CASES (Til Degree of Dili)

7/27/2019 CASES (Til Degree of Dili)

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SECOND DIVISION

G.R. No. L-46208 April 5, 1990

FIDELITY SAVINGS AND MORTGAGE BANK,petitioner,vs.HON. PEDRO D. CENZON, in his capacity as Presiding Judge of theCourt of First Instance of Manila (Branch XL) and SPOUSESTIMOTEO AND OLIMPIA SANTIAGO, respondents.

Agapito S. Fajardo and Marino E. Eslao for petitioner.

Leovillo C. Agustin Law Offices for private respondents.

REGALADO,J.:

The instant petition seeks the review, on pure questions of law, of thedecision rendered by the Court of First Instance of Manila (now RegionalTrial Court), Branch XL, on December 3, 1976 in Civil Case No.84800, 1ordering herein petitioner to pay private respondents the followingamounts:

(a) P90,000.00 with accrued interest in accordance with ExhibitsA and B until fully paid;

(b) P30,000,00 as exemplary damages; and

(c) P10,000.00 as and for attorney's fees.

The payment by the defendant Fidelity Savings and MortgageBank of the aforementioned sums of money shall be subject to

the Bank Liquidation Rules and Regulations embodied in theOrder of the Court of First Instance of Manila, Branch XIII, datedOctober 3, 1972, Civil Case No. 86005, entitled, "IN RE:Liquidation of the Fidelity Savings Bank versus Central Bank ofthe Philippines, Liquidator."


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With costs against the defendant Fidelity Savings and MortgageBank.

SO ORDERED.

Private respondents instituted this present action for a sum of money withdamages against Fidelity Savings and Mortgage Bank, Central Bank of thePhilippines, Eusebio Lopez, Jr., Arsenio M. Lopez, Sr., Arsenio S. Lopez, Jr.,Bibiana E. Lacuna, Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi andErnani A. Pacana. On motion of herein private respondents, as plaintiffs, theamended complaint was dismissed without prejudice against defendants JoseC. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. 2 In itsaforesaid decision of December 3, 1976, the court a quo dismissed the

complaint as against defendants Central Bank of the Philippines, EusebioLopez, Jr., Arsenio S. Lopez, Jr., Arsenio M. Lopez, Sr. and Bibiana S.Lacuna.

Back on August 10, 1973, the plaintiffs (herein private respondents) and thedefendants Fidelity Savings and Mortgage Bank (petitioner herein), CentralBank of the Philippines and Bibiana E. Lacuna had filed in said case in thelower court a partial stipulation of facts, as follows:

COME NOW herein plaintiffs, SPOUSES TIMOTEO M.SANTIAGO and OLIMPIA R. SANTIAGO, herein defendantsFIDELITY SAVINGS AND MORTGAGE BANK and theCENTRAL BANK OF THE PHILIPPINES, and hereindefendant BIBIANA E. LACUNA, through their respectiveundersigned counsel, and before this Honorable Court mostrespectfully submit the following Partial Stipulation of Facts:

1. That herein plaintiffs are husband and wife, both of legal age,and presently residing at No. 480 C. de la Paz Street, Sta. Elena,Marikina, Rizal;

2. That herein defendant Fidelity Savings and Mortgage Bank is acorporation duly organized and existing under and by virtue ofthe laws of the Philippines; that defendant Central Bank of the


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Philippines is a corporation duly organized and existing underand by virtue of the laws of the Philippines;

3. That herein defendant Bibiana E. Lacuna is of legal age and a

resident of No. 42 East Lawin Street, Philamlife Homes, QuezonCity, said defendant was an assistant Vice-President of thedefendant fidelity Savings and Mortgage Bank,

4. That sometime on May 16, 1968, here in plaintiffs depositedwith the defendant Fidelity Savings Bank the amount of FIFTYTHOUSAND PESOS (P50,000.00) under Savings Account No.16-0536; that likewise, sometime on July 6, 1968, herein

plaintiff,- deposited with the defendant Fidelity Savings and

Mortgage Bank the amount of FIFTY THOUSAND PESOS(P50,000.00) under Certificate of Time Deposit No. 0210; thatthe aggregate amount of deposits of the plaintiffs with thedefendant Fidelity Savings and Mortgage Bank is ONEHUNDRED THOUSAND PESOS (P100,000.00);

5. That on February 18, 1969, the Monetary Board, after findingthe report of the Superintendent of Banks, that the condition ofthe defendant Fidelity Savings and Mortgage Bank is one of

insolvency, to be true, issued Resolution No. 350 deciding,among others, as follows:

1) To forbid the Fidelity Savings Bank todo business in the Philippines;

2) To instruct the Acting Superintendentof Banks to take charge, in the name ofthe Monetary Board, of the Bank's assets

6. That pursuant to the above-cited instructions of the MonetaryBoard, the Superintendent of Banks took charge in the name ofthe Monetary Board, of the assets of defendant Fidelity SavingsBank on February 19, 1969; and that since that date up to thisdate, the Superintendent of Banks (now designated as Director,Department of Commercial and Savings Banks) has been taking


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charge of the assets of defendant Fidelity Savings and MortgageBank;

7. That sometime on October 10, 1969 the Philippine Deposit

Insurance Corporation paid the plaintiffs the amount of TENTHOUSAND PESOS (P10,000.00) on the aggregate deposits ofP100,000.00 pursuant to Republic Act No. 5517, thereby leavinga deposit balance of P90,000.00;

8. That on December 9, 1969, the Monetary Board issued itsResolution No. 2124 directing the liquidation of the affairs ofdefendant Fidelity Savings Bank;

9. That on January 25, 1972, the Solicitor General of thePhilippines filed a "Petition for Assistance and Supervision inLiquidation" of the affairs of the defendant Fidelity Savings andMortgage Bank with the Court of First Instance of Manila,assigned to Branch XIII and docketed as Civil Case No. 86005;

10. That on October 3, 1972, the Liquidation Court promulgatedthe Bank Rules and Regulations to govern the liquidation of theaffairs of defendant Fidelity Savings and Mortgage Bank,

prescribing the rules on the conversion of the Bank's assets intomoney, processing of claims against it and the manner and timeof distributing the proceeds from the assets of the Bank;

11. That the liquidation proceedings has not been terminated andis still pending up to the present;

12. That herein plaintiffs, through their counsel, sent demandletters to herein defendants, demanding the immediate paymentof the aforementioned savings and time deposits.

WHEREFORE, it is respectfully prayed that the foregoing PartialStipulation of Facts be approved by this Honorable Court,without prejudice to the presentation of additional documentaryor testimonial evidence by herein parties.

Manila, Philippines, August 10, 1973. 3


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Assigning error in the judgment of the lower court quoted ab antecedents,petitioner raises two questions of law, to wit:

1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage

Bank may be adjudged to pay interest on unpaid deposits even after itsclosure by the Central Bank by reason of insolvency without violating theprovisions of the Civil Code on preference of credits; and

2. Whether or not an insolvent bank like the Fidelity Savings and MortgageBank may be adjudged to pay moral and exemplary damages, attorney's feesand costs when the insolvency is caused b the anomalous real estatetransactions without violating the provisions of the Civil Code on preferenceof credits.

There is merit in the petition.

It is settled jurisprudence that a banking institution which has been declaredinsolvent and subsequently ordered closed by the Central Bank of thePhilippines cannot be held liable to pay interest on bank deposits whichaccrued during the period when the bank is actually closed and non-operational.

In The Overseas Bank of Manila vs. Court of Appeals and TonyD. Tapia, 4 we held that:

It is a matter of common knowledge, which We take judicialnotice of, that what enables a bank to pay stipulated interest onmoney deposited with it is that thru the other aspects of itsoperation it is able to generate funds to cover the payment of suchinterest. Unless a bank can lend money, engage in internationaltransactions, acquire foreclosed mortgaged properties or their

proceeds and generally engage in other banking and financing

activities from which it can derive income, it is inconceivablehow it can carry on as a depository obligated to pay stipulatedinterest. Conventional wisdom dictates this inexorable fair and

just conclusion. And it can be said that all who deposit money inbanks are aware of such a simple economic proposition.Consequently, it should be deemed read into every contract of


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deposit with a bank that the obligation to pay interest on thedeposit ceases the moment the operation of the bank iscompletely suspended by the duly constituted authority, theCentral Bank.

This was reiterated in the subsequent case ofThe Overseas Bank of Manilavs. The Hon. Court of Appeals and Julian R. Cordero. 5 and in the recentcases ofIntegrated Realty Corporation, et al. vs. Philippine National Bank,et al. and the Overseas Bank of Manila vs. Court of appeals, et al.6

From the aforecited authorities, it is manifest that petitioner cannot be heldliable for interest on bank deposits which accrued from the time it was

prohibited by the Central Bank to continue with its banking operations, that

is, when Resolution No. 350 to that effect was issued on February 18, 1969.The order, therefore, of the Central Bank as receiver/liquidator of petitioner

bank allowing the claims of depositors and creditors to earn interest up to thedate of its closure on February 18, 1969, 7 in line with the doctrine laid downin the jurisprudence above cited.

