G.R. No.

134699, December 23, 1999

DECISION 5.  Exemplary and punitive damages against the defendant in such amounts as may be awarded by this
KAPUNAN, J.: Tribunal in order to serve a lesson to all member-Banks under the PCHC umbrella to striclty comply with
the provisions thereof;
Section 2 of the Law on Secrecy of Bank Deposits, [1] as amended, declares bank deposits to be
“absolutely confidential” except: 6.  The costs of suit which includes filing fee in addition to litigation expenses which shall be proven in
(1)            In an examination made in the course of a special or general examination of a bank that is the course of arbitration.
specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to
believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to 7.  Such other damages thay may be awarded by this Tribunal.[2]
look into the deposit to establish such fraud or irregularity,
Thereafter, Union Bank filed in the Regional Trial court (RTC) of Makati a petition for the examination
(2)            In an examination made by an independent auditor hired by the bank to conduct its regular of Account No. 111-01854-8. Judgment on the arbitration case was held in abeyance pending the
audit provided that the examination is for audit purposes only and the results thereof shall be for the resolution of said petition.
exclusive use of the bank,
Upon motion of private respondent, the RTC dismissed Union Bank’s petition. The RTC held that:
(3)            Upon written permission of the depositor, The case of the herein petitioner does not fall under any of the foregoing exceptions to warrant a
disclosure of or inquiry into the ledgers/books of account of Allied Checking Account No. 111-01854-8.
(4)            In cases of impeachment, Needless to say, the complaint filed by herein petitioner against Allied Banking Corporation before the
Philippine Clearing House Corporation (PCHC) Arbitration Committee and docketed therein as Arb[i]com
(5)            Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or Case No. 91-068 (Annex “A”, petition) is not one for bribery or dereliction of duty of public officials much
less is there any showing that the subject matter thereof is the money deposited in the account in
(6)            In cases where the money deposited or invested in the subject matter of the litigation. question. Petitioner’s complaint primarily hing[e]s on the alleged deliberate violation by Allied Bank
Whether or not the case at bar falls under the last exception is the issue in the instant petition. Corporation of the provisions of the PCHC Rule Book, Sec. 25[.]3, and as principal reliefs, it seeks for [sic]
the recovery of amounts of money as a consequence of an alleged under-coding of check amount to
The facts are not disputed. P1,000,000.00 and damage[s] by way of loss of interest income. [3]

On March 21, 1990, a check (Check No. 11669677) dated March 31, 1990 in the amount of One Million The Court of Appeals affirmed the dismissal of the petition, ruling that the case was not one where the
Pesos (P1,000,000.00) was drawn against Account No. 0111-01854-8 with private respondent Allied Bank money deposited is the subject matter of the litigation.
payable to the order of one Jose Ch. Alvarez. The payee deposited the check with petitioner Union Bank
who credited the P1,000,000.00 to the account of Mr. Alvarez. On May 21, 1990, petitioner sent the Petitioner collecting bank itself in its complaint filed before the PCHC, Arbicom Case No. 91-068, clearly
check for clearing through the Philippine Clearing House Corporation (PCHC). When the check was stated that its “cause of action against defendant arose from defendant’s deliberate violation of the
presented for payment, a clearing discrepancy was committed by Union Bank’s clearing staff when the provisions of the PCHC Rule Book, Sec. 25.3, specifically on Under-Encoding of check amouting to
amount of One Million Pesos (P1,000,000.00) was erroneously “under-encoded” to One Thousand Pesos P1,000,000.00 drawn upon defendant’s Tondo Branch which was deposited with plaintiff herein on May
(P1,000.00) only. 20, 1990, xxx which was erroneously encoded at P1,000.00 which defendant as the receiving bank
thereof, never called nor notified the plaintiff of the error committed thus causing actual losses to
Petitioner only discovered the under-encoding almost a year later. Thus, on May 7, 1991, Union Bank plaintiff in the principal amount of P999,000.00 exclusive of opportunity losses and interest.”
Notified Allied Bank of the discrepancy by way of a charge slip for Nine Hundred Ninety-Nine Thousand
Pesos (P999,000.00) for automatic debiting against the account of Allied Bank. The latter, however, Furthermore, a reading of petitioner collecting bank’s complaint in the Arbicom case shows that its
refused to accept the charge slip “since [the] transaction was completed per your [Union Bank’s] original thrust is directed against respondent drawee bank’s alleged failure to inform the former of the under-
instruction and client’s account is now insufficiently funded.” encoding when Sec. 25.3 of the PCHC Rule Book is clear that it is receiving bank’s (respondent drawee
bank herein) duty and obligation to notify the erring bank (petitioner collecting bank herein) of any such
Subsequently, Union Bank filed a complaint against Allied Bank before the PCHC Arbitration Committee under-encoding of any check amount submitted for clearing within the member banks of the PCHC not
(Arbicom), praying that: later than 10:00 a.m. of the following clearing day and prays that respondent drawee bank be held liable
… judgment be rendered in favor of plaintiff against defendant sentencing it to pay plaintiff: to petitioner collecting bank for penalties in view of the latter’s violation of the notification requirement.

