon prevailing market conditions, there should always be a
reference rate upon which to peg such variable interest rates. An example of such a valid variable interest rate was found
in Polotan, Sr. v. Court of Appeals. 10 In that case, the contractual provision stating that "if there occurs any change in the
prevailing market rates, the new interest rate shall be the guiding rate in computing the interest due on the outstanding
obligation without need of serving notice to the Cardholder other than the required posting on the monthly statement served
to the Cardholder"11 was considered valid. The aforequoted provision was upheld notwithstanding that it may partake of the
nature of an escalation clause, because at the same time it provides for the decrease in the interest rate in case the prevailing
market rates dictate its reduction. In other words, unlike the stipulation subject of the instant case, the interest rate involved in
the Polotan case is designed to be based on the prevailing market rate. On the other hand, a stipulation ostensibly signifying an

30
agreement to "any increase or decrease in the interest rate," without more, cannot be accepted by this Court as valid for it
leaves solely to the creditor the determination of what interest rate to charge against an outstanding loan.

Petitioner has also failed to convince us that its transaction with respondent Corporation is really a trust receipt transaction
instead of merely a simple loan, as found by the lower court and the Court of Appeals.

The recent case of Colinares v. Court of Appeals 12 appears to be foursquare with the facts obtaining in the case at bar. There,
we found that inasmuch as the debtor received the goods subject of the trust receipt before the trust receipt itself was entered
into, the transaction in question was a simple loan and not a trust receipt agreement. Prior to the date of execution of the trust
receipt, ownership over the goods was already transferred to the debtor. This situation is inconsistent with what normally
obtains in a pure trust receipt transaction, wherein the goods belong in ownership to the bank and are only released to the
importer in trust after the loan is granted.

In the case at bar, as in Colinares, the delivery to respondent Corporation of the goods subject of the trust receipt occurred long
before the trust receipt itself was executed. More specifically, delivery of the bunker fuel oil to respondent Corporation's
Bulacan plant commenced on July 7, 1982 and was completed by July 19, 1982.13 Further, the oil was used up by respondent
Corporation in its normal operations by August, 1982.14 On the other hand, the subject trust receipt was only executed nearly
two months after full delivery of the oil was made to respondent Corporation, or on September 2, 1982.

The danger in characterizing a simple loan as a trust receipt transaction was explained in Colinares, to wit:

The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse of
confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the owner. Here, it
is crystal clear that on the part of Petitioners there was neither dishonesty nor abuse of confidence in the handling of money to
the prejudice of PBC. Petitioners continually endeavored to meet their obligations, as shown by several receipts issued by PBC
acknowledging payment of the loan.

The Information charges Petitioners with intent to defraud and misappropriating the money for their personal use. The mala
prohibita nature of the alleged offense notwithstanding, intent as a state of mind was not proved to be present in Petitioners'
situation. Petitioners employed no artifice in dealing with PBC and never did they evade payment of their obligation nor
attempt to abscond. Instead, Petitioners sought favorable terms precisely to meet their obligation.

Also noteworthy is the fact that Petitioners are not importers acquiring the goods for re-sale, contrary to the express provision
embodied in the trust receipt. They are contractors who obtained the fungible goods for their construction project. At no time
did title over the construction materials pass to the bank, but directly to the Petitioners from CM Builders Centre. This
impresses upon the trust receipt in question vagueness and ambiguity, which should not be the basis for criminal prosecution in
the event of violation of its provisions.

The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats
of criminal prosecution should they be unable to pay it may be unjust and inequitable if not reprehensible. Such agreements
are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved. The resort to this scheme
leaves poor and hapless borrowers at the mercy of banks, and is prone to misinterpretation, as had happened in this case.
Eventually, PBC showed its true colors and admitted that it was only after collection of the money, as manifested by its Affidavit
of Desistance.

Similarly, respondent Corporation cannot be said to have been dishonest in its dealings with petitioner. Neither has it been
shown that it has evaded payment of its obligations. Indeed, it continually endeavored to meet the same, as shown by the
various receipts issued by petitioner acknowledging payment on the loan. Certainly, the payment of the sum of P1,832,158.38
on a loan with a principal amount of only P681,075.93 negates any badge of dishonesty , abuse of confidence or mishandling of
funds on the part of respondent Corporation, which are the gravamen of a trust receipt violation. Furthermore, Respondent
Corporation is not an importer, which acquired the bunker fuel oil for re-sale; it needed the oil for its own operations. More
importantly, at no time did title over the oil pass to petitioner, but directly to respondent Corporation to which the oil was
directly delivered long before the trust receipt was executed. The fact that ownership of the oil belonged to respondent
Corporation, through its President, Gregory Lim, was acknowledged by petitioner's own account officer on the witness stand, to
wit:

31
Q -After the bank opened a letter of credit in favor of Petrophil Corp. for the account of the defendants thereby paying the
value of the bunker fuel oil what transpired next after that?

A -Upon purchase of the bunker fuel oil and upon the requests of the defendant possession of the bunker fuel oil were
transferred to them.

Q -You mentioned them to whom are you referring to?

A -To the Continental Cement Corp. upon the execution of the trust receipt acknowledging the ownership of the bunker fuel oil
this should be acceptable for whatever disposition he may make.

Q - You mentioned about acknowledging ownership of the bunker fuel oil to whom by whom?

A - By the Continental Cement Corp.

Q – So by your statement who really owns the bunker fuel oil?

A TTY. RACHON:

Objection already answered,

COURT:

Give time to the other counsel to object.

A TTY. RACHON :

He has testified that ownership was acknowledged in favor of Continental Cement Corp. so that question has already been
answered.

A TTY. BANAGA:

That is why I made a follow up question asking ownership of the bunker fuel oil.

COURT:

Proceed.

A TTY .BANAGA:

Q - Who owns the bunker fuel oil after purchase from Petrophil Corp. ?

A - Gregory Lim.15

By all indications, then, it is apparent that there was really no trust receipt transaction that took place. Evidently, respondent
Corporation was required to sign the trust receipt simply to facilitate collection by petitioner of the loan it had extended to the
former.

Finally, we are not convinced that respondent Gregory T. Lim and his spouse should be personally liable under the subject trust
receipt. Petitioner's argument that respondent Corporation and respondent Lim and his spouse are one and the same cannot
be sustained. The transactions sued upon were clearly entered into by respondent Lim in his capacity as Executive Vice
President of respondent Corporation. We stress the hornbook law that corporate personality is a shield against personal liability
of its officers. Thus, we agree that respondents Gregory T. Lim and his spouse cannot be made personally liable since
respondent Lim entered into and signed the contract clearly in his official capacity as Executive Vice President. The personality
of the corporation is separate and distinct from the persons composing it.16

WHEREFORE, in view of all the foregoing, the instant Petition for Review is DENIED. The Decision of the Court of Appeals dated
July 26, 1993 in CA-G.R. CY No.29950 is AFFIRMED.

SO ORDERED

32
BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN, Petitioner,
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.

DECISION

PERALTA, J.:

This is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals in CA-G.R. SP No.
876001 dated April 20, 2005, which reversed and set aside the September 13, 20042 and November 5, 20043 Orders issued by
the Regional Trial Court of Manila, Branch 364 in Criminal Case No. 02-202158 for qualified theft. The said orders, in turn,
respectively denied the motion filed by herein respondent Sally Go for the suppression of the testimonial and documentary
evidence relative to a Security Bank account, and denied reconsideration.

The basic antecedents are no longer disputed.

Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein representative, Ricardo
Bangayan (Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia Go and Sally Go-Bangayan, is Bangayan’s wife,
who was employed in the company as a cashier, and was engaged, among others, to receive and account for the payments
made by the various customers of the company.

In 2002, Bangayan filed with the Manila Prosecutor’s Office a complaint for estafa and/or qualified theft5 against respondent,
alleging that several checks6 representing the aggregate amount of ₱1,534,135.50 issued by the company’s customers in
payment of their obligation were, instead of being turned over to the company’s coffers, indorsed by respondent who
deposited the same to her personal banking account maintained at Security Bank and Trust Company (Security Bank) in
Divisoria, Manila Branch.7 Upon a finding that the evidence adduced was uncontroverted, the assistant city prosecutor
recommended the filing of the Information for qualified theft against respondent. 8

Accordingly, respondent was charged before the Regional Trial Court of Manila, Branch 36, in an Information, the inculpatory
portion of which reads:

That in or about or sometime during the period comprised (sic) between January 1988 [and] October 1989, inclusive, in the City
of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously with intent [to] gain and without
the knowledge and consent of the owner thereof, take, steal and carry away cash money in the total amount of ₱1,534,135.50
belonging to BSB GROUP OF COMPANIES represented by RICARDO BANGAYAN, to the damage and prejudice of said owner in
the aforesaid amount of ₱1,534,135.50, Philippine currency.

That in the commission of the said offense, said accused acted with grave abuse of confidence, being then employed as cashier
by said complainant at the time of the commission of the said offense and as such she was entrusted with the said amount of
money.

Contrary to law.9

Respondent entered a negative plea when arraigned.10 The trial ensued. On the premise that respondent had allegedly
encashed the subject checks and deposited the corresponding amounts thereof to her personal banking account, the
prosecution moved for the issuance of subpoena duces tecum /ad testificandum against the respective managers or records
custodians of Security Bank’s Divisoria Branch, as well as of the Asian Savings Bank (now Metropolitan Bank & Trust Co.
[Metrobank]), in Jose Abad Santos, Tondo, Manila Branch.11 The trial court granted the motion and issued the corresponding
subpoena.12

Respondent filed a motion to quash the subpoena dated November 4, 2003, addressed to Metrobank, noting to the court that
in the complaint-affidavit filed with the prosecutor, there was no mention made of the said bank account, to which respondent,
in addition to the Security Bank account identified as Account No. 01-14-006, allegedly deposited the proceeds of the supposed
checks. Interestingly, while respondent characterized the Metrobank account as irrelevant to the case, she, in the same motion,
nevertheless waived her objection to the irrelevancy of the Security Bank account mentioned in the same complaint-affidavit,
inasmuch as she was admittedly willing to address the allegations with respect thereto.13

33
Petitioner, opposing respondent’s move, argued for the relevancy of the Metrobank account on the ground that the complaint-
affidavit showed that there were two checks which respondent allegedly deposited in an account with the said bank.14 To this,
respondent filed a supplemental motion to quash, invoking the absolutely confidential nature of the Metrobank account under
the provisions of Republic Act (R.A.) No. 1405.15 The trial court did not sustain respondent; hence, it denied the motion to
quash for lack of merit.16

Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan (Marasigan), the representative of
Security Bank. In a nutshell, Marasigan’s testimony sought to prove that between 1988 and 1989, respondent, while engaged as
cashier at the BSB Group, Inc., was able to run away with the checks issued to the company by its customers, endorse the same,
and credit the corresponding amounts to her personal deposit account with Security Bank. In the course of the testimony, the
subject checks were presented to Marasigan for identification and marking as the same checks received by respondent,
endorsed, and then deposited in her personal account with Security Bank.17 But before the testimony could be completed,
respondent filed a Motion to Suppress,18 seeking the exclusion of Marasigan’s testimony and accompanying documents thus far
received, bearing on the subject Security Bank account. This time respondent invokes, in addition to irrelevancy, the privilege of
confidentiality under R.A. No. 1405.

The trial court, nevertheless, denied the motion in its September 13, 2004 Order.19 A motion for reconsideration was
subsequently filed, but it was also denied in the Order dated November 5, 2004.20 These two orders are the subject of the
instant case.

Aggrieved, and believing that the trial court gravely abused its discretion in acting the way it did, respondent elevated the
matter to the Court of Appeals via a petition for certiorari under Rule 65. Finding merit in the petition, the Court of Appeals
reversed and set aside the assailed orders of the trial court in its April 20, 2005 Decision.21 The decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed orders dated September 13, 2004 and November 5, 2004 are
REVERSED and SET ASIDE. The testimony of the SBTC representative is ordered stricken from the records.

SO ORDERED.22

With the denial of its motion for reconsideration,23 petitioner is now before the Court pleading the same issues as those raised
before the lower courts.

In this Petition24 under Rule 45, petitioner averred in the main that the Court of Appeals had seriously erred in reversing the
assailed orders of the trial court, and in effect striking out Marasigan’s testimony dealing with respondent’s deposit account
with Security Bank.25 It asserted that apart from the fact that the said evidence had a direct relation to the subject matter of the
case for qualified theft and, hence, brings the case under one of the exceptions to the coverage of confidentiality under R.A.
1405.26 Petitioner believed that what constituted the subject matter in litigation was to be determined by the allegations in the
information and, in this respect, it alluded to the assailed November 5, 2004 Order of the trial court, which declared to be
erroneous the limitation of the present inquiry merely to what was contained in the information.27

For her part, respondent claimed that the money represented by the Security Bank account was neither relevant nor material
to the case, because nothing in the criminal information suggested that the money therein deposited was the subject matter of
the case. She invited particular attention to that portion of the criminal Information which averred that she has stolen and
carried away cash money in the total amount of ₱1,534,135.50. She advanced the notion that the term "cash money" stated in
the Information was not synonymous with the checks she was purported to have stolen from petitioner and deposited in her
personal banking account. Thus, the checks which the prosecution had Marasigan identify, as well as the testimony itself of
Marasigan, should be suppressed by the trial court at least for violating respondent’s right to due process.28 More in point,
respondent opined that admitting the testimony of Marasigan, as well as the evidence pertaining to the Security Bank account,
would violate the secrecy rule under R.A. No. 1405.29

In its reply, petitioner asserted the sufficiency of the allegations in the criminal Information for qualified theft, as the same has
sufficiently alleged the elements of the offense charged. It posits that through Marasigan’s testimony, the Court would be able
to establish that the checks involved, copies of which were attached to the complaint-affidavit filed with the prosecutor, had
indeed been received by respondent as cashier, but were, thereafter, deposited by the latter to her personal account with
Security Bank. Petitioner held that the checks represented the cash money stolen by respondent and, hence, the subject matter
in this case is not only the cash amount represented by the checks supposedly stolen by respondent, but also the checks
themselves.30

34
We derive from the conflicting advocacies of the parties that the issue for resolution is whether the testimony of Marasigan and
the accompanying documents are irrelevant to the case, and whether they are also violative of the absolutely confidential
nature of bank deposits and, hence, excluded by operation of R.A. No. 1405. The question of admissibility of the evidence thus
comes to the fore. And the Court, after deliberative estimation, finds the subject evidence to be indeed inadmissible.