Although petitioner's formulation of the second issue that it poses is slightlyinaccurate and defective, we likewise find the awards of moral andexemplary damages and attorney's fees to be erroneous.

The trial court found, and it is not disputed, that there was no fraud or badfaith on the part of petitioner bank and the other defendants in accepting thedeposits of private respondents. Petitioner bank could not even be faulted innot immediately returning the amount claimed by private respondentsconsidering that the demand to pay was made and Civil Case No. 84800 wasfiled in the trial court several months after the Central Bank had ordered

petitioner's closure. By that time, petitioner bank was no longer in a positionto comply with its obligations to its creditors, including herein privaterespondents. Even the trial court had to admit that petitioner bank failed to

pay private respondents because it was already insolvent. 8 Further, this caseis not one of the specified or analogous cases wherein moral damages may berecovered. 9


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There is no valid basis for the award of exemplary damages which issupposed to serve as a warning to other banks from dissipating their assets inanomalous transactions. It was not proven by private respondents, and neitherwas there a categorical finding made by the trial court, that petitioner bank

actually engaged in anomalous real estate transactions. The same were raisedonly during the testimony of the bank examiner of the Central Bank, 10 but nodocumentary evidence was ever presented in support thereof. Hence, it waserror for the lower court to impose exemplary damages upon petitioner banksince, in contracts, such sanction requires that the offending party acted in awanton, fraudulent, reckless, oppressive or malevolent manner. 11 Neitherdoes this case present the situation where attorney's fees may be awarded. 12

In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank

may, therefore, not be held responsible for damages which may be reasonablyattributed to the non-performance of the obligation. 13Consequently, wereiterate that under the premises and pursuant to the aforementioned

provisions of law, it is apparent that private respondents are not justifiablyentitled to the payment of moral and exemplary damages and attorney's fees.

While we tend to agree with petitioner bank that private respondents' claimsshould he been filed in the liquidation proceedings in Civil Case No. 86005,entitled "In Re: Liquidation of the Fidelity Savings and Mortgage Bank,"

pending before Branch XIII of the then Court of First Instance of Manila, wedo not believe that the decision rendered in the instant case would beviolative of the legal provisions on preference and concurrence of credits. Asthe trial court puts it:

. . . But this order of payment should not be understood as raisingthese deposits to the category of preferred credits of thedefendant Fidelity Savings and Mortgage Bank but shall be paidin accordance with the Bank Liquidation Rules and Regulations

embodied in the Order of the. Court of First Instance of Manila,Branch XIII dated October 3, 1972 (Exh. 3). . . . 14

WHEREFORE, the judgment appealed from is hereby MODIFIED.Petitioner Fidelity Savings and Mortgage Bank is hereby declared liable to

pay private respondents Timoteo and Olimpia Santiago the sum ofP90,000.00, with accrued interest in accordance with the terms of Savings


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Account Deposit No. 16-0536 (Exhibit A) and Certificate of Time DepositNo. 0210 (Exhibit B) until February 18, 1969. The awards for moral andexemplary damages, and attorney's fees are hereby DELETED. No costs.

Manila

SPECIAL FORMER FIRST DIVISION

G.R. No. 73882 October 22, 1987

ROSA CANCIO,petitioner,vs.

HON. COURT OF TAX APPEALS and HON. COMMISSIONER OFCUSTOMS, respondents.

MELENCIO-HERRERA,J.:

Before us is petitioner's Motion for Reconsideration of this Court'sResolution of August 11, 1986, which denied for lack of merit her Petition

for Review on certiorari of respondent Court of Tax Appeals' (CTA) Decisionin C.T.A. Case No. 3398.

During the pendency of this case, or on April 23, 1986, petitioner had passedaway and her legal heirs were ordered substituted in her stead and JoseCancio, Jr., was appointed guardian ad-litem for the minors Ma. Irene andRoberto, both surnamed Cancio, in this Court's Resolution of August 11,1986.

There is no substantial dispute on the background facts and the evidentiaryaspects Vol the controversy, summarized in said

Decision as follows:

The records show that claimant Mrs. Rosa Cancio bearingPhilippine Passport No. 11797799 while clearing through the


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Pre-Boarding (AVSECOM) Area of MIA with her husband andthree (3) children to board PR 306 for Hongkong in the morningof June 12, 1981, was apprehended with One Hundred TwoThousand Nine Hundred Dollars (US$102,900.00) in cash, six

hundred dollars (US$600.00) in two travelers checks, and onethousand five hundred (Pl,500.00) Pesos; that such apprehensionwas effected only thru an alarm sounded by the scanner (metaldetecting device) of the AVSECOM men, when Mrs. Cancio whodid not declare her currency had already passed the Customsinspection area; that subject currencies were placed andconcealed inside the two fairly-sized carton boxes for localchocolates, securely wrapped and taped with tin foil-back paper;and, that in view of claimant's failure, upon being required, to

present the Central Bank Authority, the said currencies wereaccordingly confiscated and a seizure Receipt No. 013 was issuedto her; hence, this seizure proceedings.

At the hearing of this case, claimant, thru counsel, presentedcertified xerox copy of her Bank Book (Exhibit "I") for foreigncurrency deposit with the Philippine Commercial and IndustrialBank under Account FCDU No. 0265, dollar remittances intelegraphic transfers from abroad for deposits in her account from

May 13, 1981 to May 21, 1981, and withdrawal cards (Exhibit "l-A" to "1-E", inclusive), attesting to the fact that claimant RosaCancio had withdrawn from her FCDU Account a certain amountof United States currency which tended to show that claimantherein was a foreign currency depositor pursuant to the

provisions of Republic Act No. 6426, as implemented by CentralBank Circular No. 343. And herein claimant testified that

because her foreign currency deposit could not be withdrawn atone time, she made her withdrawal on several occasions starting

from May 14, 1981 up to May 27, 1981 when she closed heraccount preparatory to her departure which was scheduled in themorning of June 12, 1981 for Hongkong; that from Hongkong,she and her family intended to proceed to the United States formedical treatment of her heart ailment as advised by her twoattending physicians from the UST Hospital; that the US


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currency that they were carrying and confiscated from them onJune 12, 1981 was intended principally for such medical purposeand for other miscellaneous and necessary expenses, and, that thesubject currencies were concealed and hidden by them inside the

two chocolate boxes solely for security reasons. 1

By reason of the forfeiture decreed by respondent Commissioner of Customsof both the foreign and local currencies due to petitioner's failure to present aCentral Bank (CB) authority to bring said currencies out of the country,

petitioner appealed to respondent Court of Tax Appeals. The latter Courtaffirmed the forfeiture of the US$102,900.00 in cash, and US$600.00 intravellers' checks for having been in violation of Central Bank Circulars Nos.265 and 534, in relation to Section 2530(f) of the Tariff and Customs Code,

as amended. It reversed, however, the forfeiture of P1,500.00 on the groundthat since petitioner was travelling with her husband and three (3) children,the said amount did not exceed the P500.00 at that each traveller is allowed to

bring out of the country without a CB permit pursuant to paragraph 4 of CBCircular No. 383.

Petitioner's unimpugned evidence shows that she was a foreign currencydepositor at the Philippine Commercial and Industrial Bank at Makati, MetroManila, and that the subject foreign currency was part of the total amount of

US$116,000.00 she had withdrawn from said bank from May 14 to 27, 1981for her travel and medical expenses in the United States viaHongkong. 2 Admitted, too, is the fact that petitioner failed to present to theapprehending customs authorities a Central Bank authority to bring out of thecountry the said currencies while at the pre-boarding area of the ManilaInternational Airport on June 12, 1981 on her scheduled flight to Hongkongtogether with her husband and three children.

The primordial issue for resolution is whether or not respondent Court had

committed reversible error in upholding the forfeiture of the foreigncurrencies in question.

A second look at the facts and the equity of the case, the pertinent laws, andthe CB Circulars involved constrains us to rule in the affirmative and,accordingly, to grant reconsideration of our Resolution of August 11, 1986denying review.


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It is true that in so far as the exportation or taking out of foreign currencyfrom the country is concerned, Central Bank Circular No. 265, issued on

November 20, 1968, particularly paragraph 3 thereof, mandates:

3. No person shall take out or export from the Philippines foreigncurrency or any other foreign exchange except as otherwiseauthorized by the Central Bank.

Similarly, Central bank Circular No. 534, issued on July 19, 1976, reiteratesand provides in Sec. 3 thereof as follows:

Sec. 3. Unless specifically authorized by the Central Bank orallowed under existing international agreements or Central Bankregulations, no person shall take or transmit or attempt to take ortransmit foreign exchange, in any form out of the Philippinesonly, through other persons, through the mails, or throughinternational carriers.

The provisions of this Section shall not apply to tourists and non-resident temporary visitors who are taking or sending out of thePhilippines their own foreign exchange brought in by them.

