Ferriols RM - Bsa 3a, Digest 2

Ferriols, Rayjenn Charlotte M.
– BSA 3A
G.R. No. 189206
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner,

vs.
THE HONORABLE 15th DIVISION OF THE COURT OF APPEALS and INDUSTRIAL
BANK OF KOREA, TONG YANG MERCHANT BANK, HANAREUM BANKING
CORP., LAND BANK OF THE PHILIPPINES, WESTMONT BANK and DOMSAT
HOLDINGS, INC., Respondents.
NATURE OF THE CASE:

G.R. No. 189206 is a petition for certiorari of the Decision of the Court of Appeals in
CA-G.R. SP No. 82647 which allowed the quashal by the Makati-Regional Trial
Court (RTC) of a subpoena for the production of bank ledger. This case is incident
to Civil Case No. 99-1853, which is the main case for collection of sum of money with
damages filed by “the banks” (Industrial Bank of Korea, Tong Yang Merchant Bank,
First Merchant Banking Corporation, Land Bank of the Philippines, and Westmont Bank,
now United Overseas Bank) against Domsat Holdings, Inc. (Domsat) and the
Government Service Insurance System (GSIS).
FACTS:
Civil Case No. 99-1853, which is the main case of this petition for certiorari, stemmed
from a Loan Agreement, whereby the banks agreed to lend United States (US) $11
Million to Domsat for the purpose of financing the lease and/or purchase of a Gorizon
Satellite from the International Organization of Space Communications (Intersputnik).
Controversy arose from a surety agreement by which Domsat obtained a surety bond
from GSIS to secure the payment of the loan from the banks. When Domsat failed to
pay the $11 Million loan, GSIS refused to comply with its surety obligation reasoning
that Domsat did not utilize the loan proceeds for the rental payments for the satellite.
GSIS alleged that Domsat, with Westmont Bank as the conduit, transferred the $11
Million loan proceeds from the Industrial Bank of Korea to Citibank New York account of
Westmont Bank and, from there, to the Binondo Branch of Westmont Bank. The Banks
filed a complaint before the Makati-RTC against Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of a subpoena duces
tecum to the records custodian of Westmont Bank to produce the following financial and
banking documents in relation to the Domsat case: 1) ledgers of Domsat with Westmont
Bank; 2) application of cashier’s check of Domsat; and 3) ledger covering the account of
Philippine Agila satellite with Westmont Bank. This request for subpoena duces tecum
was granted and issued by the Makati-RTC on 21 November 2002.
Following the issuance of the subpoena, a motion to quash or repeal the said subpoena
was filed by the banks on the grounds that 1) the subpoena is unreasonable,
oppressive, and irrelevant; 2) the request for documents is in violation of the Law on
Secrecy of Bank Deposits, and 3) GSIS failed to advance the reasonable cost of
production of the documents. Domsat itself also joined the banks’ motion to quash
through its Manifestation/Comment.
However, on 9 April 2003, the Makati-RTC issued an Order denying the motion to
quash for the reason that the Court did not find merit in the motion. The Order stated
that the law declares bank deposits to be “absolutely confidential” except in cases
including where the money deposited or invested is the subject matter of the litigation.
Because the bank deposits would provide GSIS its right to prove its defenses, it was
considered sound by the Makati-RTC for the subpoena to not be quashed. Thus, the
motion was denied for lack of merit.
Nevertheless, on 1 September 2003, the RTC granted the second motion for
reconsideration filed by the banks. Hence, the previous subpoenas issued were
consequently quashed. The trial court raised the ruling in Intengan v. Court of Appeals
where it was ruled that foreign currency deposits are definitely and absolutely
confidential even if said deposits are subject to litigation. Under the Foreign Currency
Deposit Act (RA 6426), deposits can only be examined when there is explicit
written permission from the depositor. The motion for reconsideration filed by GSIS
was then denied on 30 December 2003.
Hence, these assailed orders are the subject of the petition for certiorari before the
Court of Appeals. GSIS invoked the following arguments in support of its petition:
I. Respondent judge acted with grave abuse of discretion when it favorably
considered the banks’ second Motion for Reconsideration dated 9 July 2003
despite the absence of notice of hearing which was, therefore, a mere scrap
of paper.
II. Respondent judge impulsively ignored Section 2 of the Foreign Currency
Deposit Act (RA 6426) in ruling in his Orders dated 1 September and 30
December 2003 that the US$11 Million deposit in the account of respondent
Domsat in Westmont Bank is covered by the secrecy of bank deposit.
III. Since both respondent banks and respondent Domsat have disclosed during
the trial the US$11 Million deposit, it is no longer confidential, and petitioner
GSIS’s right to inquire into what happened to such deposit cannot be
suppressed.
ISSUE:
1. Whether or not the ruling of the Court of Appeals is correct in stating that the
accounts of Domsat in Westmont Bank are covered by the Foreign Currency
Deposit Act (RA 6426).
HELD:
The Foreign Currency Deposit Act (RA 6426) applies to the accounts of
Domsat in Westmont Bank and should, therefore, be kept confidential
unless the depositor provides consent for examination. The court rules for
the respondents.
To contest the ruling on RA 6426, GSIS declared to the court that the accounts of
Domsat are under the umbrella of RA 1405 and not RA 6426. GSIS maintains that
Domsat’s deposits with Westmont Bank can be examined and inquired into under RA
1405 (Law on Secrecy of Bank Deposits), which allows the disclosure of bank deposits
in cases where the money deposited is the subject matter of litigation. GSIS
emphasizes that the subject matter of the litigation is the US$11 Million. Hence, GSIS
argues that the whereabouts of the US$11 Million is the subject matter of the case and
examination relating to such deposit should be allowed.
However, there is no conflict between RA 6426 and RA 1405. Both laws support the
confidentiality of bank deposits. Whereas RA 6426 provided for the secrecy of foreign
deposits except with written permission of the depositor, RA 1405 also provides the
same confidentiality but without distinction to local or foreign currency. Furthermore, in
cases where there is indeed conflict, the newer special law, in this case RA 6426,
prevails over the general law (RA 1405).
Therefore, since the subject matter of the subpoena invoked by GSIS pertains to foreign
currency, RA 6426 is applicable and will prevail over the deposits of Domsat in
Westmont Bank. Thus, unless Domsat would give its consent, GSIS may not inspect
such accounts and the petition is denied.

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Ferriols, Rayjenn Charlotte M.

G.R. No. 189206

GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner,

NATURE OF THE CASE:

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