Prefatorily, fundamental is the precept in all criminal prosecutions, that the constitutive acts of the offense must be established
with unwavering exactitude and moral certainty because this is the critical and only requisite to a finding of guilt. 31 Theft is
present when a person, with intent to gain but without violence against or intimidation of persons or force upon things, takes
the personal property of another without the latter’s consent. It is qualified when, among others, and as alleged in the instant
case, it is committed with abuse of confidence.32 The prosecution of this offense necessarily focuses on the existence of the
following elements: (a) there was taking of personal property belonging to another; (b) the taking was done with intent to gain;
(c) the taking was done without the consent of the owner; (d) the taking was done without violence against or intimidation of
persons or force upon things; and (e) it was done with abuse of confidence. 33 In turn, whether these elements concur in a way
that overcomes the presumption of guiltlessness, is a question that must pass the test of relevancy and competency in
accordance with Section 334 Rule 128 of the Rules of Court.

Thus, whether these pieces of evidence sought to be suppressed in this case the testimony of Marasigan, as well as the checks
purported to have been stolen and deposited in respondent’s Security Bank account are relevant, is to be addressed by
considering whether they have such direct relation to the fact in issue as to induce belief in its existence or non-existence; or
whether they relate collaterally to a fact from which, by process of logic, an inference may be made as to the existence or non-
existence of the fact in issue.35

The fact in issue appears to be that respondent has taken away cash in the amount of ₱1,534,135.50 from the coffers of
petitioner. In support of this allegation, petitioner seeks to establish the existence of the elemental act of taking by adducing
evidence that respondent, at several times between 1988 and 1989, deposited some of its checks to her personal account with
Security Bank. Petitioner addresses the incongruence between the allegation of theft of cash in the Information, on the one
hand, and the evidence that respondent had first stolen the checks and deposited the same in her banking account, on the
other hand, by impressing upon the Court that there obtains no difference between cash and check for purposes of prosecuting
respondent for theft of cash. Petitioner is mistaken.

In theft, the act of unlawful taking connotes deprivation of personal property of one by another with intent to gain, and it is
immaterial that the offender is able or unable to freely dispose of the property stolen because the deprivation relative to the
offended party has already ensued from such act of execution.36 The allegation of theft of money, hence, necessitates that
evidence presented must have a tendency to prove that the offender has unlawfully taken money belonging to another.
Interestingly, petitioner has taken pains in attempting to draw a connection between the evidence subject of the instant
review, and the allegation of theft in the Information by claiming that respondent had fraudulently deposited the checks in her
own name. But this line of argument works more prejudice than favor, because it in effect, seeks to establish the commission,
not of theft, but rather of some other crime probably estafa.

Moreover, that there is no difference between cash and check is true in other instances. In estafa by conversion, for instance,
whether the thing converted is cash or check, is immaterial in relation to the formal allegation in an information for that
offense; a check, after all, while not regarded as legal tender, is normally accepted under commercial usage as a substitute for
cash, and the credit it represents in stated monetary value is properly capable of appropriation. And it is in this respect that
what the offender does with the check subsequent to the act of unlawfully taking it becomes material inasmuch as this offense
is a continuing one.37 In other words, in pursuing a case for this offense, the prosecution may establish its cause by the
presentation of the checks involved. These checks would then constitute the best evidence to establish their contents and to
prove the elemental act of conversion in support of the proposition that the offender has indeed indorsed the same in his own
name.38

Theft, however, is not of such character. Thus, for our purposes, as the Information in this case accuses respondent of having
stolen cash, proof tending to establish that respondent has actualized her criminal intent by indorsing the checks and
depositing the proceeds thereof in her personal account, becomes not only irrelevant but also immaterial and, on that score,
inadmissible in evidence.

We now address the issue of whether the admission of Marasigan’s testimony on the particulars of respondent’s account with
Security Bank, as well as of the corresponding evidence of the checks allegedly deposited in said account, constitutes an
unallowable inquiry under R.A. 1405.

35
It is conceded that while the fundamental law has not bothered with the triviality of specifically addressing privacy rights
relative to banking accounts, there, nevertheless, exists in our jurisdiction a legitimate expectation of privacy governing such
accounts. The source of this right of expectation is statutory, and it is found in R.A. No. 1405,39 otherwise known as the Bank
Secrecy Act of 1955. 40

R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time encourage the people to
deposit their money in banking institutions, so that it may be utilized by way of authorized loans and thereby assist in economic
development.41 Owing to this piece of legislation, the confidentiality of bank deposits remains to be a basic state policy in the
Philippines.42 Section 2 of the law institutionalized this policy by characterizing as absolutely confidential in general all deposits
of whatever nature with banks and other financial institutions in the country. It declares:

Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds
issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation.1avvphi1

Subsequent statutory enactments43 have expanded the list of exceptions to this policy yet the secrecy of bank deposits still lies
as the general rule, falling as it does within the legally recognized zones of privacy.44 There is, in fact, much disfavor to
construing these primary and supplemental exceptions in a manner that would authorize unbridled discretion, whether
governmental or otherwise, in utilizing these exceptions as authority for unwarranted inquiry into bank accounts. It is then
perceivable that the present legal order is obliged to conserve the absolutely confidential nature of bank deposits. 45

The measure of protection afforded by the law has been explained in China Banking Corporation v. Ortega. 46 That case
principally addressed the issue of whether the prohibition against an examination of bank deposits precludes garnishment in
satisfaction of a judgment. Ruling on that issue in the negative, the Court found guidance in the relevant portions of the
legislative deliberations on Senate Bill No. 351 and House Bill No. 3977, which later became the Bank Secrecy Act, and it held
that the absolute confidentiality rule in R.A. No. 1405 actually aims at protection from unwarranted inquiry or investigation if
the purpose of such inquiry or investigation is merely to determine the existence and nature, as well as the amount of the
deposit in any given bank account. Thus,

x x x 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 will be noted from the discussion
of the conference committee report on Senate Bill No. 351 and House Bill No. 3977which later became Republic Act No. 1405,
that it was not the intention of the lawmakers to place banks deposits beyond the reach of execution to satisfy a final
judgmentThus:

x x x Mr. Marcos: Now, for purposes of the record, I should like the Chairman of the Committee on Ways and Means to clarify
this further. Suppose an individual has a tax case. He is being held liable by the Bureau of Internal Revenue [(BIR)] or, say,
₱1,000.00 worth of tax liability, and because of this the deposit of this individual [has been] attached by the [BIR].

Mr. Ramos: The attachment will only apply after the court has pronounced sentence declaring the liability of such person. But
where the primary aim is to determine whether he has a bank deposit in order to bring about a proper assessment by the [BIR],
such inquiry is not allowed by this proposed law.

Mr. Marcos: But under our rules of procedure and under the Civil Code, the attachment or garnishment of money deposited is
allowed. Let us assume for instance that there is a preliminary attachment which is for garnishment or for holding liable all
moneys deposited belonging to a certain individual, but such attachment or garnishment will bring out into the open the value
of such deposit. Is that prohibited by... the law?

Mr. Ramos: It is only prohibited to the extent that the inquiry... is made only for the purpose of satisfying a tax liability already
declared for the protection of the right in favor of the government; but when the object is merely to inquire whether he has a
deposit or not for purposes of taxation, then this is fully covered by the law. x x x

36
Mr. Marcos: The law prohibits a mere investigation into the existence and the amount of the deposit.

Mr. Ramos: Into the very nature of such deposit. x x x47

In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant case posits that the account
maintained by respondent with Security Bank contains the proceeds of the checks that she has fraudulently appropriated to
herself and, thus, falls under one of the exceptions in Section 2 of R.A. No. 1405 that the money kept in said account is the
subject matter in litigation. To highlight this thesis, petitioner avers, citing Mathay v. Consolidated Bank and Trust Co., 48 that
the subject matter of the action refers to the physical facts; the things real or personal; the money, lands, chattels and the like,
in relation to which the suit is prosecuted, which in the instant case should refer to the money deposited in the Security Bank
account.49 On the surface, however, it seems that petitioner’s theory is valid to a point, yet a deeper treatment tends to show
that it has argued quite off-tangentially. This, because, while Mathay did explain what the subject matter of an action is, it
nevertheless did so only to determine whether the class suit in that case was properly brought to the court.

What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has been pointedly and amply
addressed in Union Bank of the Philippines v. Court of Appeals, 50 in which the Court noted that the inquiry into bank deposits
allowable under R.A. No. 1405 must be premised on the fact that the money deposited in the account is itself the subject of the
action.51 Given this perspective, we deduce that the subject matter of the action in the case at bar is to be determined from the
indictment that charges respondent with the offense, and not from the evidence sought by the prosecution to be admitted into
the records. In the criminal Information filed with the trial court, respondent, unqualifiedly and in plain language, is charged
with qualified theft by abusing petitioner’s trust and confidence and stealing cash in the amount of ₱1,534,135.50. The said
Information makes no factual allegation that in some material way involves the checks subject of the testimonial and
documentary evidence sought to be suppressed. Neither do the allegations in said Information make mention of the supposed
bank account in which the funds represented by the checks have allegedly been kept.

In other words, it can hardly be inferred from the indictment itself that the Security Bank account is the ostensible subject of
the prosecution’s inquiry. Without needlessly expanding the scope of what is plainly alleged in the Information, the subject
matter of the action in this case is the money amounting to ₱1,534,135.50 alleged to have been stolen by respondent, and not
the money equivalent of the checks which are sought to be admitted in evidence. Thus, it is that, which the prosecution is
bound to prove with its evidence, and no other.

It comes clear that the admission of testimonial and documentary evidence relative to respondent’s Security Bank account
serves no other purpose than to establish the existence of such account, its nature and the amount kept in it. It constitutes an
attempt by the prosecution at an impermissible inquiry into a bank deposit account the privacy and confidentiality of which is
protected by law. On this score alone, the objection posed by respondent in her motion to suppress should have indeed put an
end to the controversy at the very first instance it was raised before the trial court.

In sum, we hold that the testimony of Marasigan on the particulars of respondent’s supposed bank account with Security Bank
and the documentary evidence represented by the checks adduced in support thereof, are not only incompetent for being
excluded by operation of R.A. No. 1405. They are likewise irrelevant to the case, inasmuch as they do not appear to have any
logical and reasonable connection to the prosecution of respondent for qualified theft. We find full merit in and affirm
respondent’s objection to the evidence of the prosecution. The Court of Appeals was, therefore, correct in reversing the
assailed orders of the trial court.

A final note. In any given jurisdiction where the right of privacy extends its scope to include an individual’s financial privacy
rights and personal financial matters, there is an intermediate or heightened scrutiny given by courts and legislators to laws
infringing such rights.52 Should there be doubts in upholding the absolutely confidential nature of bank deposits against
affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former. This attitude
persists unless congress lifts its finger to reverse the general state policy respecting the absolutely confidential nature of bank
deposits.53

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 87600 dated April 20, 2005,
reversing the September 13, 2004 and November 5, 2004 Orders of the Regional Trial Court of Manila, Branch 36 in Criminal
Case No. 02-202158, is AFFIRMED.

SO ORDERED.

37
38
JOSEPH VICTOR G. EJERCITO, Petitioner,
vs.
SANDIGANBAYAN (Special Division) and PEOPLE OF THE PHILIPPINES, Respondents.

DECISION

CARPIO MORALES, J.:

The present petition for certiorari under Rule 65 assails the Sandiganbayan Resolutions dated February 7 and 12, 2003 denying
petitioner Joseph Victor G. Ejercito’s Motions to Quash Subpoenas Duces Tecum/Ad Testificandum, and Resolution dated
March 11, 2003 denying his Motion for Reconsideration of the first two resolutions.

The three resolutions were issued in Criminal Case No. 26558, "People of the Philippines v. Joseph Ejercito Estrada, et al.," for
plunder, defined and penalized in R.A. 7080, "AN ACT DEFINING AND PENALIZING THE CRIME OF PLUNDER."

In above-stated case of People v. Estrada, et al., the Special Prosecution Panel 1 filed on January 20, 2003 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 the following documents
during the hearings scheduled on January 22 and 27, 2003:

I. For Trust Account No. 858;

1. Account Opening Documents;

2. Trading Order No. 020385 dated January 29, 1999;

3. Confirmation Advice TA 858;

4. Original/Microfilm copies, including the dorsal side, of the following:

a. Bank of Commerce MC # 0256254 in the amount of ₱2,000,000.00;

b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the amount of P10,875,749.43;

c. Urban Bank MC # 34182 dated November 8, 1999 in the amount of ₱42,716,554.22;

d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in the amount of ₱54,161,496.52;

5. Trust Agreement dated January 1999:

Trustee: Joseph Victor C. Ejercito

Nominee: URBAN BANK-TRUST DEPARTMENT

Special Private Account No. (SPAN) 858; and

6. Ledger of the SPAN # 858.

II. For Savings Account No. 0116-17345-9

SPAN No. 858

1. Signature Cards; and

2. Statement of Account/Ledger

III. Urban Bank Manager’s Check and their corresponding Urban Bank Manager’s Check Application Forms, as follows:

1. MC # 039975 dated January 18, 2000 in the amount of ₱70,000,000.00;

2. MC # 039976 dated January 18, 2000 in the amount of ₱2,000,000.00;

3. MC # 039977 dated January 18, 2000 in the amount of ₱2,000,000.00;

39
4. MC # 039978 dated January 18, 2000 in the amount of ₱1,000,000.00;

The Special Prosecution Panel also filed on January 20, 2003, a Request for Issuance of Subpoena Duces Tecum/Ad
Testificandum directed to the authorized representative of Equitable-PCI Bank to produce statements of account pertaining to
certain accounts in the name of "Jose Velarde" and to testify thereon.

The Sandiganbayan granted both requests by Resolution of January 21, 2003 and subpoenas were accordingly issued.

The Special Prosecution Panel filed still another Request for Issuance of Subpoena Duces Tecum/Ad Testificandum dated
January 23, 2003 for the President of EIB or his/her authorized representative to produce the same documents subject of the
Subpoena Duces Tecum dated January 21, 2003 and to testify thereon on the hearings scheduled on January 27 and 29, 2003
and subsequent dates until completion of the testimony. The request was likewise granted by the Sandiganbayan. A Subpoena
Duces Tecum/Ad Testificandum was accordingly issued on January 24, 2003.