However, peculiar to the present controversy is the fact that, as stated

previously, petitioner is a foreign currency depositor. Relevant and applicableto her is the following provision of the "Foreign Currency Deposit Act of thePhilip pines" (Republic Act No. 6426, as amended), which took effect uponits approval on April 4,1972:

SEC. 5. Withdrawability and transferability of deposits. Thereshall be no restriction on the withdrawal by the depositor of hisdeposit or on the transferability of the same abroad except thosearising from the contract between the depositor and the bank.11

(Emphasis Ours).

Under the foregoing provision, the transferability abroad of foreign currencydeposits is unrestricted. Only one exception is provided for therein, which is,any restriction " from the contract between the depositor and the bank."


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Neither is a Central Bank authority required for the transferability abroad offoreign currency deposits.

Attention is called, however, to the implementing rules and regulations to

said Republic Act 6426, as embodied in CB Circular No. 343 issued on April24, 1972, which provides:

SEC. 11. Withdrawability and Liquidity of Deposits.

a. x x x x x x x x x

b. Subject only to the terms of the contract between the bank andthe depositor, the latter shall have ageneral license towithdraw his deposit, notwithstanding any change in policy or

regulations.

xxx xxx xxx

(Emphaisis supplied)

Respondent Court has taken the position that the foregoing provision its theright of the depositor to that of withdrawal and withholds from him the rightof transferability abroad. That is not so. Circular-Letter, dated August 3,

1978, issued by the Central Bank reads in explicit terms:

TO: ALL BANKS AUTHORIZED TO ACCEPT FOREIGN CURRENCYDEPOSITS UNDER THE PROVISIONS OF RA 6426, AS AMENDEDAND PRESIDENTIAL DECREE NO. 1035.

Effective immediately, the banks authorized to accept foreigncurrency deposits under the provisions of RA 6426, as amended,and PD 1035 and as implemented by Central Bank Circular 343

and 547, are hereby instructed to advise their foreign currencydepositors who are withdrawing funds for travel purposes tocarry with them the certificate of withdrawal that the banks shallissue. The travellers shall present the certifications to theCustoms and Central Bank personnel at the MIA, if requested.

The banks shall issue a uniform certification, as follows:


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________________

___

Date

TO WHOM IT MAY CONCERN:

This certifies that ________________________whose signatureappears below has withdrawn today, the amount of

____________in cash (US$ _______________) and TravellersCheck (US$___________________________) against his/herforeign currency account maintained with us.

The funds herein withdrawn are represented to be used inconnection with the depositor's foreign travel scheduled on orabout ____________________197_________.

___________________________

(SignatureofAuthorized

Official

OverPrinted

Name)

_______________________


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(Signature of Depositor)

Please be guided accordingly.

(SGD.)R.D.RUIZ

Director

It is a fact that petitioner could not present a certificate of withdrawal at theManila International Airport when she was about to depart. As she had

explained, however, she was unaware of this requirement. And if she hadwrapped her dollar currency inside a chocolate box it was for "securityreasons." Besides, as instructed in the Circular-Letter abovequoted, it is theauthorized depository bank which should advise its depositors to carry withthem the certificate of withdrawal. At any rate, respondent Court has foundthat petitioner has presented in evidence her foreign currency bank book3 andher withdrawal cards. 4 These may be considered as substantial compliancefor purposes of this case.

Indeed, given the underlying objective of the Foreign Currency Deposit Act,as amended, which is to attract and invite the deposit of foreign currencieswhich are acceptable as part of the international reserve in duly authorized

banks in order that they may be put into the stream of the banking system, itwould be to defeat the very purpose of the law to place undue restrictions onthe transferability of such funds. The countervailing effect would be todiscourage prospective foreign currency depositors to the detriment of the

banking system.

In fine, Central Bank Circulars Nos. 265 and 534 requiring prior CentralBank authority for the taking out of the country of foreign currency shouldnot be made to encompass foreign currency depositors whose rights areexpressly defined and guaranteed in a special law, the Foreign CurrencyDeposit Act (RA 6426, as amended). As a foreign currency depositor,therefore, petitioner cannot be adjudged to have violated the aforestated


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Central Bank Circulars. It follows that neither is there room for theapplication of Section 2530(f) of the Tariff and Customs Code, as amended,which provides for the forfeiture of any article and other objects, theexportation of which is effected or attempted contrary to law.

This is not to condone petitioner's failure to declare the foreign currency shewas carrying out of the country but just to stress that the Foreign CurrencyDeposit Act grants petitioner the right of transferability of her funds abroadexcept that she was not advised by her bank to secure, and consequently wasunable to present, the necessary certificate of withdrawal from said bank.

ACCORDINGLY, the Decision of respondent Court of Tax Appeals ishereby SET ASIDE in so far as it upheld the forfeiture by respondent

Commissioner of Customs of the sums of US$102,900.00 in cash, andUS$600.00 in traveller's checks, which amounts should now be returned topetitioner's heirs, but AFFIRMED in so far as it reversed the forfeiture by thesame official of the sum of P1,500.00. No costs.

SO ORDERED.

EN BANC

[G.R. No. 94723. August 21, 1997]

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., fatherand Natural Guardian, and Spouses FEDERICO N. SALVACION,JR., and EVELINA E. SALVACION,petitioners, vs. CENTRALBANK OF THE PHILIPPINES, CHINA BANKINGCORPORATION and GREG BARTELLI yNORTHCOTT, respondents.

D E C I S I O N

TORRES, JR.,J.:


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In our predisposition to discover the original intent of a statute, courtsbecome the unfeeling pillars of thestatus quo. Little do we realize thatstatutes or even constitutions are bundles of compromises thrown our way bytheir framers. Unless we exercise vigilance, the statute may already be out of

tune and irrelevant to our day.The petition is for declaratory relief. It prays for the following reliefs:

a.) Immediately upon the filing of this petition, an Order be issuedrestraining the respondents from applying and enforcing Section 113of Central Bank Circular No. 960;

b.) After hearing, judgment be rendered:

1.) Declaring the respective rights and duties of petitioners

and respondents;2.) Adjudging Section 113 of Central Bank Circular No. 960as contrary to the provision of the Constitution, hence void;

because its provision that Foreign currency deposits shall beexempt from attachment, garnishment, or any other order to

process of any court, legislative body, government agency orany administrative body whatsoever

i.) has taken away the right of petitioners to have the bank

deposit of defendant Greg Bartelli y Northcott garnished tosatisfy the judgment rendered in petitioners favor inviolation of substantive due process guaranteed by theConstitution;

ii.) has given foreign currency depositors an undue favor ora class privilege in violation of the equal protection clauseof the Constitution;

iii.) has provided a safe haven for criminals like the herein

respondent Greg Bartelli y Northcott since criminals couldescape civil liability for their wrongful acts by merelyconverting their money to a foreign currency anddepositing it in a foreign currency deposit account with anauthorized bank.

The antecedents facts:


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On February 4, 1989, Greg Bartelli y Northcott, an American tourist,coaxed and lured petitioner Karen Salvacion, then 12 years old to go withhim to his apartment. Therein, Greg Bartelli detained Karen Salvacion forfour days, or up to February 7, 1989 and was able to rape the child once on

February 4, and three times each day on February 5, 6, and 7, 1989. OnFebruary 7, 1989, after policemen and people living nearby, rescued Karen,Greg Bartelli was arrested and detained at the Makati Municipal Jail. The

policemen recovered from Bartelli the following items: 1.) Dollar Check No.368, Control No. 021000678-1166111303, US 3,903.20; 2.) COCOBANKBank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account ChinaBanking Corp., US $/A#54105028-2; 4.) ID-122-30-8877; 5.) PhilippineMoney (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (TeddyBear) used in seducing the complainant.

On February 16, 1989, Makati Investigating Fiscal Edwin G. Condayafiled against Greg Bartelli, Criminal Case No. 801 for Serious IllegalDetention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4) countsof Rape. On the same day, petitioners filed with the Regional Trial Court ofMakati Civil Case No. 89-3214 for damages with preliminary attachmentagainst Greg Bartelli. On February 24, 1989, the day there was a scheduledhearing for Bartellis petition for bail the latter escaped from jail.

On February 28, 1989, the court granted the fiscals UrgentEx-

Parte Motion for the Issuance of Warrant of Arrest and Hold DepartureOrder. Pending the arrest of the accused Greg Bartelli y Northcott, thecriminal cases were archived in an Order dated February 28, 1989.

Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order datedFebruary 22, 1989 granting the application of herein petitioners, for theissuance of the writ of preliminary attachment. After petitioners gave Bond

No. JCL (4) 1981 by FGU Insurance Corporation in the amount P100,000.00,a Writ of Preliminary Attachment was issued by the trial court on February28, 1989.

