Chinabank v. CA (2006)

CHINA BANKING CORP. v.
CA
G.R. 140687; December 18, 2006; Chico-Nazario, J.
Petitioner: China Banking Corporation
Respondent: Jose Joseph Gotianuy, as substituted by Elizabeth Gotianuy Lo
Short Version:
Facts: Jose Gotianuy filed a complaint for recovery of sum of money against his daughter
Mary Dee. Gotianuy accused Dee of stealing his US Dollar deposits with Citibank. Dee
allegedly received the money from Citibank through checks which she allegedly
deposited at China Bank. The checks show that Gotianuy and Dee were co-payees. Dee
also admitted that the owner of the funds is Gotianuy. Upon motion by Elizabeth Lo, who
substituted Gotianuy after the latter's death, the trial court issued a subpoena against
China Bank employees to have them testify as to whose name is the China Bank account
to which the Citibank checks were deposited. China Bank resisted, saying that the order
violated RA 6426.
Held: As co-payee of the Citibank checks deposited to China Bank, Gotianuy can be
considered as a co-depositor of the China Bank account. Thus, his request for disclosure
of the China Bank account is tantamount to a written permission by a depositor which,
under RA 6426, is an exception to the secrecy of foreign currency deposits. The
legislature did not intend the law on secrecy on foreign currency deposits to perpetuate
injustice. The allowance of the inquiry would be in accord with the rudiments of fair play,
the upholding of fairness in our judicial system and would be an avoidance of delay and
time-wasteful and circuitous way of administering justice.
Facts:
1. Jose Gotianuy filed a Complaint before the RTC of Cebu for recovery of sums of
money and annulment of sales of real properties and shares of stock
against Mary Margaret Dee and George Dee, Gotianuy's and daughter and son-inlaw, respectively.
a. Jose Gotianuy accused his daughter Mary Margaret Dee of stealing his US
dollar deposits with Citibank N.A. amounting to not less than P35M and
US$864K.
b. Mary Margaret Dee allegedly received these amounts from Citibank N.A.
through checks which she allegedly deposited at China Bank.
c. He also accused George Dee of transferring real properties and shares of
stock in George Dees name without any consideration.
2. Gotianuy died during the pendency of the case, thus he was substituted by his
daughter, Elizabeth Gotianuy Lo.
a. The latter presented the US Dollar checks withdrawn by Mary Dee from
Gotianuy's US dollar placement with Citibank. The checks show that they are
payable to Jose Gotianuy and/or Mary Dee.
3. Upon motion of Elizabeth Lo, the trial court issued a subpoena to Cristota Labios
and Isabel Yap, employees of China Bank, to testify on the case.
4. China Bank moved for Reconsideration. In an Order, the trial court clarified that the
disclosure sought from the bank employees is only as to the name or in whose
name the fund is deposited and not to other matters material and relevant to the
issues in the case, thus not violative of the law.
5. From the said Order, China Bank filed a petition for certiorari with the CA.
6. The CA denied the petition. It held that since the China Bank employees are
directed solely to divulge in whose name or names the foreign currency fund is
deposited, the trial court's Order precluded inquiry on other matters, thus it does
not contravene RA 6426.
Issue: Whether the disclosure sought can be allowed