1.  The sum of NINE HUNDRED NINETY-NINE THOUSAND PESOS (P999,000.00); Prescinding from the above, we see no cogent reason to depart from the time-honored general banking
rule that all deposits of whatever nature with banks are considered of absolutely confidential nature and
2.  The sum of THREE HUNDRED SIXTY-ONE AND FOUR HUNDRED EIGHTY AND 20/XX P361,480.20 as of may not be examined, inquired or looked into by any person, government official, bureau or office and
October 9, 1991 representing reimbursements for opportunity losses and interest at the rate of 24% per corollarily, that it is unlawful for any official or employee of a bank to disclose to any person any
annum arising from actual losses sustained by plaintiff as of May 21, 1990; information concerning deposits.
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 encoded at P1,000.00 which defendant as the receiving bank thereof, never called nor notified the
Nowhere in petitioner collecting bank’s complaint filed before the PCHC does it mention of the amount it plaintiff of the error committed thus causing actual losses to plaintiff in the principal amount of
seeks to recover from Account No. 0111-018548 itself, but speaks of P999,000.00 only as an incident of P999,000.00 exclusive of opportunity losses and interest thereon whatsoever. xxx [8]
its alleged opportunity losses and interest as a result of its own employee’s admitted error in encoding Petitioner even requested private respondent’s Branch Manager for reimbursement from private
the check. respondent’s account through the automatic debiting system.
2.7.           On May 6, 1991, plaintiff’s Senior Vice-President, Ms. ERLINDA V. VALENTON wrote
The money depositied in Account No. 0111-018548 is not the subject matter of the litigation in the defendant’s Tondo Branch Manager, Mr. RODOLFO JOSE on the incident and requested assistance in
Arbicom case for as clearly stated by petitioner itself, it is the alleged violation by respondent of the rules facilitating correction of the erroneous coding with request for reimbursement thru the industry’s
and regulations of the PCHC.[4] automatic debiting of defendant’s account….[9]