Petitioner, claiming to have learned from the media that the Special Prosecution Panel had requested for the issuance of
subpoenas for the examination of bank accounts belonging to him, attended the hearing of the case on January 27, 2003 and
filed before the Sandiganbayan a letter of even date expressing his concerns as follows, quoted verbatim:

Your Honors:

It is with much respect that I write this court relative to the concern of subpoenaing the undersigned’s bank account which I
have learned through the media.

I am sure the prosecution is aware of our banking secrecy laws everyone supposed to observe. But, instead of prosecuting
those who may have breached such laws, it seems it is even going to use supposed evidence which I have reason to believe
could only have been illegally obtained.

The prosecution was not content with a general request. It even lists and identifies specific documents meaning someone else
in the bank illegally released confidential information.

If this can be done to me, it can happen to anyone. Not that anything can still shock our family. Nor that I have anything to hide.
Your Honors.

But, I am not a lawyer and need time to consult one on a situation that affects every bank depositor in the country and should
interest the bank itself, the Bangko Sentral ng Pilipinas, and maybe the Ombudsman himself, who may want to investigate, not
exploit, the serious breach that can only harm the economy, a consequence that may have been overlooked. There appears to
have been deplorable connivance.

xxxx

I hope and pray, Your Honors, that I will be given time to retain the services of a lawyer to help me protect my rights and those
of every banking depositor. But the one I have in mind is out of the country right now.

May I, therefore, ask your Honors, that in the meantime, the issuance of the subpoena be held in abeyance for at least ten (10)
days to enable me to take appropriate legal steps in connection with the prosecution’s request for the issuance of subpoena
concerning my accounts. (Emphasis supplied)

From the present petition, it is gathered that the "accounts" referred to by petitioner in his above-quoted letter are Trust
Account No. 858 and Savings Account No. 0116-17345-9.2

In open court, the Special Division of the Sandiganbayan, through Associate Justice Edilberto Sandoval, advised petitioner that
his remedy was to file a motion to quash, for which he was given up to 12:00 noon the following day, January 28, 2003.

Petitioner, unassisted by counsel, thus filed on January 28, 2003 a Motion to Quash Subpoena Duces Tecum/Ad Testificandum
praying that the subpoenas previously issued to the President of the EIB dated January 21 and January 24, 2003 be quashed. 3

In his Motion to Quash, petitioner 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

40
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, petitioner concluded, the prosecution in the case may not be allowed to make use of the
information.

Before the Motion to Quash was resolved by the Sandiganbayan, the prosecution filed another Request for the Issuance of
Subpoena Duces Tecum/Ad Testificandum dated January 31, 2003, again to direct the President of the EIB to produce, on the
hearings scheduled on February 3 and 5, 2003, the same documents subject of the January 21 and 24, 2003 subpoenas with the
exception of the Bank of Commerce MC #0256254 in the amount of ₱2,000,000 as Bank of Commerce MC #0256256 in the
amount of ₱200,000,000 was instead requested. Moreover, the request covered the following additional documents:

IV. For Savings Account No. 1701-00646-1:

1. Account Opening Forms;

2. Specimen Signature Card/s; and

3. Statements of Account.

The prosecution also filed a Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum bearing the same date,
January 31, 2003, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to produce the following documents on
the scheduled hearings on February 3 and 5, 2003:

1. Letter of authority dated November 23, 1999 re: SPAN [Special Private Account Number] 858;

2. Letter of authority dated January 29, 2000 re: SPAN 858;

3. Letter of authority dated April 24, 2000 re: SPAN 858;

4. Urban Bank check no. 052092 dated April 24, 2000 for the amount of P36, 572, 315.43;

5. Urban Bank check no. 052093 dated April 24, 2000 for the amount of P107,191,780.85; and

6. Signature Card Savings Account No. 0116-17345-9. (Underscoring supplied)

The subpoenas prayed for in both requests were issued by the Sandiganbayan on January 31, 2003.

On February 7, 2003, petitioner, this time assisted by counsel, filed an Urgent Motion to Quash Subpoenae Duces Tecum/Ad
Testificandum praying that the subpoena dated January 31, 2003 directed to Aurora Baldoz be quashed for the same reasons
which he cited in the Motion to Quash4 he had earlier filed.

On the same day, February 7, 2003, the Sandiganbayan issued a Resolution denying petitioner’s Motion to Quash Subpoenae
Duces Tecum/Ad Testificandum dated January 28, 2003.

Subsequently or on February 12, 2003, the Sandiganbayan issued a Resolution denying petitioner’s Urgent Motion to Quash
Subpoena Duces Tecum/Ad Testificandum dated February 7, 2003.

Petitioner’s Motion for Reconsideration dated February 24, 2003 seeking a reconsideration of the Resolutions of February 7 and
12, 2003 having been denied by Resolution of March 11, 2003, petitioner filed the present petition.

Raised as issues are:

1. Whether petitioner’s Trust Account No. 858 is covered by the term "deposit" as used in R.A. 1405;

2. Whether petitioner’s Trust Account No. 858 and Savings Account No. 0116-17345-9 are excepted from the protection of R.A.
1405; and

3. Whether the "extremely-detailed" information contained in the Special Prosecution Panel’s requests for subpoena was
obtained through a prior illegal disclosure of petitioner’s bank accounts, in violation of the "fruit of the poisonous tree"
doctrine.

41
Respondent People posits that Trust Account No. 8585 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. For, to respondent People, the law applies only to
"deposits" which strictly means the money delivered to the bank by which a creditor-debtor relationship is created between
the depositor and the bank.

The contention that trust accounts are not covered by the term "deposits," as used in R.A. 1405, by the mere fact that they do
not entail a creditor-debtor relationship between the trustor and the bank, does not lie. An examination of the law shows that
the term "deposits" used therein is to be understood broadly and not limited only to accounts which give rise to a creditor-
debtor relationship between the depositor and the bank.

The policy behind the law is laid down in Section 1:

SECTION 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their
money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in
authorized loans to assist in the economic development of the country. (Underscoring supplied)

If the money deposited under an account may be used by banks for authorized loans to third persons, then such account,
regardless of whether it creates a creditor-debtor relationship between the depositor and the bank, falls under the category of
accounts which the law precisely seeks to protect for the purpose of boosting the economic development of the country.

Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner and Urban Bank provides
that the trust account covers "deposit, placement or investment of funds" by Urban Bank for and in behalf of petitioner.6 The
money deposited under Trust Account No. 858, was, therefore, intended not merely to remain with the bank but to be invested
by it elsewhere. To hold that this type of account is not protected by R.A. 1405 would encourage private hoarding of funds that
could otherwise be invested by banks in other ventures, contrary to the policy behind the law.

Section 2 of the same law in fact even more clearly shows that the term "deposits" was intended to be understood broadly:

SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds
issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation. (Emphasis and underscoring supplied)

The phrase "of whatever nature" proscribes any restrictive interpretation of "deposits." Moreover, it is clear from the
immediately quoted provision that, generally, the law applies not only to money which is deposited but also to those which
are invested. This further shows that the law was not intended to apply only to "deposits" in the strict sense of the word.
Otherwise, there would have been no need to add the phrase "or invested."

Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.

The protection afforded by the law is, however, not absolute, there being recognized exceptions thereto, as above-quoted
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.

Petitioner 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. Gancayco7 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. Section 2 of R.A. No. 7080 states so.

SECTION 2. Definition of the Crime of Plunder; Penalties. — Any public officer who, by himself or in connivance with members
of his family, relatives by affinity or consanguinity, business associates, subordinates or other persons, amasses, accumulates or

42
acquires ill-gotten wealth through a combination or series of overt or criminal acts as described in Section 1(d) hereof, in the
aggregate amount or total value of at least Seventy-five million pesos (P75,000,000.00), shall be guilty of the crime of
plunder and shall be punished by life imprisonment with perpetual absolute disqualification from holding any public office. Any
person who participated with said public officer in the commission of plunder shall likewise be punished. In the imposition of
penalties, the degree of participation and the attendance of mitigating and extenuating circumstances shall be considered by
the court. The court shall declare any and all ill-gotten wealth and their interests and other incomes and assets including the
properties and shares of stock derived from the deposit or investment thereof forfeited in favor of the State. (Emphasis and
underscoring supplied)

An examination of the "overt or criminal acts as described in Section 1(d)" of R.A. No. 7080 would make the similarity between
plunder and bribery even more pronounced since bribery is essentially included among these criminal acts. Thus Section 1(d)
states:

d) "Ill-gotten wealth" means any asset, property, business enterprise or material possession of any person within the purview of
Section Two (2) hereof, acquired by him directly or indirectly through dummies, nominees, agents, subordinates and or
business associates by any combination or series of the following means or similar schemes.

1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on the public treasury;

2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or any other form of pecuniary
benefit from any person and/or entity in connection with any government contract or project or by reason of the office or
position of the public officer concerned;

3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National Government or any of its
subdivisions, agencies or instrumentalities or government-owned or -controlled corporations and their subsidiaries;

4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or
participation including promise of future employment in any business enterprise or undertaking;

5) By establishing agricultural, industrial or commercial monopolies or other combinations and/or implementation of decrees
and orders intended to benefit particular persons or special interests; or

6) By taking undue advantage of official position, authority, relationship, connection or influence to unjustly enrich himself or
themselves at the expense and to the damage and prejudice of the Filipino people and the Republic of the Philippines.
(Emphasis supplied)

Indeed, all the above-enumerated overt acts are similar to bribery such that, in each case, it may be said that "no reason is seen
why these two classes of cases cannot be excepted from the rule making bank deposits confidential."8

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.

Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must also apply to cases of
plunder.

Respecting petitioner’s claim that the money in his bank accounts is not the "subject matter of the litigation," the meaning of
the phrase "subject matter of the litigation" as used in R.A. 1405 is explained in Union Bank of the Philippines v. Court of
Appeals,9 thus:

Petitioner contends that the Court of Appeals confuses the "cause of action" with the "subject of the action". In Yusingco v. Ong
Hing Lian, petitioner points out, this Court distinguished the two concepts.

x x x "The cause of action is the legal wrong threatened or committed, while the object of the action is to prevent or redress the
wrong by obtaining some legal relief; but the subject of the action is neither of these since it is not the wrong or the relief
demanded, the subject of the action is the matter or thing with respect to which the controversy has arisen, concerning which
the wrong has been done, and this ordinarily is the property or the contract and its subject matter, or the thing in dispute."

43
The argument is well-taken. We note with approval the difference between the ‘subject of the action’ from the ‘cause of
action.’ We also find petitioner’s definition of the phrase ‘subject matter of the action’ is consistent with the term ‘subject
matter of the litigation’, as the latter is used in the Bank Deposits Secrecy Act.

In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently caused the transfer of the amount of
US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the bank accounts where part of the
money was subsequently caused to be deposited:

‘x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. Inasmuch as Civil Case No. 26899 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."

Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation since the money
deposited was the very thing in dispute. x x x" (Emphasis and underscoring supplied)

The plunder case now pending with the Sandiganbayan necessarily involves an inquiry into the whereabouts of the amount
purportedly acquired illegally by former President Joseph Estrada.

In light then of this Court’s pronouncement in Union Bank, the subject matter of the litigation cannot be limited to bank
accounts under the name of President Estrada alone, but must include those accounts to which the money purportedly
acquired illegally or a portion thereof was alleged to have been transferred. Trust Account No. 858 and Savings Account No.
0116-17345-9 in the name of petitioner fall under this description and must thus be part of the subject matter of the litigation.

In a further attempt to show that the subpoenas issued by the Sandiganbayan are invalid and may not be enforced, petitioner
contends, as earlier stated, 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. Petitioner thus
claims that, following the "fruit of the poisonous tree" doctrine, the subpoenas must be quashed.

Petitioner further contends that even if, as claimed by respondent People, the "extremely-detailed" 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.

Petitioner relies on Marquez v. Desierto10 where the Court held:

We rule that before an in camera inspection may be allowed there must be a pending case before a court of competent
jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case
before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during
the inspection, and such inspection may cover only the account identified in the pending case. (Underscoring supplied)

As no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction at the time the
Ombudsman conducted an investigation, petitioner concludes that the information about his bank accounts were acquired
illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry into the same bank accounts.

Petitioner’s attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it bears noting, nowhere
provides that an unlawful examination of bank accounts shall render the evidence obtained therefrom inadmissible in evidence.
Section 5 of R.A. 1405 only states that "[a]ny violation of this law will subject the offender upon conviction, to an imprisonment
of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court."

The case of U.S. v. Frazin,11 involving the Right to Financial Privacy Act of 1978 (RFPA) of the United States, is instructive.

Because the statute, when properly construed, excludes a suppression remedy, it would not be appropriate for us to provide
one in the exercise of our supervisory powers over the administration of justice. Where Congress has both established a right
and provided exclusive remedies for its violation, we would "encroach upon the prerogatives" of Congress were we to authorize
a remedy not provided for by statute. United States v. Chanen, 549 F.2d 1306, 1313 (9th Cir.), cert. denied, 434 U.S. 825, 98
S.Ct. 72, 54 L.Ed.2d 83 (1977).

The same principle was reiterated in U.S. v. Thompson:12

44
x x x When Congress specifically designates a remedy for one of its acts, courts generally presume that it engaged in the
necessary balancing of interests in determining what the appropriate penalty should be. See Michaelian, 803 F.2d at
1049 (citing cases); Frazin, 780 F.2d at 1466. Absent a specific reference to an exclusionary rule, it is not appropriate for the
courts to read such a provision into the act.

Even assuming arguendo, however, that the exclusionary rule applies in principle to cases involving R.A. 1405, the Court finds
no reason to apply the same in this particular case.

Clearly, the "fruit of the poisonous tree" doctrine13 presupposes a violation of law. If there was no violation of R.A. 1405 in the
instant case, then there would be no "poisonous tree" to begin with, and, thus, no reason to apply the doctrine.

