G.R. No.

84526             January 28, 1991 The instant case originated from an action  filed with the National
8

Labor Relations Commission (NLRC) by a group of laborers who

PHILIPPINE COMMERCIAL & INDUSTRIAL BANK and JOSE obtained therefrom a favorable judgment for the payment of
HENARES, petitioners, backwages amounting to P205,853.00 against the private
vs. respondent.
THE HON. COURT OF APPEALS and MARINDUQUE MINING
AND INDUSTRIAL CORPORATION, respondents. On April 26, 1976, the said Commission issued a writ of execution
directing the Deputy Sheriff of Negros Occidental, one Damian
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Rojas, to enforce the aforementioned judgment. The pertinent
petitioners. portion of the said writ reads as follows:
Rexes V. Alejano for private respondent.
x x x           x x x          x x x
SARMIENTO, J.:
Further, you are to collect from same respondent the total
This is a petition for review on certiorari which assails both the amount of P205,853.00 as their backwage (sic) for twelve
resolution  dated June 27, 1988 of the Court of Appeals  which
1 2 (12) months and then turn over said amount to this
reconsidered and set aside its earlier decisions  dated February
3 commission for further disposition. In case you fail to
26, 1988 reversing the decision  of the trial court and the
4 collect said amount in cash, you are to cause the
subsequent resolution  dated August 3, 1988 which denied the
5 satisfaction of the same on the movable or immovable
petitioners' motion for reconsideration. The dispositive portion of properties of the respondent not exempt from execution.
the resolution in question dated June 27, 1988 reads as follows: (Exhs. G, G-1 and G-3, also Exh. 3; Emphasis supplied). 9

x x x           x x x          x x x Accordingly, on April 28, 1976, the aforenamed deputy sheriff

went to the mining site of the private respondent and served the
For the reasons above adduced, We are constrained to writ of execution on the persons concerned, but nothing seemed
reconsider Our aforesaid decision and to set it aside and to have happened thereat.
in lieu thereof hereby enter another decision AFFIRMING
the decision dated January 15, 1985 of the Regional Trial Thereafter, the Sheriff prepared on his own a Notice of
Court of Manila, Branch 11, in Civil Case No. 103100 Garnishment dated April 29, 1976 addressed to six (6) banks, all
entitled "Marinduque Mining and Industrial Corporation located in Bacolod City, one of which being the petitioner herein,
(MMIC) vs. Philippine Commercial and Industrial Bank, et directing the bank concerned to immediately issue a check in the
al." 6 name of the Deputy Provincial Sheriff of Negros Occidental in an
amount equivalent to the amount of the garnishment and that
The undisputed facts  as gathered from the findings of the trial
7 proper receipt would be issued therefor.
court are as follows:
Incidentally, the house lawyer of the private respondent, Atty.
Rexes V. Alejano, acting on a tip regarding the existence of the
said notice of garnishment, communicated with the bank disclosure of the said current deposit and unlawful release
manager, the petitioner Jose Henares, verbally at first at around thereof, the latter have failed and refused to restore the amount of
2:00 o'clock in the afternoon of that day, April 29, 1976, and later P37,466.18 to the former's account despite repeated demands.
confirmed in a formal letter received by the petitioner Henares at
about 5:00 o'clock of that same day, requesting the withholding of Both the petitioners and the Deputy Sheriff filed their respective
any release of the deposit of the private respondent with the answers denying the material averments of the said complaint
petitioner bank. and alleged that their actuations were all in accordance with law
and likewise filed counterclaims for damages, including a cross-
Meanwhile, at about 9:30 in the morning of April 29, 1976, the claim of the former against the latter. The third-party complaint of
deputy sheriff presented the Notice of Garnishment and the Writ the petitioners against the forty-nine (49) laborers in the NLRC
of Execution attached therewith to the petitioner Henares and case was, however, dismissed for failure of the sheriff to serve
later in the afternoon, demanded from the latter, under pain of summons upon the latter.
contempt, the release of the deposit of the private respondent.
On January 23, 1982, after several postponements, the pre-trial
The petitioner Henares, upon knowing from the Acting Provincial was finally conducted and terminated with only the petitioners and
Sheriff that there was no restraining order from the National Labor the private respondent participating, through their respective
Relations Commission and on the favorable advice of the bank's counsel.
legal counsel, issued a debit memo for the full balance of the
private respondent's account with the petitioner bank. Thereafter, On January 15, 1985, the trial court rendered its judgment in
he issued a manager's check in the name of the Deputy favor of the private respondent, the dispositive portion of which
Provincial Sheriff of Negros Occidental for the amount of reads:
P37,466.18, which was the exact balance of the private
respondent's account as of that day. WHEREFORE, judgment is hereby rendered in favor of
the plaintiff and against the three (3) defendants by
On the following day, April 30, 1976, at about 1:00 o'clock in the ordering the latter to pay, jointly and severally, the plaintiff
afternoon, the deputy sheriff returned to the bank in order to the following amounts, to wit:
encash the check but before the actual encashment, the
petitioner Henares once again inquired about any existing (a) the sum of P37,466.18, with interest thereon at the
restraining order from the NLRC and upon being told that there rate of 12% per annum from date of first demand on April
was none, the latter allowed the said encashment. 29, 1976 until the amount shall have been fully and
completely restored and paid;
On July 6, 1976, the private respondent, then plaintiff, filed a
complaint before the Regional Trial Court of Manila, Branch II, (b) the sum of P10,000.00 as attorney's fees.
against the petitioners and Damian Rojas, the Deputy Provincial
Sheriff of Negros Occidental, then defendants, alleging that the
Defendants are ordered to pay, jointly and severally,
former's current deposit with the petitioner bank was levied upon,
double costs. 10