On March 1, 1989, the Deputy Sheriff of Makati served a Notice ofGarnishment on China Banking Corporation. In a letter dated March 13,1989 to the Deputy Sheriff of Makati, China Banking Corporation invokedRepublic Act No. 1405 as its answer to the notice of garnishment served onit. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent


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his reply to China Banking Corporation saying that the garnishment did notviolate the secrecy of bank deposits since the disclosure is merely incidentalto a garnishment properly and legally made by virtue of a court order whichhas placed the subject deposits in custodia legis. In answer to this letter of

the Deputy Sheriff of Makati, China Banking Corporation, in a letter datedMarch 20, 1989, invoked Section 113 of Central Bank Circular No. 960 tothe effect that the dollar deposits of defendant Greg Bartelli are exempt fromattachment, garnishment, or any other order or process of any court,legislative body, government agency or any administrative body, whatsoever.

This prompted the counsel for petitioners to make an inquiry with theCentral Bank in a letter dated April 25, 1989 on whether Section 113 of CBCircular No. 960 has any exception or whether said section has been repealedor amended since said section has rendered nugatory the substantive right ofthe plaintiff to have the claim sought to be enforced by the civil actionsecured by way of the writ of preliminary attachment as granted to the

plaintiff under Rule 57 of the Revised Rules of Court. The Central Bankresponded as follows:

May 26, 1989

Ms. Erlinda S. Carolino

12 Pres. Osmea AvenueSouth Admiral VillageParanaque, Metro Manila

Dear Ms. Carolino:

This is in reply to your letter dated April 25, 1989 regarding yourinquiry on Section 113, CB Circular No. 960 (1983).

The cited provision is absolute in application. It does not admit ofany exception, nor has the same been repealed nor amended.

The purpose of the law is to encourage dollar accounts within thecountrys banking system which would help in the development of theeconomy. There is no intention to render futile the basic rights of a

person as was suggested in your subject letter. The law may be harsh


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as some perceive it, but it is still the law. Compliance is, therefore,enjoined.

Ver

y truly yours, (SGD) AGAPITO S. FAJARDO

Director[1]

Meanwhile, on April 10, 1989, the trial court granted petitioners motionfor leave to serve summons by publication in the Civil Case No. 89-3214entitled Karen Salvacion. et al. vs. Greg Bartelli y Northcott. Summonswith the complaint was published in the Manila Times once a week for three

consecutive weeks. Greg Bartelli failed to file his answer to the complaintand was declared in default on August 7, 1989. After hearing the case ex-

parte, the court rendered judgment in favor of petitioners on March 29, 1990,the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs andagainst defendant, ordering the latter:

1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 asmoral damages;

2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr.,and Evelina E. Salvacion the amount of P150,000.00 each or a totalof P300,000.00 for both of them;

3. To pay plaintiffs exemplary damages of P100,000.00; and

4. To pay attorneys fees in an amount equivalent to 25% of the totalamount of damages herein awarded;

5. To pay litigation expenses of P10,000.00; plus

6. Costs of the suit.

SO ORDERED.

The heinous acts of respondents Greg Bartelli which gave rise to theaward were related in graphic detail by the trial court in its decision asfollows:
http://sc.judiciary.gov.ph/jurisprudence/1997/aug1997/94723.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1997/aug1997/94723.htm#_edn1


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The defendant in this case was originally detained in the municipaljail of Makati but was able to escape therefrom on February 24, 1989as per report of the Jail Warden of Makati to the Presiding Judge,Honorable Manuel M. Cosico of the Regional Trial Court of Makati,

Branch 136, where he was charged with four counts of Rape andSerious Illegal Detention (Crim. Cases Nos. 802 to 805). Accordingly,upon motion of plaintiffs, through counsel, summons was served upondefendant by publication in the Manila Times, a newspaper of generalcirculation as attested by the Advertising Manager of the Metro MediaTimes, Inc., the publisher of the said newspaper. Defendant, however,failed to file his answer to the complaint despite the lapse of the periodof sixty (60) days from the last publication; hence, upon motion of the

plaintiffs through counsel, defendant was declared in default and

plaintiffs were authorized to present their evidence ex parte.In support of the complaint, plaintiffs presented as witness the minorKaren E. Salvacion, her father, Federico N. Salacion, Jr., a certainJoseph Aguilar and a certain Liberato Mandulio, who gave thefollowing testimony:

Karen took her first year high school in St. Marys Academy in Pasay Citybut has recently transferred to Arellano University for her second year.

In the afternoon of February 4, 1989, Karen was at the Plaza Fair MakatiCinema Square, with her friend Edna Tangile whiling away her free time. Atabout 3:30 p.m. while she was finishing her snack on a concrete bench infront of Plaza Fair, an American approached her. She was then alone becauseEdna Tangile had already left, and she was about to go home. (TSN, Aug.15, 1989, pp. 2 to 5)

The American asked her name and introduced himself as Greg Bartelli. Hesat beside her when he talked to her. He said he was a Math teacher and told

her that he has a sister who is a nurse in New York. His sister allegedly has adaughter who is about Karens age and who was with him in his house alongKalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5).

The American asked Karen what was her favorite subject and she told himits Pilipino. He then invited her to go with him to his house where she could


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teach Pilipino to his niece. He even gave her a stuffed toy to persuade her toteach his niece. (Id., pp.5-6)

They walked from Plaza Fair along Pasong Tamo, turning right to reach the

defendants house along Kalayaan Avenue. (Id., p.6)When they reached the apartment house, Karen notices that defendantsalleged niece was not outside the house but defendant told her maybe hisniece was inside. When Karen did not see the alleged niece inside the house,defendant told her maybe his niece was upstairs, and invited Karen to goupstairs. (Id., p. 7)

Upon entering the bedroom defendant suddenly locked the door. Karenbecame nervous because his niece was not there. Defendant got a piece ofcotton cord and tied Karens hands with it, and then he undressed her. Karencried for help but defendant strangled her. He took a packing tape and hecovered her mouth with it and he circled it around her head. (Id., p. 7)

Then, defendant suddenly pushed Karen towards the bed which was justnear the door. He tied her feet and hands spread apart to the bed posts. Heknelt in front of her and inserted his finger in her sex organ. She felt severe

pain. She tried to shout but no sound could come out because there weretapes on her mouth. When defendant withdrew his finger it was full of bloodand Karen felt more pain after the withdrawal of the finger. (Id., p.8)

He then got a Johnsons Baby Oil and he applied it to his sex organ as well asto her sex organ. After that he forced his sex organ into her but he was notable to do so. While he was doing it, Karen found it difficult to breathe andshe perspired a lot while feeling severe pain. She merely presumed that hewas able to insert his sex organ a little, because she could not see. Karencould not recall how long the defendant was in that position. (Id., pp. 8-9)

After that, he stood up and went to the bathroom to wash. He also toldKaren to take a shower and he untied her hands. Karen could only hear thesound of the water while the defendant, she presumed, was in the bathroomwashing his sex organ. When she took a shower more blood came out fromher. In the meantime, defendant changed the mattress because it was full of

blood. After the shower, Karen was allowed by defendant to sleep. She fell


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asleep because she got tired crying. The incident happened at about 4:00p.m. Karen had no way of determining the exact time because defendantremoved her watch. Defendant did not care to give her food before she wentto sleep. Karen woke up at about 8:00 oclock the following morning. (Id.,

pp. 9-10)

The following day, February 5, 1989, a Sunday, after breakfast of biscuitand coke at about 8:30 to 9:00 a.m. defendant raped Karen while she was still

bleeding. For lunch, they also took biscuit and coke. She was raped for thesecond time at about 12:00 to 2:00 p.m. In the evening, they had rice fordinner which defendant had stored downstairs; it was he who cooked the ricethat is why it looks like lugaw. For the third time, Karen was raped againduring the night. During those three times defendant succeeded in inserting

his sex organ but she could not say whether the organ was inserted wholly.