How the Ombudsman conducted his inquiry into the bank accounts of petitioner is recounted by respondent People of the
Philippines, viz:

x x x [A]s early as February 8, 2001, long before the issuance of the Marquez ruling, the Office of the Ombudsman, acting under
the powers granted to it by the Constitution and R.A. No. 6770, and acting on information obtained from various sources,
including impeachment (of then Pres. Joseph Estrada) related reports, articles and investigative journals, issued a Subpoena
Duces Tecum addressed to Urban Bank. (Attachment "1-b") It should be noted that the description of the documents sought to
be produced at that time included that of numbered accounts 727, 737, 747, 757, 777 and 858 and included such names as Jose
Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin Garcia.
The subpoena did not single out account 858.

xxxx

Thus, on February 13, 2001, PDIC, as receiver of Urban Bank, issued a certification as to the availability of bank documents
relating to A/C 858 and T/A 858 and the non-availability of bank records as to the other accounts named in the subpoena.
(Attachments "2", "2-1" and "2-b)

Based on the certification issued by PDIC, the Office of the Ombudsman on February 16, 2001 again issued a Subpoena Duces
Tecum directed to Ms. Corazon dela Paz, as Interim Receiver, directing the production of documents pertinent to account A/C
858 and T/C 858. (Attachment "3")

In compliance with the said subpoena dated February 16, 2001, Ms. Dela Paz, as interim receiver, furnished the Office of the
Ombudsman certified copies of documents under cover latter dated February 21, 2001:

1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-99, 1-07-00, 04-03-00 and 04-24-00;

2. Report of Unregularized TAFs & TDs for UR COIN A & B Placements of Various Branches as of February 29, 2000 and as of
December 16, 1999; and

3. Trading Orders Nos. A No. 78102 and A No. 078125.

Trading Order A No. 07125 is filed in two copies – a white copy which showed "set up" information; and a yellow copy which
showed "reversal" information. Both copies have been reproduced and are enclosed with this letter.

We are continuing our search for other records and documents pertinent to your request and we will forward to you on Friday,
23 February 2001, such additional records and documents as we might find until then. (Attachment "4")

The Office of the Ombudsman then requested for the manger’s checks, detailed in the Subpoena Duces Tecum dated March 7,
2001. (Attachment "5")

PDIC again complied with the said Subpoena Duces Tecum dated March 7, 2001 and provided copies of the manager’s checks
thus requested under cover letter dated March 16, 2001. (Attachment "6")14 (Emphasis in the original)

The Sandiganbayan credited the foregoing account of respondent People.15 The Court finds no reason to disturb this finding of
fact by the Sandiganbayan.

The Marquez ruling notwithstanding, the above-described examination by the Ombudsman of petitioner’s bank accounts,
conducted before a case was filed with a court of competent jurisdiction, was lawful.

45
For the Ombudsman issued the subpoenas bearing on the bank accounts of petitioner about four months before Marquez was
promulgated on June 27, 2001.

While judicial interpretations of statutes, such as that made in Marquez with respect to R.A. No. 6770 or the Ombudsman Act of
1989, are deemed part of the statute as of the date it was originally passed, the rule is not absolute.

Columbia Pictures, Inc. v. Court of Appeals16 teaches:

It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally
passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and
more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties
who relied on the old doctrine and acted in good faith. (Emphasis and underscoring supplied)

When this Court construed the Ombudsman Act of 1989, in light of the Secrecy of Bank Deposits Law in Marquez, that "before
an in camera inspection may be allowed there must be a pending case before a court of competent jurisdiction", it was, in fact,
reversing an earlier doctrine found in Banco Filipino Savings and Mortgage Bank v. Purisima17.

Banco Filipino involved subpoenas duces tecum issued by the Office of the Ombudsman, then known as the Tanodbayan,18 in
the course of its preliminary investigation of a charge of violation of the Anti-Graft and Corrupt Practices Act.

While the main issue in Banco Filipino was whether R.A. 1405 precluded the Tanodbayan’s issuance of subpoena duces
tecum of bank records in the name of persons other than the one who was charged, this Court, citing P.D. 1630, 19 Section 10,
the relevant part of which states:

(d) He may issue a subpoena to compel any person to appear, give sworn testimony, or produce documentary or other
evidence the Tanodbayan deems relevant to a matter under his inquiry,

held that "The power of the Tanodbayan to issue subpoenae ad testificandum and subpoenae duces tecum at the time in
question is not disputed, and at any rate does not admit of doubt."20

As the subpoenas subject of Banco Filipino were issued during a preliminary investigation, in effect this Court upheld the power
of the Tandobayan under P.D. 1630 to issue subpoenas duces tecum for bank documents prior to the filing of a case before a
court of competent jurisdiction.

Marquez, on the other hand, practically reversed this ruling in Banco Filipino despite the fact that the subpoena power of the
Ombudsman under R.A. 6770 was essentially the same as that under P.D. 1630. Thus Section 15 of R.A. 6770 empowers the
Office of the Ombudsman to

(8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation or inquiry, including
the power to examine and have access to bank accounts and records;

A comparison of this provision with its counterpart in Sec. 10(d) of P.D. 1630 clearly shows that it is only more explicit in stating
that the power of the Ombudsman includes the power to examine and have access to bank accounts and records which power
was recognized with respect to the Tanodbayan through Banco Filipino.

The Marquez ruling that there must be a pending case in order for the Ombudsman to validly inspect bank records in camera
thus reversed a prevailing doctrine.21 Hence, it may not be retroactively applied.

The Ombudsman’s inquiry into the subject bank accounts prior to the filing of any case before a court of competent jurisdiction
was therefore valid at the time it was conducted.

Likewise, the Marquez ruling that "the account holder must be notified to be present during the inspection" may not be applied
retroactively to the inquiry of the Ombudsman subject of this case. This ruling is not a judicial interpretation either of R.A. 6770
or R.A. 1405, but a "judge-made" law which, as People v. Luvendino22 instructs, can only be given prospective application:

x x x The doctrine that an uncounselled waiver of the right to counsel is not to be given legal effect was initially a judge-
made one and was first announced on 26 April 1983 in Morales v. Enrile and reiterated on 20 March 1985 in People v. Galit. x
xx

46
While the Morales-Galit doctrine eventually became part of Section 12(1) of the 1987 Constitution, that doctrine affords no
comfort to appellant Luvendino for the requirements and restrictions outlined in Morales and Galit have no retroactive
effect and do not reach waivers made prior to 26 April 1983 the date of promulgation of Morales. (Emphasis supplied)

In fine, the subpoenas issued by the Ombudsman in this case were legal, hence, invocation of the "fruit of the poisonous tree"
doctrine is misplaced.

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.

In particular, the Ombudsman, even before its inquiry, had already possessed information giving him grounds to believe that (1)
there are bank accounts bearing the number "858," (2) that such accounts are in the custody of Urban Bank, and (3) that the
same are linked with the bank accounts of former President Joseph Estrada who was then under investigation for plunder.

Only with such prior independent information could it have been possible for the Ombudsman to issue the February 8,
2001 subpoena duces tecum addressed to the President and/or Chief Executive Officer of Urban Bank, which described the
documents subject thereof as follows:

(a) bank records and all documents relative thereto pertaining to all bank accounts (Savings, Current, Time Deposit, Trust,
Foreign Currency Deposits, etc…) under the account names of Jose Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy
Melendrez, Peach Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737, 747, 757, 777 and 858. (Emphasis and underscoring
supplied)

The information on the existence of Bank Accounts bearing number "858" was, according to respondent People of the
Philippines, obtained from various sources including the proceedings during the impeachment of President Estrada, related
reports, articles and investigative journals.23 In the absence of proof to the contrary, this explanation proffered by respondent
must be upheld. To presume that the information was obtained in violation of R.A. 1405 would infringe the presumption of
regularity in the performance of official functions.

Thus, with the filing of the plunder case against former President Estrada before the Sandiganbayan, the Ombudsman, using
the above independent information, may now proceed to conduct the same investigation it earlier conducted, through which it
can eventually obtain the same information previously disclosed to it by the PDIC, for it is an inescapable fact that the bank
records of petitioner are no longer protected by R.A. 1405 for the reasons already explained above.1âwphi1

Since conducting such an inquiry would, however, only result in the disclosure of the same documents to the Ombudsman, this
Court, in avoidance of what would be a time-wasteful and circuitous way of administering justice,24 upholds the challenged
subpoenas.

Respecting petitioner’s claim that the Sandiganbayan violated his right to due process as he was neither notified of the requests
for the issuance of the subpoenas nor of the grant thereof, suffice it to state that the defects were cured when petitioner
ventilated his arguments against the issuance thereof through his earlier quoted letter addressed to the Sandiganbayan and
when he filed his motions to quash before the Sandiganbayan.

IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse of discretion in issuing the challenged subpoenas
for documents pertaining to petitioner’s Trust Account No. 858 and Savings Account No. 0116-17345-9 for the following
reasons:

1. 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 petitioner’s bank accounts is said to form part of the subject matter of
the same plunder case.

2. 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
this case. In the first place, R.A. 1405 does not provide for the application of this rule. Moreover, there is no basis for applying

47
the same in this case since the primary source for the detailed information regarding petitioner’s bank accounts – the
investigation previously conducted by the Ombudsman – was lawful.

3. At all events, even if the subpoenas issued by the Sandiganbayan were quashed, the Ombudsman may conduct on its own
the same inquiry into the subject bank accounts that it earlier conducted last February-March 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.

WHEREFORE, the petition is DISMISSED. The Sandiganbayan Resolutions dated February 7 and 12, 2003 and March 11, 2003 are
upheld.

48
LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION BANK OF THE PHILIPPINES, petitioner,
vs.
HONORABLE ANIANO A. DESIERTO, in his capacity as OMBUDSMAN, ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-
MANALAC AND JOSE T. DE JESUS, JR., in their capacity as Chairman and Members of the Panel, respectively, respondents.

PARDO, J.:

In the petition at bar, petitioner seeks to --

a. Annul and set aside, for having been issued without or in excess of jurisdiction or with grave abuse of discretion amounting to
lack of jurisdiction, respondents' order dated September 7, 1998 in OMB-0-97-0411, In Re: Motion to Cite Lourdes T. Marquez
for indirect contempt, received by counsel of September 9,1998, and their order dated October 14,1998, denying Marquez's
motion for reconsideration dated September 10, 1998, received by counsel on October 20, 1998.

b. Prohibit respondents from implementing their order dated October 14, 1998, in proceeding with the hearing of the motion
to cite Marquez for indirect contempt, through the issuance by this Court of a temporary restraining order and/or preliminary
injunction.1

The antecedent facts are as follows:

Sometime in May 1998, petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto dated April 29, 1998,
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 petitioner is the branch manager. The accounts to be inspected are Account Nos.
011-37270, 240-020718, 245-30317-3 and 245-30318-1, involved in a case pending with the Ombudsman entitled, Fact-Finding
and Intelligence Bureau (FFIB) v. Amado Lagdameo, et al. The order further states:

"It is worth mentioning that the power of the Ombudsman to investigate and to require the production and inspection of
records and documents is sanctioned by the 1987 Philippine Constitution, Republic Act No. 6770, otherwise known as
Ombudsman Act of 1989 and under existing jurisprudence on the matter. It must be noted that R.A. 6770 especially Section 15
thereof provides, among others, the following powers, functions and duties of the Ombudsman, to wit:

xxx

(8) Administer oaths, issue subpoena duces tecum and take testimony in any investigation or inquiry, including the power to
examine and have access to banks accounts and records;

(9) Punish for contempt in accordance with the Rules of Court and under the same procedure and with the same penalties
provided therein.

Clearly, the specific provision of R.A. 6770, a later legislation, modifies the law on the Secrecy of Bank Deposits (R.A.1405) and
places the office of the Ombudsman in the same footing as the courts of law in this regard."2

The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail managers checks purchased by one
George Trivinio, a respondent in OMB-097-0411, pending with the office of the Ombudsman.

It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks (MCs) for a total amount of P272.1 Million
at Traders Royal Bank, United Nations Avenue branch, on May 2 and 3, 1995. Out of the 51 MCs, eleven (11) MCs in the amount
of P70.6 million, were deposited and credited to an account maintained at the Union Bank, Julia Vargas Branch. 3

On May 26, 1998, the FFIB panel met in conference with petitioner Lourdes T. Marquez and Atty. Fe B. Macalino at the bank's
main office, Ayala Avenue, Makati City. The meeting was for the purpose of allowing petitioner and Atty. Macalino to view the
checks furnished by Traders Royal Bank. After convincing themselves of the veracity of the checks, Atty. Macalino advised Ms.
Marquez to comply with the order of the Ombudsman. Petitioner agreed to an in camera inspection set on June 3, 1998.4

However, on June 4,1998, petitioner wrote the Ombudsman explaining to him that the accounts in question cannot readily be
identified and asked for time to respond to the order. The reason forwarded by the petitioner was that "despite diligent efforts
and from the accounts numbers presented, we can not identify these accounts since the checks are issued in cash or bearer.
We surmised that these accounts have long been dormant, hence are not covered by the new account number generated by

49
the Union Bank system. We therefore have to verify from the Interbank records archives for the whereabouts of these
accounts.5

The Ombudsman, responding to the request of the petitioner for time to comply with the order, stated: "firstly, it must be
emphasized that Union Bank, Julia Vargas Branch was depositary bank of the subject Traders Royal Bank Manager's Check
(MCs), as shown at its dorsal portion and as cleared by the Philippines Clearing House, not the International Corporate Bank.

Notwithstanding the facts that the checks were payable to cash or bearer, nonetheless, the name of the depositor(s) could
easily be identified since the account numbers x x x where said checks were deposited are identified in the order.

Even assuming that the accounts xxx were already classified as "dormant accounts," the bank is still required to preserve the
records pertaining to the accounts within a certain period of time as required by existing banking rules and regulations.

And finally, the in camera inspection was already extended twice from May 13, 1998 to June 3,1998 thereby giving the bank
enough time within which to sufficiently comply with the order."6

Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner to produce the bank documents relative to
accounts in issue. The order states:

Viewed from the foregoing, your persistent refusal to comply with Ombudsman's order in unjustified, and is merely intended to
delay the investigation of the case. Your act constitutes disobedience of or resistance to a lawful order issued by this office and
is punishable as Indirect Contempt under Section 3(b) of R.A. 6770. The same may also constitute obstruction in the lawful
exercise of the functions of the Ombudsman which is punishable under Section 36 of R.A. 6770.7

On July 10,1998, petitioner together with Union Bank of the Philippines, filed a petition for declaratory relief, prohibition and
injunctions8 with the Regional Trial Court, Makati City, against the Ombudsman.

The petition was intended to clear the rights and duties of petitioner. Thus, petitioner sought a declaration of her rights from
the court due to the clear conflict between RA No.6770, Section 15 and R.A. No. 1405, Sections 2 and 3.

Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman and the other persons acting under his
authority were continuously harassing her to produce the bank documents relatives to the accounts in question. Moreover, on
June 16, 1998, the Ombudsman issued another order stating that unless petitioner appeared before the FFIB with the
documents requested, petitioner manager would be charged with indirect contempt and obstruction of justice.