Held: YES. As co-payee of the Citibank checks deposited to China Bank, Gotianuy can be
considered as a co-depositor of the China Bank account. Thus, his request for disclosure
of the China Bank account is tantamount to the written permission required for disclosure
of a foreign currency deposit.
Ratio:
The relevant provision is Sec 8 of RA 6426, as amended by PD 1426. The said
provision states:
o SEC. 8. Secrecy of Foreign Currency Deposits. All foreign currency
deposits authorized under this Act, as amended by Presidential Decree No.
1035, as well as foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of an absolutely
confidential nature and, except upon the written permission of the depositor,
in no instance shall such foreign currency deposits be examined, inquired or
looked into by any person, government official, bureau or office whether
judicial or administrative or legislative or any other entity whether public or
private: Provided, however, that said foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body
whatsoever.
Under the provision, all foreign currency deposits authorized under RA 6426,
PD 1246, PD 1035, as well as foreign currency deposits authorized under PD
1034 are considered absolutely confidential in nature and may not be inquired
into.
There is only one exception to the secrecy of foreign currency deposits, that is,
disclosure is allowed upon the written permission of the depositor.
It must be remembered that under the whereas clause of PD 1246 which amended
Sec 8 of RA 6426, the Foreign Currency Deposit System including the Offshore
Banking System under PD 10341 were intended to draw deposits from foreign
lenders and investors. The whereas clause states in part:
o ... in order to assure the development and speedy growth of the Foreign
Currency Deposit System and the Offshore Banking System in the
Philippines, certain incentives were provided for... such as confidentiality of
deposits subject to certain exceptions...
o making absolute the protective cloak of confidentiality over such foreign
currency deposits... would better encourage the inflow of foreign currency
deposits into the banking institutions... in the Philippines thereby placing
such institutions more in a position to properly channel the same to loans
and investments in the Philippines, thus directly contributing to the
economic development of the country.
As to the deposit in foreign currencies entitled to be protected under the
confidentiality rule, PD 1034 defines deposits to mean funds in foreign currencies
which are accepted and held by an offshore banking unit in the regular course of
business, with the obligation to return an equivalent amount to the owner thereof,
with or without interest.
o It is in this light that the Court in Salvacion v. Central Bank allowed the
inquiry of the foreign currency deposit in question mainly due to the peculiar
circumstances of the case such that a strict interpretation of the letter of the
law would result to rank injustice.
1
Authorizing the Establishment of an Offshore Banking System in the Philippines.
In the present case, there is no issue as to the source of the funds. Mary Dee
admitted the source to be Jose Gotianuy. There is likewise no dispute that these
funds in the form of Citibank US dollar Checks are now deposited with China Bank.
As the owner of the funds unlawfully taken and which are undisputably now
deposited with China Bank, Gotianuy has the right to inquire into the said deposits.
A depositor, in cases of bank deposits, is one who pays money into the bank in the
usual course of business, to be placed to his credit and subject to his check or the
beneficiary of the funds held by the bank as trustee. 2
Thus, the following statements by the CA are worth reiterating:
o The monies subject of said checks originally came from... Gotianuy, the
owner of the account. Thus, he also has legal rights and interests in the
[China Bank] account where said monies were deposited... the Citibank
checks... readily demonstrate that... Gotianuy is one of the payees of said
checks. Being a co-payee thereof, then he or his estate can be considered as
a co-depositor of said checks. Ergo, since the... Gotianuy is a co-depositor of
the [China Bank] account, then his request for the assailed subpoena is
tantamount to an express permission of a depositor for the disclosure of the
name of the account holder...
It must also be remembered that Gotianuy alleged that his US dollar deposits with
Citibank were illegally taken from him, and that the China Bank employee Cristuta
Labios testified that Mary Dee deposited the money of Gotianuy in the China Bank
account of Adrienne Chu, Mary Dee's sister.
o At the very least, Gotianuy as the owner of these funds is entitled to a
hearing on the whereabouts of these funds.
In view of the distinctive circumstances attendant to the present case, however,
this ruling is a limited pro hac vice ruling. Clearly it was not the intent of the
legislature when it enacted the law on secrecy on foreign currency deposits to
perpetuate injustice.
The allowance of the inquiry would be in accord with the rudiments of fair play, the
upholding of fairness in our judicial system and would be an avoidance of delay
and time-wasteful and circuitous way of administering justice.
Dispositive:
Petition denied. CA decision affirmed. Case is remanded to the trial court for continuation
of hearing.
-Elvin
Court cited Wright v. Holmes, an American case.

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CHINA BANKING CORP. v.

Issue: Whether the disclosure sought can be allowed

Authorizing the Establishment of an Offshore Banking System in the Philippines.

Court cited Wright v. Holmes, an American case.

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