Karen did not see any firearm or any bladed weapon. The defendant did nottie her hands and feet nor put a tape on her mouth anymore but she did notcry for help for fear that she might be killed; besides, all those windows anddoors were closed. And even if she shouted for help, nobody would hearher. She was so afraid that if somebody would hear her and would be able tocall a police, it was still possible that as she was still inside the house,defendant might kill her. Besides, the defendant did not leave that Sunday,

ruling out her chance to call for help. At nighttime he slept with heragain. (TSN, Aug. 15, 1989, pp. 12-14)

On February 6, 1989, Monday, Karen was raped three times, once in themorning for thirty minutes after breakfast of biscuits; again in the afternoon;and again in the evening. At first, Karen did not know that there was awindow because everything was covered by a carpet, until defendant openedthe window for around fifteen minutes or less to let some air in, and shefound that the window was covered by styrofoam and plywood. After that,

he again closed the window with a hammer and he put the styrofoam,plywood, and carpet back. (Id., pp. 14-15)

That Monday evening, Karen had a chance to call for help, althoughdefendant left but kept the door closed. She went to the bathroom and saw asmall window covered by styrofoam and she also spotted a small hole. Shestepped on the bowl and she cried for help through the hole. She cried:


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Maawa na po kayo sa akin. Tulungan nyo akong makalabasdito. Kinidnap ako! Somebody heard her. It was a woman, probably aneighbor, but she got angry and said she was istorbo. Karen pleaded forhelp and the woman told her to sleep and she will call the police. She finally

fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp. 15-16)

She woke up at 6:00 oclock the following morning, and she saw defendantin bed, this time sleeping. She waited for him to wake up. When he wokeup, he again got some food but he always kept the door locked. As usual, shewas merely fed with biscuit and coke. On that day, February 7, 1989, shewas again raped three times. The first at about 6:30 to 7:00 a.m., the secondat about 8:30 9:00, and the third was after lunch at 12:00 noon. After hehad raped her for the second time he left but only for a short while. Upon his

return, he caught her shouting for help but he did not understand what shewas shouting about. After she was raped the third time, he left thehouse. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the bathroom andshouted for help. After shouting for about five minutes, she heard manyvoices. The voices were asking for her name and she gave her name asKaren Salvacion. After a while, she heard a voice of a woman saying theywill just call the police. They were also telling her to change herclothes. She went from the bathroom to the room but she did not change herclothes being afraid that should the neighbors call the police and the

defendant see her in different clothes, he might kill her. At that time she waswearing a T-shirt of the American bacause the latter washed her dress. (Id.,

p. 16)

Afterwards, defendant arrived and opened the door. He asked her if she hadasked for help because there were many policemen outside and she deniedit. He told her to change her clothes, and she did change to the one she waswearing on Saturday. He instructed her to tell the police that she left homeand willingly; then he went downstairs but he locked the door. She could

hear people conversing but she could not understand what they weresaying. (Id., p. 19)

When she heard the voices of many people who were conversingdownstairs, she knocked repeatedly at the door as hard as she could. Sheheard somebody going upstairs and when the door was opened, she saw a

policeman. The policeman asked her name and the reason why she was


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there. She told him she was kidnapped. Downstairs, he saw about fivepolicemen in uniform and the defendant was talking to them. Nakikipag-areglo po sa mga pulis,Karen added. The policeman told him to justexplain at the precinct. (Id., p. 20)

They went out of the house and she saw some of her neighbors in front ofthe house. They rode the car of a certain person she called Kuya Boytogether with defendant, the policeman, and two of her neighbors whom shecalled Kuya Bong Lacson and one Ate Nita. They were brought to Sub-Station I and there she was investigated by a policeman. At about 2:00 a.m.,her father arrived, followed by her mother together with some of theirneighbors. Then they were brought to the second floor of the policeheadquarters. (Id., p. 21)

At the headquarters, she was asked several questions by theinvestigator. The written statement she gave to the police was markedExhibit A. Then they proceeded to the National Bureau of Investigationtogether with the investigator and her parents. At the NBI, a doctor,a medico-legalofficer, examined her private parts. It was already 3:00 inearly morning, of the following day when they reached the NBI, (TSN, Aug.15, 1989, p. 22) The findings of the medico-legalofficer has been marked asExhibit B.

She was studying at the St. Marys Academy in Pasay City at the time of theIncident but she subsequently transferred to Apolinario Mabini, ArellanoUniversity, situated along Taft Avenue, because she was ashamed to be thesubject of conversation in the school. She first applied for transfer to JoseAbad Santos, Arellano University along Taft Avenue near the Light RailTransit Station but she was denied admission after she told the school the truereason for her transfer. The reason for their denial was that they might beimplicated in the case. (TSN, Aug. 15, 1989, p. 46)

xxx xxx xxx

After the incident, Karen has changed a lot. She does not play with herbrother and sister anymore, and she is always in a state of shock; she hasbeen absent-minded and is ashamed even to go out of the house. (TSN, Sept.12, 1989, p. 10) She appears to be restless or sad. (Id., p. 11) The father


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prays for P500,000.00 moral damages for Karen for this shocking experiencewhich probably, she would always recall until she reaches old age, and he isnot sure if she could ever recover from this experience. (TSN, Sept. 24,1989, pp. 10-11)

Pursuant to an Order granting leave to publish notice of decision, saidnotice was published in the Manila Bulletin once a week for threeconsecutive weeks. After the lapse of fifteen (15) days from the date of thelast publication of the notice of judgment and the decision of the trial courthad become final, petitioners tried to execute on Bartellis dollar deposit withChina Banking Corporation. Likewise, the bank invoked Section 113 ofCentral Bank Circular No. 960.

Thus, petitioners decided to seek relief from this Court.

The issues raised and the arguments articulated by the parties boil downto two:

May this Court entertain the instant petition despite the fact that originaljurisdiction in petitions for declaratory relief rests with the lower court? SheSection 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, asamended by P.D. 1246, otherwise known as the Foreign Currency DepositAct be made applicable to a foreign transient?

Petitioners aver as heretofore stated that Section 113 of Central BankCircular No. 960 providing that Foreign currency deposits shall be exemptfrom attachment, garnishment, or any other order or process of any court,legislative body, government agency or any administrative bodywhatsoever. should be adjudged as unconstitutional on the groundsthat: 1.) it has taken away the right of petitioners to have the bank deposit ofdefendant Greg Bartelli y Northcott garnished to satisfy the judgmentrendered in petitioners favor in violation of substantive due processguaranteed by the Constitution; 2.) it has given foreign currency depositors

an undue favor or a class privilege n violation of the equal protection clauseof the Constitution; 3.) it has provided a safe haven for criminals like theherein respondent Greg Bartelli y Northcott since criminal could escape civilliability for their wrongful acts by merely converting their money to a foreigncurrency and depositing it in a foreign currency deposit account with anauthorized bank; and 4.) The Monetary Board, in issuing Section 113 ofCentral Bank Circular No. 960 has exceeded its delegated quasi- legislative


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power when it took away: a.) the plaintiffs substantive right to have theclaim sought to be enforced by the civil action secured by way of the writ of

preliminary attachment as granted by Rule 57 of the Revised Rules ofCourt; b.) the plaintiffs substantive right to have the judgment credit

satisfied by way of the writ of execution out of the bank deposit of thejudgment debtor as granted to the judgment creditor by Rule 39 of theRevised Rules of Court, which is beyond its power to do so.

On the other hand, respondent Central Bank, in its Comment alleges thatthe Monetary Board in issuing Section 113 of CB Circular No. 960 did notexceed its power or authority because the subject Section is copied verbatimfrom a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was notthe Monetary Board that grants exemption from attachment or garnishment toforeign currency deposits, but the law (R.A. 6426 as amended) itself; that itdoes not violate the substantive due process guaranteed by the Constitution

because a.) it was based on a law; b.) the law seems to be reasonable; c.) itis enforced according to regular methods of procedure; and d.) it applies toall members of a class.

Expanding, the Central Bank said; that one reason for exempting theforeign currency deposits from attachment, garnishment or any other order

process of any court, is to assure the development and speedy growth of theForeign Currency Deposit System and the Offshore Banking System in the

Philippines; that another reason is to encourage the inflow of foreigncurrency deposits into the banking institutions thereby placing suchinstitutions more in a position to properly channel the same to loans andinvestments in the Philippines, thus directly contributing to the economicdevelopment of the country; that the subject section is being enforcedaccording to the regular methods of procedure; and that it applies to allcurrency deposits made by any person and therefore does not violate theequal protection clause of the Constitution.

Respondent Central Bank further avers that the questioned provision isneeded to promote the public interest and the general welfare; that the Statecannot just stand idly by while a considerable segment of the society suffersfrom economic distress; that the State had to take some measures toencourage economic development; and that in so doing persons and propertymay be subjected to some kinds of restraints or burdens to secure the generalwelfare or public interest. Respondent Central Bank also alleges that Rule 39


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and Rule 57 of the Revised Rules of Court provide that some properties areexempted from execution/attachment especially provided by law and R.A.

No. 6426 as amended is such a law, in that it specifically provides, amongothers, that foreign currency deposits shall be exempted from attachment,

garnishment, or any other order or process of any court, legislative body,government agency or any administrative body whatsoever.

For its part, respondent China Banking Corporation, aside from givingreasons similar to that of respondent Central Bank, also stated that respondentChina Bank is not unmindful of the inhuman sufferings experienced by theminor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it isnot only too willing to release the dollar deposit of Bartelli which may

perhaps partly mitigate the sufferings petitioner has undergone; but it isrestrained from doing so in view of R.A. No. 6426 and Section 113 of CentralBank Circular No. 960; and that despite the harsh effect to these laws on

petitioners, CBC has no other alternative but to follow the same.

This court finds the petition to be partly meritorious.

Petitioner deserves to receive the damages awarded to her by thecourt. But this petition for declaratory relief can only be entertained andtreated as a petition for mandamus to require respondents to honor andcomply with the writ of execution in Civil Case No. 89-3214.