In the meantime,9 on July 14, 1998, the lower court denied petitioner's prayer for a temporary restraining order and stated us:

"After hearing the arguments of the parties, the court finds the application for a Temporary Restraining Order to be without
merit.

"Since the application prays for restraint of the respondent, in the exercise of his contempt powers under Section 15(9) in
relation to paragraph (8) of RA. 6770, known as " The Ombudsman Act of 1989", there is no great or irreparable injury from
which petitioners may suffer, if respondent is not so restrained. Respondent should he decide to exercise his contempt powers
would still have to apply with the court. x x x Anyone who, without lawful excuse x x x refuses to produce documents for
inspection, when thereunto lawfully required shall be subject to discipline as in case of contempt of Court and upon application
of the individual or body exercising the power in question shall be dealt with by the Judge of the First Instance (now RTC) having
jurisdiction of the case in a manner provided by the law (section 580 of the Revised Administrative Code). Under the present
Constitution only judges may issue warrants, hence, respondent should apply with the Court for the issuance of the warrant
needed for the enforcement of his contempt orders. It is in these proceedings where petitioner may question the propriety of
respondent's exercise of his contempt powers. Petitioners are not therefore left without any adequate remedy.

"The questioned orders were issued with the investigation of the case of Fact-Finding and Intelligence Bureau vs. Amado
Lagdameo, et. al., OMB-0-97-0411, for violation of RA. 3019. Since petitioner failed to show prima facie evidence that the
subject matter of the investigation is outside the jurisdiction of the Office of the Ombudsman, no writ of injunction may be
issued by this Court to delay this investigation pursuant to section 14 of Ombudsman Act of 1989."10

On July 20,1998, petitioner filed a motion for reconsideration based on the following grounds:

50
a. Petitioners' application for filed Temporary Restraining Order is not only to restrain the Ombudsman from exercising his
contempt powers, but to stop him from implementing his Orders dated April 29, 1998 and June 16, 1998: and

b. The subject matter of the investigation being conducted by the Ombudsman at petitioners' premises is outside his
jurisdiction.11

On July 23, 1998, the Ombudsman filed a motion to dismiss the petition for declaratory relief12 on the ground that the Regional
Trial Court has no jurisdiction to hear a petition for relief from the findings and orders of the Ombudsman, citing R.A. No. 6770,
Sections 14 and 27. On August 7, 1998, the Ombudsman filed an opposition to petitioner's motion for reconsideration dated
July 20, 1998.13

On August 19,1998, the lower court denied petitioner's motion for reconsideration,14 and also the Ombudsman's motion to
dismiss. 15

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).16

On August 31, 1998, petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the ground
that the filing thereof was premature due to the petition pending in the lower court.17 Petitioner likewise reiterated that she
had no intention to disobey the orders of the Ombudsman. However, she wanted to be clarified as to how she would comply
with the orders without her breaking any law, particularly RA. No. 1405.18

Respondent Ombudsman panel set the incident for hearing on September 7, 1998.19 After hearing, the panel issued an order
dated September 7, 1998, ordering petitioner and counsel to appear for a continuation of the hearing of the contempt charges
against her.20

On September 10, 1998, petitioner filed with the Ombudsman a motion for reconsideration of the above order.21 Her motion
was premised on the fact that there was a pending case with the Regional Trial Court, Makati City, 22 which would determine
whether obeying the orders of the Ombudsman to produce bank documents would not violate any law.

The FFIB opposed the motion,23 and on October 14, 1998, the Ombudsman denied the motion by order the dispositive portion
of which reads:

"Wherefore, respondent Lourdes T. Marquez's motion for reconsideration is hereby DENIED, for lack of merit. Let the hearing
of the motion of the Fact Finding Intelligence Bureau (FFIB) to cite her for indirect contempt to be intransferrably set to 29
October 1998 at 2:00 o'clock p.m. at which date and time she should appear personally to submit her additional evidence.
Failure to do so shall be deemed a waiver thereof."24

Hence, the present petition.25

The issue is whether petitioner may be cited for indirect contempt for her failure to produce the documents requested by the
Ombudsman. And whether the order of the Ombudsman to have 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).

An examination of the secrecy of bank deposits law (R.A. No.1405) would reveal the following exceptions:

1. Where the depositor consents in writing;

2. Impeachment case;

3. By court order in bribery or dereliction of duty cases against public officials;

4. Deposit is subject of litigation;

5. Sec. 8, R.A. No.3019, in cases of unexplained wealth as held in the case of PNB vs. Gancayco. 26

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.

51
We rule that before an in camera inspection may be allowed, there must be a pending case before a court of competent
jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case
before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during
the inspection, and such inspection may cover only the account identified in the pending case.

In Union Bank of the Philippines v. Court of Appeals, we held that "Section 2 of the Law on Secrecy of Bank Deposits, as
amended, declares bank deposits to be "absolutely confidential" except:

(1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by the
Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has
been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the
examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or

(6) In cases where the money deposited or invested is the subject matter of the litigation".27

In the case at bar, there is yet no pending litigation before any court of competent authority. What is 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. The Civil Code provides that" [e]very person shall respect the dignity,
personality, privacy and peace of mind of his neighbors and other persons" and punishes as actionable torts several acts for
meddling and prying into the privacy of another. It also holds public officer or employee or any private individual liable for
damages for any violation of the rights and liberties of another person, and recognizes the privacy of letters and other private
communications. The Revised Penal Code makes a crime of the violation of secrets by an officer, revelation of trade and
industrial secrets, and trespass to dwelling. 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.28

IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to cease and desist from requiring Union Bank Manager
Lourdes T. Marquez, or anyone in her place to comply with the order dated October 14,1998, and similar orders. No costs.

SO ORDERED

52
UNION BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and ALLIED BANK CORPORATION, respondents.

KAPUNAN, J.:

Sec. 2 of the Law on Secrecy of Bank Deposits, 1 as amended, declares bank deposits to be "absolutely confidential" except:

(1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by the
Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has
been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the
examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or

(6) In cases where the money deposited or invested is the subject matter of the litigation.

Whether or not the case at bar falls under the last exception is the issue in the instant petition.

The facts are not disputed.

On March 21, 1990, a check (Check No. 11669677) dated March 31, 1990 in the amount of One Million Pesos (P1,000,000.00)
was drawn against Account No. 0111-01854-8 with private respondent 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. On
May 21, 1990, petitioner sent the check for clearing through the Philippine Clearing House Corporation (PCHC). 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 (P1,000,000.00) was erroneously "under-encoded" to One Thousand Pesos (P1,000.00) only.

Petitioner only discovered the under-encoding almost a year later. Thus, on May 7, 1991, Union Bank notified Allied Bank of the
discrepancy by way of a charge slip for Nine Hundred Ninety-Nine Thousand Pesos (P999,000.00) for automatic debiting against
of Allied Bank. The latter, however, refused to accept the charge slip "since [the] transaction was completed per your [Union
Bank's] original instruction and client's account is now insufficiently funded."

Subsequently, Union Bank filed a complaint against Allied Bank before the PCHC Arbitration Committee (Arbicom), praying that:

. . . judgment be rendered in favor of plaintiff against defendant sentencing it to pay plaintiff:

1. The sum of NINE HUNDRED NINETY-NINE THOUSAND PESOS (P999,000.00);

2. The sum of THREE HUNDRED SIXTY-ONE AND FOUR HUNDRED EIGHTY AND 20/XX P361,480.20 as of October 9, 1991
representing reimbursements for opportunity losses and interest at the rate of 24% per annum arising from actual losses
sustained by plaintiff as of May 21, 1990;

3. The amount for attorney's fees at the rate of 25% of any and all sums due;

4. Penalty Charges at the rate of 1/8 of 1% of P999,000.00 from May 22, 1990 until payment thereof.

5. Exemplary and punitive damages against the defendant in such amounts as may be awarded by this Tribunal in order to serve
a lesson to all member-Banks under the PCHC umbrella to strictly comply with the provisions thereof;

6. The costs of suit which includes filing fee in addition to litigation expenses which shall be proven in the course of arbitration.

7. Such other damages that may be awarded by this Tribunal. 2

53
Thereafter, Union Bank filed in the Regional Trial Court (RTC) of Makati a petition for the examination of Account No. 111-
01854-8. Judgment on the arbitration case was held in abeyance pending the resolution of said petition.

Upon motion of private respondent, the RTC dismissed Union Bank's petition. The RTC held that:

The case of the herein petitioner does not fall under any of the foregoing exceptions to warrant a disclosure of or inquiry into
the ledgers/books of account of Allied Checking Account No. 111-01854-8. Needless to say, the complaint filed by herein
petitioner against Allied Banking Corporation before the Philippine Clearing House Corporation (PCHC) Arbitration Committee
and docketed therein as Arb[i]com Case No. 91-068 (Annex "A", petition) is not one for bribery or dereliction of duty of public
officials much less is there any showing that the subject matter thereof is the money deposited in the account in question.
Petitioner's complaint primarily hing[e]s on the alleged deliberate violation by Allied Bank Corporation of the provisions of the
PCHC Rule Book, Sec. 25[.]3, and as principal reliefs, it seeks for [sic] the recovery of amounts of money as a consequence of an
alleged under-coding of check amount to P1,000,000.00 and damage[s] by way of loss of interest income. 3

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.

Petitioner collecting bank itself in its complaint filed before the PCHC, Arbicom Case No. 91-068, clearly stated that its "cause of
action against defendant arose from defendant's deliberate violation of the provisions of the PCHC Rule Book, Sec. 25.3,
specifically on Under-Encoding of check amounting to P1,000,000.00 drawn upon defendant's Tondo Branch which was
deposited with plaintiff herein on May 20, 1990, . . . which was erroneously encoded at P1,000.00 which defendant as the
receiving bank thereof, never called nor notified the plaintiff of the error committed thus causing actual losses to plaintiff in the
principal amount of P999,000.00 exclusive of opportunity losses and interest."

Furthermore, a reading of petitioner collecting bank's complaint in the Arbicom case shows that its thrust is directed against
respondent drawee bank's alleged failure to inform the former of the under-encoding when Sec. 25.3 of the PCHC Rule Book is
clear that it is receiving bank's (respondent drawee bank herein) duty and obligation to notify the erring bank (petitioner
collecting bank herein) of any such under-encoding of any check amount submitted for clearing within the member banks of
the PCHC not later than 10:00 a.m. of the following clearing day and prays that respondent drawee bank be held liable to
petitioner collecting bank for penalties in view of the latter's violation of the notification requirement.

Prescinding from the above, we see no cogent reason to depart from the time-honored general banking rule that all deposits of
whatever nature with banks are considered of absolutely confidential nature and may not be examined, inquired or looked into
by any person, government official, bureau or office and corollarily, that it is unlawful for any official or employee of a bank to
disclose to any person any information concerning deposits.

Nowhere in petitioner collecting bank's complaint filed before the PCHC does it mention of the amount it seeks to recover from
Account No. 0111-018548 itself, but speaks of P999,000.00 only as an incident of its alleged opportunity losses and interest as a
result of its own employee's admitted error in encoding the check.

The money deposited in Account No. 0111-018548 is not the subject matter of the litigation in the Arbicom case for as clearly
stated by petitioner itself, it is the alleged violation by respondent of the rules and regulations of the PCHC. 4

Union Bank is now before this Court insisting that the money deposited in Account No. 0111-01854-8 is the subject matter of
the litigation Petitioner cites the case of Mathay vs. Consolidated Bank and Trust Company, 5 where we defined "subject matter
of the action," thus:

. . . By the phrase "subject matter of the action" is meant "the physical facts, the things real or personal, the money, lands,
chattels, and the like, in relation to which the suit is prosecuted, and not the delict or wrong committed by the defendant."

Petitioner contends that the Court of Appeals confuses the "cause of action" with the "subject of the action." In Yusingco
vs. Ong Hing Lian, 6 petitioner points out, this Court distinguished the two concepts.

. . . The cause of action is the legal wrong threatened or committed, while the object of the action is to prevent or redress the
wrong by obtaining some legal relief; but the subject of the action is neither of these since it is not the wrong or the relief
demanded, the subject of the action is the matter or thing with respect to which the controversy has arisen, concerning which
the wrong has been done, and this ordinarily is the property, or the contract and its subject matter, or the thing in dispute.

54
The argument is well taken. We note with approval the difference between the "subject of the action" from the "cause of
action." We also find petitioner's definition of the phrase "subject matter of the action" is consistent with the term "subject
matter of the litigation," as the latter is used in the Bank Deposits Secrecy Act.

In Mellon Bank, N.A. vs. Magsino, 7 where the petitioner bank inadvertently caused the transfer of the amount of
US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the bank accounts where part of the
money was subsequently caused to be deposited:

. . . Sec. 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money deposited is the subject
matter of the litigation. Inasmuch as Civil Case No. 26899 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.

Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation since the money so
deposited was the very thing in dispute. This, however, is not the case here.

Petitioner's theory is that private respondent Allied Bank should have informed petitioner of the under-encoding pursuant to
the provisions of Section 25.3.1 of the PCHC Handbook, which states:

25.3.1. The Receiving Bank should inform the erring Bank about the under-encoding of amount not later than 10:00 A.M. of the
following clearing day.

Failing in that duty, petitioner holds private respondent directly liable for the P999,000.00 and other damages. It does not
appear that petitioner is seeking reimbursement from the account of the drawer. This much is evident in petitioner's complaint
before the Arbicom.

. . . plaintiff's cause of action against defendant arose from defendant's deliberate violation of the provisions of the PCHC Rule
Book, Sec. 25.3, specifically on Under-Encoding of check amounting to P1,000,000.00 drawn upon defendant's Tondo Branch
which was deposited with plaintiff herein sometime on May 20, 1990. From the check amount of P1,000,000.00, it was instead
erroneously encoded at P1,000.00 which defendant as the receiving bank thereof, never called nor notified the plaintiff of the
error committed thus causing actual losses to plaintiff in the principal amount of P999,000.00 exclusive of opportunity losses
and interest thereon whatsoever. . . . 8

Petitioner even requested private respondent's Branch Manager for reimbursement from private respondent's account through
the automatic debiting system.

2.7. On May 6, 1991, plaintiff's Senior Vice-President, Ms. ERLINDA V. VALENTON wrote defendant's Tondo Branch Manager,
Mr. RODOLFO JOSE on the incident and requested assistance in facilitating correction of the erroneous coding with request for
reimbursement thru the industry's automatic debiting of defendant's account. . . . 9

Further, petitioner rejected private respondent's proposal that the drawer issue postdated checks in favor of petitioner since
the identity and credit standing of the depositor were unknown to petitioner.