Union Bank is now before this Court insisting that the money deposited in Account No. 0111-01854-8 is Further, petitioner rejected private respondent’s proposal that the drawer issue postdated checks in
the subject matter of the litigation Petitioner cites the case of Mathay vs. Consolidated Bank and Trust favor of petitioner since the identity and credit standing of the depositor were unknown to petitioner.
Company,[5] where we defined “subject matter of the action,” thus: 2.9.           On May 23, 1991, defendant’s Branch Manager, the same Mr. Rodolfo Jose wrote plaintiff’s
Ms. Erlinda Valenton again insisting on the execution of the Quitclaim and Release in favor of defendant
xxx By the phrase “subject matter of the action” is meant “the physical facts, the things real or personal, as the Branch has endeavored to negotiate with its client for the collection of such amount. Upon a
the money, lands, chattels, and the like, in relation to which the suit is prosecuted, and not the delict or reading of the terms of the Quitclaim and Release being proposed by defendant, the unmistakable fact
wrong committed by the defendant.” lies that again defendant attempts for the second time to take advantage of plaintiff’s plight by indicating
that the terms of the payment of the principal amount of P999,000.00 is by way of several personal
Petitioner contends that the Court of Appeals confuses the “cause of action” with the “subject of the postdated checks up to March 21, 1992 from a person whose identity is not even disclosed to plaintiff….
action.” In Yusingco vs. Ong Hing Lian,[6] petitioner points out, this Court distinguished the two concepts.
To an ordinary person aggrieved already by having been taken advantage of for 620 days more or less,
xxx “The cause of action is the legal wrong threatened or committed, while the object of the action is to the proposal of defendant could not be acceptable for the reason that aside from the interest lost
prevent or redress the wrong by obtaining some legal relief; but the subject of the action is neither of already for the use of its money by another party, no assurance is made as to the actual collection
these since it is not the wrong or the relief demanded, the subject of the action is the matter or thing thereof from a party whose credit standing, the recipient is not at all aware of…. [10]
with respect to which the controversy has arisen, concerning which the wrong has been done, and this
ordinarily is the property, or the contract and its subject matter, or the thing in dispute.” Petitioner also believed that it had no privity with the depositor:
The argument is well taken. We note with approval the difference between the “subject of the action” 2.12.          Plaintiff then replied to defendant’s letter by requesting that in lieu of the post-dated checks
from the “cause of action.” We also find petitioner’s definition of the phrase “subject matter of the from defendant’s client with whom plaintiff has no privity whatsoever, if the defendant could tender the
action” is consistent with the term “subject matter of the litigation,” as the latter is used in the Bank full payment of the amount of P999,000.00 in defendant’s own Manager’s check and that plaintiff is
Deposits Secrecy Act. willing to forego its further claims for interest and losses for a period of 620 days, more or less…. [11]
The following argument adduced by petitioner in the Arbicom case leaves no doubt that petitioner is
In Mellon Bank, N.A. vs. Magsino, [7] where the petitioner bank inadvertently caused the transfer of the holding private respondent itself liable for the discrepancy:
amount of US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the Defendant by its acceptance thru the clearing exchange of the check deposit from its client cannot be
bank accounts where part of the money was subsequently caused to be deposited: said to be free from any liability for the unpaid portion of the check amount considering that defendant
… Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money as the drawee bank, is remiss in its duty of verifying possible technicalities on the face of the check.
deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering
the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the wherabouts of Since the provisions of the PCHC Rule Book has so imposed upon the defendant being the Receiving Bank
the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of of a discrepant check item to give that timely notification and defendant failing to comply with such
persons other than the one responsible for the illegal acquisition. requirement, then it can be said that defendant is guilty of negligence. He who is guilty of negligence in
the performance of its [sic] duty is liable for damages. (Art. 1170, New Civil Code.)
Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation Art. 1172 of the Civil Code provides that:
since the money so deposited was the very thing in dispute. This, however, is not the case here.
“Responsibility arising from negligence in the performance of every kind of obligation is also
Petitioner’s theory is that private respondent Allied Bank should have informed petitioner of the under- demandable, but such liability may be regulated by the courts, according to the circumstances.[”] [12]
encoding pursuant to the provisions of Section 25.3.1 of the PCHC Handbook, which states:
25.3.1.       The Receiving Bank should inform the erring Bank about the under-encoding of amount not Petitioner points to its prayer in its complaint to show that it sought reimbursement from the drawer’s
later than 10:00 A.M. of the following clearing day. account. The prayer, however, does not specifically state that it was seeking recovery of the amount
Failing in that duty, petitioner holds private respondent directly liable for the P999,000.00 and other from the depositor’s account. Petitioner merely asked that “judgment be rendered in favor of plaintiff
damages. It does not appear that petitioner is seeking reimbursement from the account of the drawer. against defendant sentencing it to pay plaintiff: 1. The sum of NINE HUNDRED NINETY-NINE THOUSAND
This much is evident in petitioner’s complaint before the Arbicom. PESOS (P999,000.00)….”[13]
xxx plaintiff’s cause of action against defendant arose from defendant’s deliberate violation of the
provisions of the PCHC Rule Book, Sec. 25.3, specifically on Under-Encoding of check amounting to On the other hand, the petition before this court reveals that the true purpose for the examination is to
P1,000,000.00 drawn upon defendant’s Tondo Branch which was deposited with plaintiff herein aid petitioner in proving the extent of Allied Bank’s liability:
sometime on May 20, 1990. From the check amount of P1,000,000.00, it was instead erroneously Hence, the amount actually debited from the subject account becomes very material and germane to
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petitioner’s claim for reimbursement as it is only upon examination of subject account can it be proved
that indeed a discrepancy in the amount credited to petitioner was committed, thereby, rendering
respondent Allied Bank liable to petitioner for the deficiency. The money deposited in aforesaid account
is undeniably the subject matter of the litigation since the issue in the Arbicom case is whether
respondent Bank should be held liable to petitioner for reimbursement of the amount of money
constituting the difference between the amount of the check and the amount credited to petitioner, that
is, P999,000.00, which has remained deposited in aforesaid account.

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

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

1.  how long respondent Allied Bank had willfully or negligently allowed the difference of P999,000.00 to
be maintained in the subject account without remitting the same to petitioner;
2.  whether indeed the subject account was no longer sufficiently funded when petitioner sent its charge
slip for reimbursement to respondent bank on May 7, 1991; and
3.  whether or not respondent Allied Bank’s actuations in refusing to immediately reimburse the
discrepancy was attended by good or bad faith.

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

In short, petitioner is fishing for information so it can determine the culpability of private respondent and
the amount of damages it can recover from the latter. It does not seek recovery of the very money
contained in the deposit. The subject matter of the dispute may be the amount of P999,000.00 that
petitioner seeks from private respondent as a result of the latter’s alleged failure to inform the former of
the discrepancy; but it is not the P999,000.00 deposited in the drawer’s account. By the terms of R.A. No.
1405, the “money deposited” itself should be the subject matter of the litigation.

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