The Court has no original and exclusive jurisdiction over a petition fordeclatory relief.[2] However, exceptions to this rule have beenrecognized. Thus, where the petition has far-reaching implications and raisesquestions that should be resolved, it may be treated as one for mandamus. [3]

Here is a child, a 12-year old girl, who in her belief that all Americans aregood and in her gesture of kindness by teaching his alleged niece the Filipinolanguage as requested by the American, trustingly went with said stranger tohis apartment, and there she was raped by said American tourist GregBartelli. Not once, but ten times. She was detained therein for four (4)days. This American tourist was able to escape from the jail and avoid

punishment. On the other hand, the child, having received a favorablejudgment in the Civil Case for damages in the amount of morethan P1,000,000.00, which amount could alleviate the humiliation, anxiety,and besmirched reputation she had suffered and may continue to suffer for along, long time; and knowing that this person who had wronged her has the
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money, could not, however get the award of damages because of thisunreasonable law. This questioned law, therefore makes futile the favorable

judgment and award of damages that she and her parents fully deserve. Asstated by the trial court in its decision,

Indeed, after hearing the testimony of Karen, the Court believes thatit was indoubtedly a shocking and traumatic experience she hadundergone which could haunt her mind for a long, long time, the mererecall of which could make her feel so humiliated, as in fact she had

been actually humiliated once when she was refused admission at theAbad Santos High School, Arellano University, where she sought totransfer from another school, simply because the school authorities ofthe said High School learned about what happened to her and allegedlyfeared that they might be implicated in the case.

xxx

The reason for imposing exemplary or corrective damages is due to thewanton and bestial manner defendant had committed the acts of rapeduring a period of serious illegal detention of his hapless victim, theminor Karen Salvacion whose only fault was in her being so naive andcredulous to believe easily that defendant, an American national, couldnot have such a bestial desire on her nor capable of committing suchheinous crime. Being only 12 years old when that unfortunate incidenthappened, she has never heard of an old Filipino adage that in everyforest there is a snake, xxx.[4]

If Karens sad fate had happened to anybodys own kin, it would bedifficult for him to fathom how the incentive for foreign currency depositcould be more important than his childs right to said award of damages; inthis case, the victims claim for damages from this alien who had the gall towrong a child of tender years of a country where he is mere visitor. Thisfurther illustrates the flaw in the questioned provisions.

It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at atime when the countrys economy was in a shambles; when foreigninvestments were minimal and presumably, this was the reason why saidstatute was enacted. But the realities of the present times show that thecountry has recovered economically; and even if not, the questioned law stilldenies those entitled to due process of law for being unreasonable and


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oppressive. The intention of the questioned law may be good whenenacted. The law failed to anticipate the inquitous effects producing outrightinjustice and inequality such as as the case before us.

It has thus been said that-

But I also know,[5] that laws and institutions must go hand in handwith the progress of the human mind. As that becomes moredeveloped, more enlightened, as new discoveries are made, new truthsare disclosed and manners and opinions change with the change ofcircumstances, institutions must advance also, and keep pace with thetimes We might as well require a man to wear still the coat whichfitted him when a boy, as civilized society to remain ever under theregimen of their barbarous ancestors.

In his comment, the Solicitor General correctly opined, thus:

"The present petition has far-reaching implications on the right of anational to obtain redress for a wrong committed by an alien who takesrefuge under a law and regulation promulgated for a purpose whichdoes not contemplate the application thereof envisaged by theallien. More specifically, the petition raises the question whether the

protection against attachment, garnishment or other court processaccorded to foreign currency deposits PD No. 1246 and CB Circular

No. 960 applies when the deposit does not come from a lender orinvestor but from a mere transient who is not expected to maintain thedeposit in the bank for long.

The resolution of this question is important for the protection ofnationals who are victimized in the forum by foreigners who aremerely passing through.

xxx

xxx Respondents China Banking Corporation and Central Bank of the

Philippines refused to honor the writ of execution issued in Civil CaseNo. 89-3214 on the strength of the following provision of CentralBank Circular No. 960:

Sec. 113 Exemption from attachment. Foreign currencydeposits shall be exempt from attachment, garnishment, or any


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other order or process of any court, legislative body,government agency or any administrative body whatsoever.

Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic

Act No. 6426:Sec. 7. Rules and Regulations. The Monetary Board of theCentral Bank shall promulgate such rules and regulations asmay be necessary to carry out the provisions of this Act whichshall take effect after the publication of such rules andregulations in the Official Gazette and in a newspaper ofnational circulation for at least once a week for threeconsecutive weeks. In case the Central Bank promulgates new

rules and regulations decreasing the rights of depositors, therules and regulations at the time the deposit was made shallgovern.

The aforecited Section 113 was copied from Section 8 of RepublicAct No. 6426. As amended by P.D. 1246, thus:

Sec. 8. Secrecy of Foreign Currency Deposits. -- All foreigncurrency deposits authorized under this Act, as amended byPresidential Decree No. 1035, as well as foreign currency

deposits authorized under Presidential Decree No. 1034, arehereby declared as and considered of an absolutelyconfidential nature and, except upon the written permission ofthe depositor, in no instance shall such foreign currencydeposits be examined, inquired or looked into by any person,government official, bureau or office whether judicial oradministrative or legislative or any other entity whether publicor private: Provided, however, that said foreign currencydeposits shall be exempt from attachment, garnishment, or any

other order or process of any court, legislative body,government agency or any administrative body whatsoever.

The purpose of PD 1246 in according protection against attachment,garnishment and other court process to foreign currency deposits isstated in its whereases, viz.:


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WHEREAS, under Republic Act No. 6426, as amended byPresidential Decree No. 1035, certain Philippine bankinginstitutions and branches of foreign banks are authorized toaccept deposits in foreign currency;

WHEREAS, under provisions of Presidential Decree No.1034 authorizing the establishment of an offshore bankingsystem in the Philippines, offshore banking units are alsoauthorized to receive foreign currency deposits in certaincases;

WHEREAS, in order to assure the development andspeedy growth of the Foreign Currency Deposit System andthe Offshore Banking System in the Philippines, certain

incentives were provided for under the two Systems such asconfidentiality subject to certain exceptions and taxexemptions on the interest income of depositors who arenonresidents and are not engaged in trade or business in thePhilippines;

WHEREAS, making absolute the protective cloak ofconfidentiality over such foreign currency deposits, exemptingsuch deposits from tax, and guaranteeing the vested right ofdepositors would better encourage the inflow of foreigncurrency deposits into the banking institutions authorized toaccept such deposits in the Philippines thereby placing suchinstitutions more in a position to properly channel the same toloans and investments in the Philippines, thus directlycontributing to the economic development of the country;

Thus, one of the principal purposes of the protection accorded toforeign currency deposits is to assure the development and speedygrowth of the Foreign Currency Deposit system and the Offshore

Banking in the Philippines (3rd

Whereas).The Offshore Banking System was established by PD No. 1034. Inturn, the purposes of PD No. 1034 are as follows:

WHEREAS, conditions conducive to the establishment of anoffshore banking system, such as political stability, a growing


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economy and adequate communication facilities, amongothers, exist in the Philippines;

WHEREAS, it is in the interest of developing countries tohave as wide access as possible to the sources of capital funds

for economic development;

WHEREAS, an offshore banking system based in thePhilippines will be advantageous and beneficial to the country

by increasing our links with foreign lenders, facilitating theflow of desired investments into the Philippines, creatingemployment opportunities and expertise in internationalfinance, and contributing to the national development effort.

WHEREAS, the geographical location, physical and human

resources, and other positive factors provide the Philippineswith the clear potential to develop as another financial centerin Asia;

On the other hand, the Foreign Currency Deposit system was createdby PD No. 1035. Its purpose are as follows:

WHEREAS, the establishment of an offshore banking systemin the Philippines has been authorized under a separate decree;

WHEREAS, a number of local commercial banks, asdepository bank under the Foreign Currency Deposit Act (RANo. 6426), have the resources and managerial competence tomore actively engage in foreign exchange transactions and

participate in the grant of foreign currency loans to residentcorporations and firms;

WHEREAS, it is timely to expand the foreign currencylending authority of the said depository banks under RA 6426and apply to their transactions the same taxes as would be

applicable to transaction of the proposed offshore bankingunits;

It is evident from the above [Whereas clauses] that the OffshoreBanking System and the Foreign Currency Deposit System weredesigned to draw deposits from foreign lenders and investors (Videsecond Whereas of PD No. 1034; third Whereas of PD No. 1035). It is


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these depositors that are induced by the two laws and given protectionand incentives by them.

Obviously, the foreign currency deposit made by a transient or atourist is not the kind of deposit encourage by PD Nos. 1034 and 1035

and given incentives and protection by said laws because suchdepositor stays only for a few days in the country and, therefore, willmaintain his deposit in the bank only for a short time.

Respondent Greg Bartelli, as stated, is just a tourist or a transient. Hedeposited his dollars with respondent China Banking Corporation onlyfor safekeeping during his temporary stay in the Philippines.