2.9. On May 23, 1991, defendant's Branch Manager, the same Mr. Rodolfo Jose wrote plaintiff's Ms. Erlinda Valenton again
insisting on the execution of the Quitclaim and Release in favor of defendant as the Branch has endeavored to negotiate with
its client for the collection of such amount. Upon a reading of the terms of the Quitclaim and Release being proposed by
defendant, the unmistakable fact lies that again defendant attempts for the second time to take advantage of plaintiffs plight
by indicating that the terms of the payment of the principal amount of P999,000.00 is by way of several personal postdated
checks up to March 21, 1992 from a person whose identify is not even disclosed to plaintiff. . . .

To an ordinary person aggrieved already by having been taken advantage of for 620 days more or less, the proposal of
defendant could not be acceptable for the reason that aside from the interest lost already for the use of its money by another
party, no assurance is made as to the actual collection thereof from a party whose credit standing, the recipient is not at all
aware of. . . . 10

Petitioner also believed that it had no privity with the depositor:

2.12. Plaintiff then replied to defendant's letter by requesting that in lieu of the post-dated checks from defendant's client with
whom plaintiff has no privity whatsoever, if the defendant could tender the full payment of the amount of P999,000.00 in

55
defendant's own Manager's check and that plaintiff is willing to forego its further claims for interest and losses for a period of
620 days, more or less. . . . 11

The following argument adduced by petitioner in the Arbicom case leaves no doubt that petitioner is holding private
respondent itself liable for the discrepancy:

Defendant by its acceptance thru the clearing exchange of the check deposit from its client cannot be said to be free from any
liability for the unpaid portion of the check amount considering that defendant as the drawee bank, is remiss in its duty of
verifying possible technicalities on the face of the check.

Since the provisions of the PCHC Rule Book has so imposed upon the defendant being the Receiving Bank of a discrepant check
item to give that timely notification and defendant failing to comply with such requirement, then it can be said that defendant
is guilty of negligence. He who is guilty of negligence in the performance of its [sic] duty is liable for damages. (Art. 1170, New
Civil Code.)

Art. 1172 of the Civil Code provides that:

"Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may
be regulated by the courts, according to the circumstances.["] 12

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: 1. The sum of NINE
HUNDRED NINETY-NINE THOUSAND PESOS (P999,000.00). . . . 13

On the other hand, the petition before this Court reveals that the true purpose for the examination is to aid petitioner in
proving the extent of Allied Bank's liability:

Hence, the amount actually debited from the subject account becomes very material and germane to petitioner's claim for
reimbursement as it is only upon examination of subject account can it be proved that indeed a discrepancy in the amount
credited to petitioner was committed, thereby, rendering respondent Allied Bank liable to petitioner for the deficiency. The
money deposited in aforesaid account is undeniably the subject matter of the litigation since the issue in the Arbicom case is
whether respondent Bank should be held liable to petitioner for reimbursement of the amount of money constituting the
difference between the amount of the check and the amount credited to petitioner, that is, P999,000.00, which has remained
deposited in aforesaid account.

On top of the allegations in the Complaint, which can be verified only by examining the subject bank account, the defense of
respondent Allied Bank that the reimbursement cannot be made since client's account is not sufficiently funded at the time
petitioner sent its Charge Slip, bolsters petitioner's contention that the money in subject account is the very subject matter of
the pending Arbicom case.

Indeed, to prove the allegations in its Complaint before the PCHC Arbitration Committee, and to rebut private respondent's
defense on the matter, petitioner needs to determine:

1. how long respondent Allied Bank had wilfully or negligently allowed the difference of P999,000.00 to be maintained in the
subject account without remitting the same to petitioner;

2. whether indeed the subject account was no longer sufficiently funded when petitioner sent its charge slip for reimbursement
to respondent bank on May 7, 1991; and

3. whether or not respondent Allied Bank's actuations in refusing to immediately reimburse the discrepancy was attended by
good or bad faith.

In other words, only a disclosure of the pertinent details and information relating to the transactions involving subject account
will enable petitioner to prove its allegations in the pending Arbicom
case. . . . . 14

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

56
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.

That petitioner feels a need for such information in order to establish its case against private respondent does not, by itself,
warrant the examination of the bank deposits. The necessity of the inquiry, or the lack thereof, is immaterial since the case
does not come under any of the exceptions allowed by the Bank Deposits Secrecy Act.

57
58
REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY LAUNDERING COUNCIL (AMLC), petitioner,
vs.
HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA
CHENG, respondents.

DECISION

TINGA, J.:

The present petition for certiorari and prohibition under Rule 65 assails the orders and resolutions issued by two different
courts in two different cases. The courts and cases in question are the Regional Trial Court of Manila, Branch 24, which heard SP
Case No. 06-1142001 and the Court of Appeals, Tenth Division, which heared CA-G.R. SP No. 95198.2 Both cases arose as part of
the aftermath of the ruling of this Court in Agan v. PIATCO3 nullifying the concession agreement awarded to the Philippine
International Airport Terminal Corporation (PIATCO) over the Ninoy Aquino International Airport – International Passenger
Terminal 3 (NAIA 3) Project.

I.

Following the promulgation of Agan, a series of investigations concerning the award of the NAIA 3 contracts to PIATCO were
undertaken by the Ombudsman and the Compliance and Investigation Staff (CIS) of petitioner Anti-Money Laundering Council
(AMLC). On 24 May 2005, the Office of the Solicitor General (OSG) wrote the AMLC requesting the latter’s assistance "in
obtaining more evidence to completely reveal the financial trail of corruption surrounding the [NAIA 3] Project," and also noting
that petitioner Republic of the Philippines was presently defending itself in two international arbitration cases filed in relation
to the NAIA 3 Project.4 The CIS conducted an intelligence database search on the financial transactions of certain individuals
involved in the award, including respondent Pantaleon Alvarez (Alvarez) who had been the Chairman of the PBAC Technical
Committee, NAIA-IPT3 Project.5 By this time, Alvarez had already been charged by the Ombudsman with violation of Section 3(j)
of R.A. No. 3019.6 The search revealed that Alvarez maintained eight (8) bank accounts with six (6) different banks.7

On 27 June 2005, the AMLC issued Resolution No. 75, Series of 2005,8 whereby the Council resolved to authorize the Executive
Director of the AMLC "to sign and verify an application to inquire into and/or examine the [deposits] or investments of
Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and Cheng Yong, and their related web of accounts wherever these may
be found, as defined under Rule 10.4 of the Revised Implementing Rules and Regulations;" and to authorize the AMLC
Secretariat "to conduct an inquiry into subject accounts once the Regional Trial Court grants the application to inquire into
and/or examine the bank accounts" of those four individuals.9 The resolution enumerated the particular bank accounts of
Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong which were to be the subject of the
inquiry.10 The rationale for the said resolution was founded on the cited findings of the CIS that amounts were transferred from
a Hong Kong bank account owned by Jetstream Pacific Ltd. Account to bank accounts in the Philippines maintained by Liongson
and Cheng Yong.11 The Resolution also noted that "[b]y awarding the contract to PIATCO despite its lack of financial capacity,
Pantaleon Alvarez caused undue injury to the government by giving PIATCO unwarranted benefits, advantage, or preference in
the discharge of his official administrative functions through manifest partiality, evident bad faith, or gross inexcusable
negligence, in violation of Section 3(e) of Republic Act No. 3019."12

Under the authority granted by the Resolution, the AMLC filed an application to inquire into or examine the deposits or
investments of Alvarez, Trinidad, Liongson and Cheng Yong before the RTC of Makati, Branch 138, presided by Judge (now Court
of Appeals Justice) Sixto Marella, Jr. The application was docketed as AMLC No. 05-005.13 The Makati RTC heard the testimony
of the Deputy Director of the AMLC, Richard David C. Funk II, and received the documentary evidence of the
AMLC.14 Thereafter, on 4 July 2005, the Makati RTC rendered an Order (Makati RTC bank inquiry order) granting the AMLC the
authority to inquire and examine the subject bank accounts of Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being
satisfied that there existed "[p]robable cause [to] believe that the deposits in various bank accounts, details of which appear in
paragraph 1 of the Application, are related to the offense of violation of Anti-Graft and Corrupt Practices Act now the subject of
criminal prosecution before the Sandiganbayan as attested to by the Informations, Exhibits C, D, E, F, and G." 15 Pursuant to the
Makati RTC bank inquiry order, the CIS proceeded to inquire and examine the deposits, investments and related web accounts
of the four.16

Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis Villa-Ignacio, wrote a letter dated 2 November
2005, requesting the AMLC to investigate the accounts of Alvarez, PIATCO, and several other entities involved in the nullified
contract. The letter adverted to probable cause to believe that the bank accounts "were used in the commission of unlawful

59
activities that were committed" in relation to the criminal cases then pending before the Sandiganbayan. 17 Attached to the
letter was a memorandum "on why the investigation of the [accounts] is necessary in the prosecution of the above criminal
cases before the Sandiganbayan."18

In response to the letter of the Special Prosecutor, the AMLC promulgated on 9 December 2005 Resolution No. 121 Series of
2005,19 which authorized the executive director of the AMLC to inquire into and examine the accounts named in the letter,
including one maintained by Alvarez with DBS Bank and two other accounts in the name of Cheng Yong with Metrobank. The
Resolution characterized the memorandum attached to the Special Prosecutor’s letter as "extensively justif[ying] the existence
of probable cause that the bank accounts of the persons and entities mentioned in the letter are related to the unlawful activity
of violation of Sections 3(g) and 3(e) of Rep. Act No. 3019, as amended."20

Following the December 2005 AMLC Resolution, the Republic, through the AMLC, filed an application21 before the Manila RTC
to inquire into and/or examine thirteen (13) accounts and two (2) related web of accounts alleged as having been used to
facilitate corruption in the NAIA 3 Project. Among said accounts were the DBS Bank account of Alvarez and the Metrobank
accounts of Cheng Yong. The case was raffled to Manila RTC, Branch 24, presided by respondent Judge Antonio Eugenio, Jr., and
docketed as SP Case No. 06-114200.

On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank inquiry order) granting the Ex Parte Application
expressing therein "[that] the allegations in said application to be impressed with merit, and in conformity with Section 11 of
R.A. No. 9160, as amended, otherwise known as the Anti-Money Laundering Act (AMLA) of 2001 and Rules 11.1 and 11.2 of the
Revised Implementing Rules and Regulations."22 Authority was thus granted to the AMLC to inquire into the bank accounts
listed therein.

On 25 January 2006, Alvarez, through counsel, entered his appearance23 before the Manila RTC in SP Case No. 06-114200 and
filed an Urgent Motion to Stay Enforcement of Order of January 12, 2006.24 Alvarez alleged that he fortuitously learned of the
bank inquiry order, which was issued following an ex parte application, and he argued that nothing in R.A. No. 9160 authorized
the AMLC to seek the authority to inquire into bank accounts ex parte.25 The day after Alvarez filed his motion, 26 January 2006,
the Manila RTC issued an Order26 staying the enforcement of its bank inquiry order and giving the Republic five (5) days to
respond to Alvarez’s motion.

The Republic filed an Omnibus Motion for Reconsideration27 of the 26 January 2006 Manila RTC Order and likewise sought to
strike out Alvarez’s motion that led to the issuance of said order. For his part, Alvarez filed a Reply and Motion to Dismiss28 the
application for bank inquiry order. On 2 May 2006, the Manila RTC issued an Omnibus Order 29 granting the Republic’s Motion
for Reconsideration, denying Alvarez’s motion to dismiss and reinstating "in full force and effect" the Order dated 12 January
2006. In the omnibus order, the Manila RTC reiterated that the material allegations in the application for bank inquiry order
filed by the Republic stood as "the probable cause for the investigation and examination of the bank accounts and investments
of the respondents."30

Alvarez filed on 10 May 2006 an Urgent Motion31 expressing his apprehension that the AMLC would immediately enforce the
omnibus order and would thereby render the motion for reconsideration he intended to file as moot and academic; thus he
sought that the Republic be refrained from enforcing the omnibus order in the meantime. Acting on this motion, the Manila
RTC, on 11 May 2006, issued an Order32 requiring the OSG to file a comment/opposition and reminding the parties that
judgments and orders become final and executory upon the expiration of fifteen (15) days from receipt thereof, as it is the
period within which a motion for reconsideration could be filed. Alvarez filed his Motion for Reconsideration33 of the omnibus
order on 15 May 2006, but the motion was denied by the Manila RTC in an Order34 dated 5 July 2006.

On 11 July 2006, Alvarez filed an Urgent Motion and Manifestation35 wherein he manifested having received reliable
information that the AMLC was about to implement the Manila RTC bank inquiry order even though he was intending to appeal
from it. On the premise that only a final and executory judgment or order could be executed or implemented, Alvarez sought
that the AMLC be immediately ordered to refrain from enforcing the Manila RTC bank inquiry order.

On 12 July 2006, the Manila RTC, acting on Alvarez’s latest motion, issued an Order36 directing the AMLC "to refrain from
enforcing the order dated January 12, 2006 until the expiration of the period to appeal, without any appeal having been filed."
On the same day, Alvarez filed a Notice of Appeal37 with the Manila RTC.

On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for Clarification.38 Therein, he alleged having learned that the AMLC
had began to inquire into the bank accounts of the other persons mentioned in the application for bank inquiry order filed by

60
the Republic.39 Considering that the Manila RTC bank inquiry order was issued ex parte, without notice to those other persons,
Alvarez prayed that the AMLC be ordered to refrain from inquiring into any of the other bank deposits and alleged web of
accounts enumerated in AMLC’s application with the RTC; and that the AMLC be directed to refrain from using, disclosing or
publishing in any proceeding or venue any information or document obtained in violation of the 11 May 2006 RTC Order.40

On 25 July 2006, or one day after Alvarez filed his motion, the Manila RTC issued an Order41 wherein it clarified that "the Ex
Parte Order of this Court dated January 12, 2006 can not be implemented against the deposits or accounts of any of the
persons enumerated in the AMLC Application until the appeal of movant Alvarez is finally resolved, otherwise, the appeal
would be rendered moot and academic or even nugatory."42 In addition, the AMLC was ordered "not to disclose or publish any
information or document found or obtained in [v]iolation of the May 11, 2006 Order of this Court."43 The Manila RTC reasoned
that the other persons mentioned in AMLC’s application were not served with the court’s 12 January 2006 Order. This 25 July
2006 Manila RTC Order is the first of the four rulings being assailed through this petition.

In response, the Republic filed an Urgent Omnibus Motion for Reconsideration44 dated 27 July 2006, urging that it be allowed to
immediately enforce the bank inquiry order against Alvarez and that Alvarez’s notice of appeal be expunged from the records
since appeal from an order of inquiry is disallowed under the Anti money Laundering Act (AMLA).

Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with
Application for TRO and/or Writ of Preliminary Injunction45 dated 10 July 2006, directed against the Republic of the Philippines
through the AMLC, Manila RTC Judge Eugenio, Jr. and Makati RTC Judge Marella, Jr.. She identified herself as the wife of Cheng
Yong46 with whom she jointly owns a conjugal bank account with Citibank that is covered by the Makati RTC bank inquiry order,
and two conjugal bank accounts with Metrobank that are covered by the Manila RTC bank inquiry order. Lilia Cheng imputed
grave abuse of discretion on the part of the Makati and Manila RTCs in granting AMLC’s ex parte applications for a bank inquiry
order, arguing among others that the ex parte applications violated her constitutional right to due process, that the bank
inquiry order under the AMLA can only be granted in connection with violations of the AMLA and that the AMLA can not apply
to bank accounts opened and transactions entered into prior to the effectivity of the AMLA or to bank accounts located outside
the Philippines.47

On 1 August 2006, the Court of Appeals, acting on Lilia Cheng’s petition, issued a Temporary Restraining Order 48 enjoining the
Manila and Makati trial courts from implementing, enforcing or executing the respective bank inquiry orders previously issued,
and the AMLC from enforcing and implementing such orders. On even date, the Manila RTC issued an Order49 resolving to hold
in abeyance the resolution of the urgent omnibus motion for reconsideration then pending before it until the resolution of Lilia
Cheng’s petition for certiorari with the Court of Appeals. The Court of Appeals Resolution directing the issuance of the
temporary restraining order is the second of the four rulings assailed in the present petition.

The third assailed ruling50 was issued on 15 August 2006 by the Manila RTC, acting on the Urgent Motion for
Clarification51 dated 14 August 2006 filed by Alvarez. It appears that the 1 August 2006 Manila RTC Order had amended its
previous 25 July 2006 Order by deleting the last paragraph which stated that the AMLC "should not disclose or publish any
information or document found or obtained in violation of the May 11, 2006 Order of this Court."52 In this new motion, Alvarez
argued that the deletion of that paragraph would allow the AMLC to implement the bank inquiry orders and publish whatever
information it might obtain thereupon even before the final orders of the Manila RTC could become final and executory. 53 In
the 15 August 2006 Order, the Manila RTC reiterated that the bank inquiry order it had issued could not be implemented or
enforced by the AMLC or any of its representatives until the appeal therefrom was finally resolved and that any enforcement
thereof would be unauthorized.54

The present Consolidated Petition55 for certiorari and prohibition under Rule 65 was filed on 2 October 2006, assailing the two
Orders of the Manila RTC dated 25 July and 15 August 2006 and the Temporary Restraining Order dated 1 August 2006 of the
Court of Appeals. Through an Urgent Manifestation and Motion56 dated 9 October 2006, petitioner informed the Court that on
22 September 2006, the Court of Appeals hearing Lilia Cheng’s petition had granted a writ of preliminary injunction in her
favor.57 Thereafter, petitioner sought as well the nullification of the 22 September 2006 Resolution of the Court of Appeals,
thereby constituting the fourth ruling assailed in the instant petition.58

The Court had initially granted a Temporary Restraining Order59 dated 6 October 2006 and later on a Supplemental Temporary
Restraining Order60 dated 13 October 2006 in petitioner’s favor, enjoining the implementation of the assailed rulings of the
Manila RTC and the Court of Appeals. However, on respondents’ motion, the Court, through a Resolution61 dated 11 December
2006, suspended the implementation of the restraining orders it had earlier issued.

61
Oral arguments were held on 17 January 2007. The Court consolidated the issues for argument as follows:

1. Did the RTC-Manila, in issuing the Orders dated 25 July 2006 and 15 August 2006 which deferred the implementation of its
Order dated 12 January 2006, and the Court of Appeals, in issuing its Resolution dated 1 August 2006, which ordered the status
quo in relation to the 1 July 2005 Order of the RTC-Makati and the 12 January 2006 Order of the RTC-Manila, both of which
authorized the examination of bank accounts under Section 11 of Rep. Act No. 9160 (AMLA), commit grave abuse of discretion?

(a) Is an application for an order authorizing inquiry into or examination of bank accounts or investments under Section 11 of
the AMLA ex-parte in nature or one which requires notice and hearing?

(b) What legal procedures and standards should be observed in the conduct of the proceedings for the issuance of said order?

(c) Is such order susceptible to legal challenges and judicial review?

2. Is it proper for this Court at this time and in this case to inquire into and pass upon the validity of the 1 July 2005 Order of the
RTC-Makati and the 12 January 2006 Order of the RTC-Manila, considering the pendency of CA G.R. SP No. 95-198 (Lilia Cheng
v. Republic) wherein the validity of both orders was challenged?62

After the oral arguments, the parties were directed to file their respective memoranda, which they did, 63 and the petition was
thereafter deemed submitted for resolution.

II.

Petitioner’s general advocacy is that the bank inquiry orders issued by the Manila and Makati RTCs are valid and immediately
enforceable whereas the assailed rulings, which effectively stayed the enforcement of the Manila and Makati RTCs bank inquiry
orders, are sullied with grave abuse of discretion. These conclusions flow from the posture that a bank inquiry order, issued
upon a finding of probable cause, may be issued ex parte and, once issued, is immediately executory. Petitioner further argues
that the information obtained following the bank inquiry is necessarily beneficial, if not indispensable, to the AMLC in
discharging its awesome responsibility regarding the effective implementation of the AMLA and that any restraint in the
disclosure of such information to appropriate agencies or other judicial fora would render meaningless the relief supplied by
the bank inquiry order.

Petitioner raises particular arguments questioning Lilia Cheng’s right to seek injunctive relief before the Court of Appeals,
noting that not one of the bank inquiry orders is directed against her. Her "cryptic assertion" that she is the wife of Cheng Yong
cannot, according to petitioner, "metamorphose into the requisite legal standing to seek redress for an imagined injury or to
maintain an action in behalf of another." In the same breath, petitioner argues that Alvarez cannot assert any violation of the
right to financial privacy in behalf of other persons whose bank accounts are being inquired into, particularly those other
persons named in the Makati RTC bank inquiry order who did not take any step to oppose such orders before the courts.

Ostensibly, the proximate question before the Court is whether a bank inquiry order issued in accordance with Section 10 of
the AMLA may be stayed by injunction. Yet in arguing that it does, petitioner relies on what it posits as the final and
immediately executory character of the bank inquiry orders issued by the Manila and Makati RTCs. Implicit in that position is
the notion that the inquiry orders are valid, and such notion is susceptible to review and validation based on what appears on
the face of the orders and the applications which triggered their issuance, as well as the provisions of the AMLA governing the
issuance of such orders. Indeed, to test the viability of petitioner’s argument, the Court will have to be satisfied that the subject
inquiry orders are valid in the first place. However, even from a cursory examination of the applications for inquiry order and
the orders themselves, it is evident that the orders are not in accordance with law.

III.

A brief overview of the AMLA is called for.

Money laundering has been generally defined by the International Criminal Police Organization (Interpol) `as "any act or
attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from
legitimate sources."64 Even before the passage of the AMLA, the problem was addressed by the Philippine government through
the issuance of various circulars by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative proscription was necessary,
especially with the inclusion of the Philippines in the Financial Action Task Force’s list of non-cooperative countries and

62
territories in the fight against money laundering.65 The original AMLA, Republic Act (R.A.) No. 9160, was passed in 2001. It was
amended by R.A. No. 9194 in 2003.

Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the proceeds of an unlawful activity as [defined in
the law] are transacted, thereby making them appear to have originated from legitimate sources." 66 The section further
provides the three modes through which the crime of money laundering is committed. Section 7 creates the AMLC and defines
its powers, which generally relate to the enforcement of the AMLA provisions and the initiation of legal actions authorized in
the AMLA such as civil forefeiture proceedings and complaints for the prosecution of money laundering offenses. 67

In addition to providing for the definition and penalties for the crime of money laundering, the AMLA also authorizes certain
provisional remedies that would aid the AMLC in the enforcement of the AMLA. These are the "freeze order" authorized under
Section 10, and the "bank inquiry order" authorized under Section 11.

Respondents posit that a bank inquiry order under Section 11 may be obtained only upon the pre-existence of a money
laundering offense case already filed before the courts.68 The conclusion is based on the phrase "upon order of any competent
court in cases of violation of this Act," the word "cases" generally understood as referring to actual cases pending with the
courts.

We are unconvinced by this proposition, and agree instead with the then Solicitor General who conceded that the use of the
phrase "in cases of" was unfortunate, yet submitted that it should be interpreted to mean "in the event there are violations" of
the AMLA, and not that there are already cases pending in court concerning such violations.69 If the contrary position is
adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and wholly inutile as
a means for the government to ascertain whether there is sufficient evidence to sustain an intended prosecution of the account
holder for violation of the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its
character as a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders.
After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing of complaints
under the AMLA with the hope or expectation that the evidence of money laundering would somehow surface during the trial.
Since the AMLC could not make use of the bank inquiry order to determine whether there is evidentiary basis to prosecute the
suspected malefactors, not filing any case at all would not be an alternative. Such unwholesome set-up should not come to
pass. Thus Section 11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the
unfounded initiation of complaints for money laundering.

Still, even if the bank inquiry order may be availed of without need of a pre-existing case under the AMLA, it does not follow
that such order may be availed of ex parte. There are several reasons why the AMLA does not generally sanction ex
parte applications and issuances of the bank inquiry order.

IV.

It is evident that Section 11 does not specifically authorize, as a general rule, the issuance ex parte of the bank inquiry order.
We quote the provision in full:

SEC. 11. Authority to Inquire into Bank Deposits. ― Notwithstanding the provisions of Republic Act No. 1405, as amended,
Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any
particular deposit or investment with any banking institution or non bank financial institution upon order of any competent
court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or
investments are related to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under Section
4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(i)1, (2) and
(12).

To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of
investment with any banking institution or non bank financial institution when the examination is made in the course of a
periodic or special examination, in accordance with the rules of examination of the BSP.70 (Emphasis supplied)

Of course, Section 11 also allows the AMLC to inquire into bank accounts without having to obtain a judicial order in cases
where there is probable cause that the deposits or investments are related to kidnapping for ransom,71 certain violations of the
Comprehensive Dangerous Drugs Act of 2002,72 hijacking and other violations under R.A. No. 6235, destructive arson and
murder. Since such special circumstances do not apply in this case, there is no need for us to pass comment on this proviso.

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Suffice it to say, the proviso contemplates a situation distinct from that which presently confronts us, and for purposes of the
succeeding discussion, our reference to Section 11 of the AMLA excludes said proviso.

In the instances where a court order is required for the issuance of the bank inquiry order, nothing in Section 11 specifically
authorizes that such court order may be issued ex parte. It might be argued that this silence does not preclude the ex
parte issuance of the bank inquiry order since the same is not prohibited under Section 11. Yet this argument falls when the
immediately preceding provision, Section 10, is examined.

SEC. 10. Freezing of Monetary Instrument or Property. ― The Court of Appeals, upon application ex parte by the AMLC and
after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful
activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall
be for a period of twenty (20) days unless extended by the court.73

Although oriented towards different purposes, the freeze order under Section 10 and the bank inquiry order under Section 11
are similar in that they are extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute
money laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the provisional
relief therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize ex parte proceedings for
the issuance of the bank inquiry order, then it could have easily expressed such intent in the law, as it did with the freeze order
under Section 10.

Even more tellingly, the current language of Sections 10 and 11 of the AMLA was crafted at the same time, through the passage
of R.A. No. 9194. Prior to the amendatory law, it was the AMLC, not the Court of Appeals, which had authority to issue a freeze
order, whereas a bank inquiry order always then required, without exception, an order from a competent court.74 It was
through the same enactment that ex parte proceedings were introduced for the first time into the AMLA, in the case of the
freeze order which now can only be issued by the Court of Appeals. It certainly would have been convenient, through the same
amendatory law, to allow a similar ex parte procedure in the case of a bank inquiry order had Congress been so minded. Yet
nothing in the provision itself, or even the available legislative record, explicitly points to an ex parte judicial procedure in the
application for a bank inquiry order, unlike in the case of the freeze order.

That the AMLA does not contemplate ex parte proceedings in applications for bank inquiry orders is confirmed by the present
implementing rules and regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With respect to freeze
orders under Section 10, the implementing rules do expressly provide that the applications for freeze orders be filed ex
parte,75 but no similar clearance is granted in the case of inquiry orders under Section 11.76 These implementing rules were
promulgated by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission,77 and
if it was the true belief of these institutions that inquiry orders could be issued ex parte similar to freeze orders, language to
that effect would have been incorporated in the said Rules. This is stressed not because the implementing rules could
authorize ex parte applications for inquiry orders despite the absence of statutory basis, but rather because the framers of the
law had no intention to allow such ex parte applications.

Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC78 to enforce the provisions of the AMLA specifically
authorize ex parte applications with respect to freeze orders under Section 1079 but make no similar authorization with respect
to bank inquiry orders under Section 11.

The Court could divine the sense in allowing ex parte proceedings under Section 10 and in proscribing the same under Section
11. A freeze order under Section 10 on the one hand is aimed at preserving monetary instruments or property in any way
deemed related to unlawful activities as defined in Section 3(i) of the AMLA. The owner of such monetary instruments or
property would thus be inhibited from utilizing the same for the duration of the freeze order. To make such freeze order
anteceded by a judicial proceeding with notice to the account holder would allow for or lead to the dissipation of such funds
even before the order could be issued.

On the other hand, a bank inquiry order under Section 11 does not necessitate any form of physical seizure of property of the
account holder. What the bank inquiry order authorizes is the examination of the particular deposits or investments in banking
institutions or non-bank financial institutions. The monetary instruments or property deposited with such banks or financial
institutions are not seized in a physical sense, but are examined on particular details such as the account holder’s record of
deposits and transactions. Unlike the assets subject of the freeze order, the records to be inspected under a bank inquiry order
cannot be physically seized or hidden by the account holder. Said records are in the possession of the bank and therefore

64
cannot be destroyed at the instance of the account holder alone as that would require the extraordinary cooperation and
devotion of the bank.