For the reasons stated above, the Solicitor General thus submits thatthe dollar deposit of respondent Greg Bartelli is not entitled to the

protection of Section 113 of Central Bank Circular No. 960 and PDNo. 1246 against attachment, garnishment or other court processes.[6]

In fine, the application of the law depends on the extent of itsjustice. Eventually, if we rule that the questioned Section 113 of CentralBank Circular No. 960 which exempts from attachment, garnishment, or anyother order or process of any court. Legislative body, government agency orany administrative body whatsoever, is applicable to a foreign transient,injustice would result especially to a citizen aggrieved by a foreign guest like

accused Greg Bartelli. This would negate Article 10 of the New Civil Codewhich provides that in case of doubt in the interpretation or application oflaws, it is presumed that the lawmaking body intended right and justice to

prevail. Ninguno non deue enriquecerse tortizerzmente con damo deotro. Simply stated, when the statute is silent or ambiguous, this is one ofthose fundamental solutions that would respond to the vehement urge ofconscience. (Padilla vs. Padilla, 74 Phil. 377)

It would be unthinkable, that the questioned Section 113 of Central BankNo. 960 would be used as a device by accused Greg Bartelli for wrongdoing,and in so doing, acquitting the guilty at the expense of the innocent.

Call it what it may but is there no conflict of legal policy here? Dollaragainst Peso? Upholding the final and executory judgment of the lower courtagainst the Central Bank Circular protecting the foreign depositor? Shieldingor protecting the dollar deposit of a transient alien depositor against injustice


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to a national and victim of a crime? This situation calls for fairness legaltyranny.

We definitely cannot have both ways and rest in the belief that we haveserved the ends of justice.

IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No.960 and PD No. 1246, insofar as it amends Section 8 of R.A. 6426 are herebyheld to be INAPPLICABLE to this case because of its peculiarcircumstances. Respondents are hereby REQUIRED to COMPLY with thewrit of execution issued in Civil Case No. 89-3214, Karen Salvacion, et al.vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and toRELEASE to petitioners the dollar deposit of respondent Greg Bartelli y

Northcott in such amount as would satisfy the judgment.

SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno,Vitug, Kapunan, Francisco, andPanganiban, JJ., concur.

Padilla, J., no part.Mendoza, andHermosisima, Jr., JJ., on leave.

[1] Annex R, Petition.

[2] Alliance of Government Workers (AGW) v. Ministry of Labor andEmployment, 124 SCRA 1.

[3] Nationalista Party vs. Angelo Bautista, 85 Phil. 101; Aquino vs. Comelec,62 SCRA 275; and Alliance of Government Workers vs. Minister ofLabor and Employment,supra.

[4] Decision, Regional Trial Court, Civil Case No. 89-3214, pp. 9 &12; Rollo,pp. 66 & 69.

[5]

Thomas Jefferson, Democracy, ed. Saul K. Padover. (New York, Penguin,1946) p. 171.[6] Comment of the Solicitor General,Rollo, pp. 128 129; 135-136.
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FIRST DIVISION

G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED,petitioner,vs.THE HONORABLE COURT OF APPEALS and TRADERS ROYALBANK, respondents.

Don P. Porcuincula for petitioner.

San Juan, Gonzalez, San Agustin & Sinense for private respondent.

CRUZ,J.:

We are concerned in this case with the question of damages, specificallymoral and exemplary damages. The negligence of the private respondent hasalready been established. All we have to ascertain is whether the petitioner isentitled to the said damages and, if so, in what amounts.

The parties agree on the basic facts. The petitioner is a private corporation

engaged in the exportation of food products. It buys these products fromvarious local suppliers and then sells them abroad, particularly in the UnitedStates, Canada and the Middle East. Most of its exports are purchased by the

petitioner on credit.

The petitioner was a depositor of the respondent bank and maintained achecking account in its branch at Romulo Avenue, Cubao, Quezon City. OnMay 25, 1981, the petitioner deposited to its account in the said bank theamount of P100,000.00, thus increasing its balance as of that date to

P190,380.74.

1

Subsequently, the petitioner issued several checks against itsdeposit but was suprised to learn later that they had been dishonored forinsufficient funds.

The dishonored checks are the following:


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1. Check No. 215391 dated May 29, 1981, in favor of CaliforniaManufacturing Company, Inc. for P16,480.00:

2. Check No. 215426 dated May 28, 1981, in favor of the Bureau

of Internal Revenue in the amount of P3,386.73:3. Check No. 215451 dated June 4, 1981, in favor of Mr. GregPedreo in the amount of P7,080.00;

4. Check No. 215441 dated June 5, 1981, in favor of MalabonLonglife Trading Corporation in the amount of P42,906.00:

5. Check No. 215474 dated June 10, 1981, in favor of MalabonLonglife Trading Corporation in the amount of P12,953.00:

6. Check No. 215477 dated June 9, 1981, in favor of Sea-LandServices, Inc. in the amount of P27,024.45:

7. Check No. 215412 dated June 10, 1981, in favor of BaguioCountry Club Corporation in the amount of P4,385.02: and

8. Check No. 215480 dated June 9, 1981, in favor of EnriquetaBayla in the amount of P6,275.00. 2

As a consequence, the California Manufacturing Corporation sent on June 9,1981, a letter of demand to the petitioner, threatening prosecution if thedishonored check issued to it was not made good. It also withheld delivery ofthe order made by the petitioner. Similar letters were sent to the petitioner bythe Malabon Long Life Trading, on June 15, 1981, and by the G. and U.Enterprises, on June 10, 1981. Malabon also canceled the petitioner's creditline and demanded that future payments be made by it in cash or certifiedcheck. Meantime, action on the pending orders of the petitioner with the

other suppliers whose checks were dishonored was also deferred.The petitioner complained to the respondent bank on June 10,1981. 3 Investigation disclosed that the sum of P100,000.00 deposited by the

petitioner on May 25, 1981, had not been credited to it. The error wasrectified on June 17, 1981, and the dishonored checks were paid after theywere re-deposited. 4


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In its letter dated June 20, 1981, the petitioner demanded reparation from therespondent bank for its "gross and wanton negligence." This demand was notmet. The petitioner then filed a complaint in the then Court of First Instanceof Rizal claiming from the private respondent moral damages in the sum of

P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25%attorney's fees, and costs.

After trial, Judge Johnico G. Serquinia rendered judgment holding that moraland exemplary damages were not called for under the circumstances.However, observing that the plaintiff's right had been violated, he ordered thedefendant to pay nominal damages in the amount of P20,000.00 plusP5,000.00 attorney's fees and costs. 5 This decision was affirmed in toto bythe respondent court. 6

The respondent court found with the trial court that the private respondentwas guilty of negligence but agreed that the petitioner was nevertheless notentitled to moral damages. It said:

The essential ingredient of moral damages is proof of bad faith(De Aparicio vs. Parogurga, 150 SCRA 280). Indeed, there wasthe omission by the defendant-appellee bank to credit appellant'sdeposit of P100,000.00 on May 25, 1981. But the bank rectified

its records. It credited the said amount in favor of plaintiff-appellant in less than a month. The dishonored checks wereeventually paid. These circumstances negate any imputation orinsinuation of malicious, fraudulent, wanton and gross bad faithand negligence on the part of the defendant-appellant.

It is this ruling that is faulted in the petition now before us.

This Court has carefully examined the facts of this case and finds that itcannot share some of the conclusions of the lower courts. It seems to us thatthe negligence of the private respondent had been brushed off rather lightlyas if it were a minor infraction requiring no more than a slap on the wrist. Wefeel it is not enough to say that the private respondent rectified its records andcredited the deposit in less than a month as if this were sufficient repentance.The error should not have been committed in the first place. The respondent

bank has not even explained why it was committed at all. It is true that the


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dishonored checks were, as the Court of Appeals put it, "eventually" paid.However, this took almost a month when, properly, the checks should have

been paid immediately upon presentment.

As the Court sees it, the initial carelessness of the respondent bank,aggravated by the lack of promptitude in repairing its error, justifies the grantof moral damages. This rather lackadaisical attitude toward the complainingdepositor constituted the gross negligence, if not wanton bad faith, that therespondent court said had not been established by the petitioner.

We also note that while stressing the rectification made by the respondentbank, the decision practically ignored the prejudice suffered by the petitioner.This was simply glossed over if not, indeed, disbelieved. The fact is that the

petitioner's credit line was canceled and its orders were not acted uponpending receipt of actual payment by the suppliers. Its business declined. Itsreputation was tarnished. Its standing was reduced in the businesscommunity. All this was due to the fault of the respondent bank which wasundeniably remiss in its duty to the petitioner.

Article 2205 of the Civil Code provides that actual or compensatory damagesmay be received "(2) for injury to the plaintiff s business standing orcommercial credit." There is no question that the petitioner did sustain actual

injury as a result of the dishonored checks and that the existence of the losshaving been established "absolute certainty as to its amount is notrequired." 7 Such injury should bolster all the more the demand of the

petitioner for moral damages and justifies the examination by this Court ofthe validity and reasonableness of the said claim.