Interestingly, petitioner’s memorandum does not attempt to demonstrate before the Court that the bank inquiry order under
Section 11 may be issued ex parte, although the petition itself did devote some space for that argument. The petition argues
that the bank inquiry order is "a special and peculiar remedy, drastic in its name, and made necessary because of a public
necessity… [t]hus, by its very nature, the application for an order or inquiry must necessarily, be ex parte." This argument is
insufficient justification in light of the clear disinclination of Congress to allow the issuance ex parte of bank inquiry orders
under Section 11, in contrast to the legislature’s clear inclination to allow the ex parte grant of freeze orders under Section 10.

Without doubt, a requirement that the application for a bank inquiry order be done with notice to the account holder will alert
the latter that there is a plan to inspect his bank account on the belief that the funds therein are involved in an unlawful activity
or money laundering offense.80 Still, the account holder so alerted will in fact be unable to do anything to conceal or cleanse his
bank account records of suspicious or anomalous transactions, at least not without the whole-hearted cooperation of the bank,
which inherently has no vested interest to aid the account holder in such manner.

V.

The necessary implication of this finding that Section 11 of the AMLA does not generally authorize the issuance ex parte of the
bank inquiry order would be that such orders cannot be issued unless notice is given to the owners of the account, allowing
them the opportunity to contest the issuance of the order. Without such a consequence, the legislated distinction between ex
parte proceedings under Section 10 and those which are not ex parte under Section 11 would be lost and rendered useless.

There certainly is fertile ground to contest the issuance of an ex parte order. Section 11 itself requires that it be established that
"there is probable cause that the deposits or investments are related to unlawful activities," and it obviously is the court which
stands as arbiter whether there is indeed such probable cause. The process of inquiring into the existence of probable cause
would involve the function of determination reposed on the trial court. Determination clearly implies a function of adjudication
on the part of the trial court, and not a mechanical application of a standard pre-determination by some other body. The word
"determination" implies deliberation and is, in normal legal contemplation, equivalent to "the decision of a court of justice."81

The court receiving the application for inquiry order cannot simply take the AMLC’s word that probable cause exists that the
deposits or investments are related to an unlawful activity. It will have to exercise its

own determinative function in order to be convinced of such fact. The account holder would be certainly capable of contesting
such probable cause if given the opportunity to be apprised of the pending application to inquire into his account; hence a
notice requirement would not be an empty spectacle. It may be so that the process of obtaining the inquiry order may become
more cumbersome or prolonged because of the notice requirement, yet we fail to see any unreasonable burden cast by such
circumstance. After all, as earlier stated, requiring notice to the account holder should not, in any way, compromise the
integrity of the bank records subject of the inquiry which remain in the possession and control of the bank.

Petitioner argues that a bank inquiry order necessitates a finding of probable cause, a characteristic similar to a search warrant
which is applied to and heard ex parte. We have examined the supposed analogy between a search warrant and a bank inquiry
order yet we remain to be unconvinced by petitioner.

The Constitution and the Rules of Court prescribe particular requirements attaching to search warrants that are not imposed by
the AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge personally examine under oath
or affirmation the complainant and the witnesses he may produce,82 such examination being in the form of searching questions
and answers.83 Those are impositions which the legislative did not specifically prescribe as to the bank inquiry order under the
AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a bank inquiry order is not
a search warrant or warrant of arrest as it contemplates a direct object but not the seizure of persons or property.

Even as the Constitution and the Rules of Court impose a high procedural standard for the determination of probable cause for
the issuance of search warrants which Congress chose not to prescribe for the bank inquiry order under the AMLA, Congress
nonetheless disallowed ex parte applications for the inquiry order. We can discern that in exchange for these procedural
standards normally applied to search warrants, Congress chose instead to legislate a right to notice and a right to be heard—
characteristics of judicial proceedings which are not ex parte. Absent any demonstrable constitutional infirmity, there is no
reason for us to dispute such legislative policy choices.

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VI.

The Court’s construction of Section 11 of the AMLA is undoubtedly influenced by right to privacy considerations. If sustained,
petitioner’s argument that a bank account may be inspected by the government following an ex parte proceeding about which
the depositor would know nothing would have significant implications on the right to privacy, a right innately cherished by all
notwithstanding the legally recognized exceptions thereto. The notion that the government could be so empowered is cause
for concern of any individual who values the right to privacy which, after all, embodies even the right to be "let

alone," the most comprehensive of rights and the right most valued by civilized people.84

One might assume that the constitutional dimension of the right to privacy, as applied to bank deposits, warrants our present
inquiry. We decline to do so. Admittedly, that question has proved controversial in American jurisprudence. Notably, the United
States Supreme Court in U.S. v. Miller85 held that there was no legitimate expectation of privacy as to the bank records of a
depositor.86 Moreover, the text of our Constitution has not bothered with the triviality of allocating specific rights peculiar to
bank deposits.

However, sufficient for our purposes, we can assert there is a right to privacy governing bank accounts in the Philippines, and
that such right finds application to the case at bar. The source of such right is statutory, expressed as it is in R.A. No. 1405
otherwise known as the Bank Secrecy Act of 1955. The right to privacy is enshrined in Section 2 of that law, to wit:

SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in
bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered
as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official,
bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the
subject matter of the litigation. (Emphasis supplied)

Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in the
Philippines.87 Subsequent laws, including the AMLA, may have added exceptions to the Bank Secrecy Act, yet the secrecy of
bank deposits still lies as the general rule. It falls within the zones of privacy recognized by our laws.88 The framers of the 1987
Constitution likewise recognized that bank accounts are not covered by either the right to information89 under Section 7, Article
III or under the requirement of full public disclosure90 under Section 28, Article II.91 Unless the Bank Secrecy Act is repealed or

amended, the legal order is obliged to conserve the absolutely confidential nature of Philippine bank deposits.

Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2 of the Bank Secrecy Act itself
prescribes exceptions whereby these bank accounts may be examined by "any person, government official, bureau or office";
namely when: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) the examination of bank accounts
is upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) the money deposited or
invested is the subject matter of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been
recognized by this Court as constituting an additional exception to the rule of absolute confidentiality,92 and there have been
other similar recognitions as well.93

The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may inquire into a bank account upon
order of any competent court in cases of violation of the AMLA, it having been established that there is probable cause that the
deposits or investments are related to unlawful activities as defined in Section 3(i) of the law, or a money laundering offense
under Section 4 thereof. Further, in instances where there is probable cause that the deposits or investments are related to
kidnapping for ransom,94 certain violations of the Comprehensive Dangerous Drugs Act of 2002,95 hijacking and other violations
under R.A. No. 6235, destructive arson and murder, then there is no need for the AMLC to obtain a court order before it could
inquire into such accounts.

It cannot be successfully argued the proceedings relating to the bank inquiry order under Section 11 of the AMLA is a
"litigation" encompassed in one of the exceptions to the Bank Secrecy Act which is when "the money deposited or invested is
the subject matter of the litigation." The orientation of the bank inquiry order is simply to serve as a provisional relief or
remedy. As earlier stated, the application for such does not entail a full-blown trial.

Nevertheless, just because the AMLA establishes additional exceptions to the Bank Secrecy Act it does not mean that the later
law has dispensed with the general principle established in the older law that "[a]ll deposits of whatever nature with banks or

66
banking institutions in the Philippines x x x are hereby considered as of an absolutely confidential nature."96 Indeed, by force of
statute, all bank deposits are absolutely confidential, and that nature is unaltered even by the legislated exceptions referred to
above. There is disfavor towards construing these exceptions in such a manner that would authorize unlimited discretion on the
part of the government or of any party seeking to enforce those exceptions and inquire into bank deposits. If there are doubts
in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts,
then such doubts must be resolved in favor of the former. Such a stance would persist unless Congress passes a law reversing
the general state policy of preserving the absolutely confidential nature of Philippine bank accounts.

The presence of this statutory right to privacy addresses at least one of the arguments raised by petitioner, that Lilia Cheng had
no personality to assail the inquiry orders before the Court of Appeals because she was not the subject of said orders. AMLC
Resolution No. 75, which served as the basis in the successful application for the Makati inquiry order, expressly adverts to
Citibank Account No. 88576248 "owned by Cheng Yong and/or Lilia G. Cheng with Citibank N.A.,"97 whereas Lilia Cheng’s
petition before the Court of Appeals is accompanied by a certification from Metrobank that Account Nos. 300852436-0 and
700149801-7, both of which are among the subjects of the Manila inquiry order, are accounts in the name of "Yong Cheng or
Lilia Cheng."98 Petitioner does not specifically deny that Lilia Cheng holds rights of ownership over the three said accounts,
laying focus instead on the fact that she was not named as a subject of either the Makati or Manila RTC inquiry orders. We are
reasonably convinced that Lilia Cheng has sufficiently demonstrated her joint ownership of the three accounts, and such
conclusion leads us to acknowledge that she has the standing to assail via certiorari the inquiry orders authorizing the
examination of her bank accounts as the orders interfere with her statutory right to maintain the secrecy of said accounts.

While petitioner would premise that the inquiry into Lilia Cheng’s accounts finds root in Section 11 of the AMLA, it cannot be
denied that the authority to inquire under Section 11 is only exceptional in character, contrary as it is to the general rule
preserving the secrecy of bank deposits. Even though she may not have been the subject of the inquiry orders, her bank
accounts nevertheless were, and she thus has the standing to vindicate the right to secrecy that attaches to said accounts and
their owners. This statutory right to privacy will not prevent the courts from authorizing the inquiry anyway upon the fulfillment
of the requirements set forth under Section 11 of the AMLA or Section 2 of the Bank Secrecy Act; at the same time, the owner
of the accounts have the right to challenge whether the requirements were indeed complied with.

VII.

There is a final point of concern which needs to be addressed. Lilia Cheng argues that the AMLA, being a substantive penal
statute, has no retroactive effect and the bank inquiry order could not apply to deposits or investments opened prior to the
effectivity of Rep. Act No. 9164, or on 17 October 2001. Thus, she concludes, her subject bank accounts, opened between 1989
to 1990, could not be the subject of the bank inquiry order lest there be a violation of the constitutional prohibition against ex
post facto laws.

No ex post facto law may be enacted,99 and no law may be construed in such fashion as to permit a criminal prosecution
offensive to the ex post facto clause. As applied to the AMLA, it is plain that no person may be prosecuted under the penal
provisions of the AMLA for acts committed prior to the enactment of the law on 17 October 2001. As much was understood by
the lawmakers since they deliberated upon the AMLA, and indeed there is no serious dispute on that point.

Does the proscription against ex post facto laws apply to the interpretation of Section 11, a provision which does not provide
for a penal sanction but which merely authorizes the inspection of suspect accounts and deposits? The answer is in the
affirmative. In this jurisdiction, we have defined an ex post facto law as one which either:

(1) makes criminal an act done before the passage of the law and which was innocent when done, and punishes such an act;

(2) aggravates a crime, or makes it greater than it was, when committed;

(3) changes the punishment and inflicts a greater punishment than the law annexed to the crime when committed;

(4) alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the
time of the commission of the offense;

(5) assuming to regulate civil rights and remedies only, in effect imposes penalty or deprivation of a right for something which
when done was lawful; and

67
(6) deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection
of a former conviction or acquittal, or a proclamation of amnesty. (Emphasis supplied)100

Prior to the enactment of the AMLA, the fact that bank accounts or deposits were involved in activities later on enumerated in
Section 3 of the law did not, by itself, remove such accounts from the shelter of absolute confidentiality. Prior to the AMLA, in
order that bank accounts could be examined, there was need to secure either the written permission of the depositor or a
court order authorizing such examination, assuming that they were involved in cases of bribery or dereliction of duty of public
officials, or in a case where the money deposited or invested was itself the subject matter of the litigation. The passage of the
AMLA stripped another layer off the rule on absolute confidentiality that provided a measure of lawful protection to the
account holder. For that reason, the application of the bank inquiry order as a means of inquiring into records of transactions
entered into prior to the passage of the AMLA would be constitutionally infirm, offensive as it is to the ex post facto clause.

Still, we must note that the position submitted by Lilia Cheng is much broader than what we are willing to affirm. She argues
that the proscription against ex post facto laws goes as far as to prohibit any inquiry into deposits or investments included in
bank accounts opened prior to the effectivity of the AMLA even if the suspect transactions were entered into when the law had
already taken effect. The Court recognizes that if this argument were to be affirmed, it would create a horrible loophole in the
AMLA that would in turn supply the means to fearlessly engage in money laundering in the Philippines; all that the criminal has
to do is to make sure that the money laundering activity is facilitated through a bank account opened prior to 2001. Lilia Cheng
admits that "actual money launderers could utilize the ex post facto provision of the Constitution as a shield" but that the
remedy lay with Congress to amend the law. We can hardly presume that Congress intended to enact a self-defeating law in the
first place, and the courts are inhibited from such a construction by the cardinal rule that "a law should be interpreted with a
view to upholding rather than destroying it."101

Besides, nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt
from the bank inquiry order all bank accounts opened prior to the passage of the AMLA. There is a cited exchange between
Representatives Ronaldo Zamora and Jaime Lopez where the latter confirmed to the former that "deposits are supposed to be
exempted from scrutiny or monitoring if they are already in place as of the time the law is enacted."102 That statement does
indicate that transactions already in place when the AMLA was passed are indeed exempt from scrutiny through a bank inquiry
order, but it cannot yield any interpretation that records of transactions undertaken after the enactment of the AMLA are
similarly exempt. Due to the absence of cited authority from the legislative record that unqualifiedly supports respondent Lilia
Cheng’s thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal as it is to the anima of that law.

IX.

We are well aware that Lilia Cheng’s petition presently pending before the Court of Appeals likewise assails the validity of the
subject bank inquiry orders and precisely seeks the annulment of said orders. Our current declarations may indeed have the
effect of preempting that0 petition. Still, in order for this Court to rule on the petition at bar which insists on the enforceability
of the said bank inquiry orders, it is necessary for us to consider and rule on the same question which after all is a pure question
of law.

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REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING INSTITUTION AND PROVIDING
PENALTY THEREFOR.

Section 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money
in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized
loans to assist in the economic development of the country.

Section 2. 1 All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds
issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation.

Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those
mentioned in Section two hereof any information concerning said deposits.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations which are inconsistent with the
provisions of this Act are hereby repealed.

Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a
fine of not more than twenty thousand pesos or both, in the discretion of the court.

Section 6. This Act shall take effect upon its approval.

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