We agree that moral damages are not awarded to penalize the defendant butto compensate the plaintiff for the injuries he may have suffered. 8 In the caseat bar, the petitioner is seeking such damages for the prejudice sustained by itas a result of the private respondent's fault. The respondent court said that theclaimed losses are purely speculative and are not supported by substantialevidence, but if failed to consider that the amount of such losses need not beestablished with exactitude precisely because of their nature. Moral damagesare not susceptible of pecuniary estimation. Article 2216 of the Civil Codespecifically provides that "no proof of pecuniary loss is necessary in orderthat moral, nominal, temperate, liquidated or exemplary damages may be


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adjudicated." That is why the determination of the amount to be awarded(except liquidated damages) is left to the sound discretion of the court,according to "the circumstances of each case."

From every viewpoint except that of the petitioner's, its claim of moraldamages in the amount of P1,000,000.00 is nothing short of preposterous. Itsbusiness certainly is not that big, or its name that prestigious, to sustain suchan extravagant pretense. Moreover, a corporation is not as a rule entitled tomoral damages because, not being a natural person, it cannot experience

physical suffering or such sentiments as wounded feelings, serious anxiety,mental anguish and moral shock. The only exception to this rule is where thecorporation has a good reputation that is debased, resulting in its socialhumiliation. 9

We shall recognize that the petitioner did suffer injury because of the privaterespondent's negligence that caused the dishonor of the checks issued by it.The immediate consequence was that its prestige was impaired because of the

bouncing checks and confidence in it as a reliable debtor was diminished.The private respondent makes much of the one instance when the petitionerwas sued in a collection case, but that did not prove that it did not have agood reputation that could not be marred, more so since that case wasultimately settled. 10 It does not appear that, as the private respondent would

portray it, the petitioner is an unsavory and disreputable entity that has nogood name to protect.

Considering all this, we feel that the award of nominal damages in the sum ofP20,000.00 was not the proper relief to which the petitioner was entitled.Under Article 2221 of the Civil Code, "nominal damages are adjudicated inorder that a right of the plaintiff, which has been violated or invaded by thedefendant, may be vindicated or recognized, and not for the purpose ofindemnifying the plaintiff for any loss suffered by him." As we have found

that the petitioner has indeed incurred loss through the fault of the privaterespondent, the proper remedy is the award to it of moral damages, which weimpose, in our discretion, in the same amount of P20,000.00.

Now for the exemplary damages.

The pertinent provisions of the Civil Code are the following:


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Art. 2229. Exemplary or corrective damages are imposed, by wayof example or correction for the public good, in addition to themoral, temperate, liquidated or compensatory damages.

Art. 2232. In contracts and quasi-contracts, the court may awardexemplary damages if the defendant acted in a wanton,fraudulent, reckless, oppressive, or malevolent manner.

The banking system is an indispensable institution in the modern world andplays a vital role in the economic life of every civilized nation. Whether asmere passive entities for the safekeeping and saving of money or as activeinstruments of business and commerce, banks have become an ubiquitous

presence among the people, who have come to regard them with respect and

even gratitude and, most of all, confidence. Thus, even the humble wage-earner has not hesitated to entrust his life's savings to the bank of his choice,knowing that they will be safe in its custody and will even earn some interestfor him. The ordinary person, with equal faith, usually maintains a modestchecking account for security and convenience in the settling of his monthly

bills and the payment of ordinary expenses. As for business entities like thepetitioner, the bank is a trusted and active associate that can help in therunning of their affairs, not only in the form of loans when needed but moreoften in the conduct of their day-to-day transactions like the issuance or

encashment of checks.In every case, the depositor expects the bank to treat his account with theutmost fidelity, whether such account consists only of a few hundred pesos orof millions. The bank must record every single transaction accurately, downto the last centavo, and as promptly as possible. This has to be done if theaccount is to reflect at any given time the amount of money the depositor candispose of as he sees fit, confident that the bank will deliver it as and towhomever he directs. A blunder on the part of the bank, such as the dishonor

of a check without good reason, can cause the depositor not a littleembarrassment if not also financial loss and perhaps even civil and criminallitigation.

The point is that as a business affected with public interest and because of thenature of its functions, the bank is under obligation to treat the accounts of itsdepositors with meticulous care, always having in mind the fiduciary nature


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of their relationship. In the case at bar, it is obvious that the respondent bankwas remiss in that duty and violated that relationship. What is especiallydeplorable is that, having been informed of its error in not crediting thedeposit in question to the petitioner, the respondent bank did not immediately

correct it but did so only one week later or twenty-three days after the depositwas made. It bears repeating that the record does not contain any satisfactoryexplanation of why the error was made in the first place and why it was notcorrected immediately after its discovery. Such ineptness comes under theconcept of the wanton manner contemplated in the Civil Code that calls forthe imposition of exemplary damages.

After deliberating on this particular matter, the Court, in the exercise of itsdiscretion, hereby imposes upon the respondent bank exemplary damages in

the amount of P50,000.00, "by way of example or correction for the publicgood," in the words of the law. It is expected that this ruling will serve as awarning and deterrent against the repetition of the ineptness and indefferencethat has been displayed here, lest the confidence of the public in the bankingsystem be further impaired.

ACCORDINGLY, the appealed judgment is hereby MODIFIED and theprivate respondent is ordered to pay the petitioner, in lieu of nominaldamages, moral damages in the amount of P20,000.00, and exemplary

damages in the amount of P50,000.00 plus the original award of attorney'sfees in the amount of P5,000.00, and costs.

SO ORDERED.

FIRST DIVISION

G.R. No. 69162 February 21, 1992

BANK OF THE PHILIPPINE ISLANDS,petitioner,vs.


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THE INTERMEDIATE APPELLATE COURT and the SPOUSESARTHUR CANLAS and VIVIENE CANLAS,respondents.

Leonen, Ramirez & Associates for petitioner.

L. Emmanuel B. Canilao for private respondents.

GRIO-AQUINO,J.:

In a decision dated September 3, 1984, the Intermediate Appellate Court(now Court of Appeals) in AC-G.R. CV No. 69178 entitled, "Arthur A.Canlas, et al., Plaintiff-Appellees vs. Commercial Bank and Trust Company

of the Philippines, Defendant-Appellant," reduced to P105,000 the P465,000damage-award of the trial court to the private respondents for an error of a

bank teller which resulted in the dishonor of two small checks which theprivate respondents had issued against their joint current account. Thispetition for review of that decision was filed by the Bank.

The respondent spouses, Arthur and Vivienne Canlas, opened a joint currentaccount No. 210-520-73 on April 25, 1977 in the Quezon City branch of theCommercial Bank and Trust Company of the Philippines (CBTC) with an

initial deposit of P2,250. Prior thereto, Arthur Canlas had an existing separatepersonal checking account No. 210-442-41 in the same branch.

When the respondent spouses opened their joint current account, the "newaccounts" teller of the bank pulled out from the bank's files the old andexisting signature card of respondent Arthur Canlas for Current Account No.210-442-41 for use as I D and reference. By mistake, she placed the old

personal account number of Arthur Canlas on the deposit slip for the newjoint checking account of the spouses so that the initial deposit of P2,250 for

the joint checking account was miscredited to Arthur's personal account (p.9,Rollo). The spouses subsequently deposited other amounts in their jointaccount.

However, when respondent Vivienne Canlas issued a check for Pl,639.89 inApril 1977 and another check for P1,160.00 on June 1, 1977, one of thechecks was dishonored by the bank for insufficient funds and a penalty of


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P20 was deducted from the account in both instances. In view of theoverdrawings, the bank tried to call up the spouses at the telephone numberwhich they had given in their application form, but the bank could not contactthem because they actually reside in Porac, Pampanga. The city address and

telephone number which they gave to the bank belonged to Mrs. Canlas'parents.

On December 15, 1977, the private respondents filed a complaint fordamages against CBTC in the Court of First Instance of Pampanga (p.113,Rollo).

On February 27, 1978, the bank filed a motion to dismiss the complaint forimproper venue. The motion was denied.

During the pendency of the case, the Bank of the Philippine Islands (BPI) andCBTC were merged. As the surviving corporation under the mergeragreement and under Section 80 (5) of the Corporation Code of thePhilippines, BPI took over the prosecution and defense of any pendingclaims, actions or proceedings by and against CBTC.

On May 5, 1981, the Regional Trial Court of Pampanga rendered a decisionagainst BPI, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered sentencingdefendant to pay the plaintiff the following:

1. P 5,000.00 as actual damages;

2. P 150,000.00 for plaintiff Arthur Canlas and P150,000.00 forplaintiff Vivienne S. Canlas representing moral damages;

3. P 150.000.00 as exemplary damages;

4. P 10,000.00 as attorney's fees; and

5. Costs. (p. 36,Rollo).

On appeal, the Intermediate Appellate Cou

CASES (Til Degree of Dili)

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