garnished, and with undue haste unlawfully allowed to be

withdrawn, and notwithstanding the alleged unauthorized
 x x x           x x x          x x x which the Honorable Supreme Court ruled upon is no
authority for the release of the deposit, thus:
On appeal, the respondent court in a decision dated February 26,
1988, first reversed the said judgment of the lower court, but In the second place, the mere garnishment of
however, on the motion for reconsideration filed by the private funds belonging to a party upon order of the court
respondent, subsequently annulled and set aside its said decision does not have the effect of delivering the money
in the resolution dated June 27, 1988. On August 3, 1988, the garnished to the sheriff or to the party in whose
respondent court denied the petitioner's own motion for favor the attachment is issued. The fund is
reconsideration. retained by the garnishee or the person holding
the money for the defendant.
Hence, this petition.
The garnishee, or one in whose hands property is
The petitioners raise two issues,  to wit:
11 attached or garnished, is universally regarded as
charged with its legal custody pending outcome of
1. Whether or not petitioners had legal basis in releasing the attachment or garnishment unless, by local
the garnished deposit of private respondent to the sheriff. statute and practice, he is permitted to surrender
or pay the garnished property or funds into court,
to the attaching officer, or to a receiver or trustee
2. Whether or not petitioners violated Republic Act No.
appointed to receive them. (5 Am. Jur. 14)
1405, otherwise known as the Secrecy of Bank Deposits
Act, when they allowed the sheriff to garnish the deposit
of private respondent. The effect of the garnishment, therefore, was to
require the Philippine Trust Company, holder of
the funds of the Luzon Surety Co., to set aside
The petition is impressed with merit.
said amount from the funds of the Luzon Surety
Co., and keep the same subject to the final orders
The crux of the instant controversy boils down to the question of of the Court. In the case at bar there was never
whether or not a bank is liable for releasing its depositor's funds an order to deliver the full amount garnished to
on the strength of the notice of garnishment made by the deputy the plaintiff-appellee; all that was ordered to be
sheriff pursuant to a writ of execution issued by the National delivered after the judgment had become final
Labor Relations Commission (NLRC). was the amount found by the Court of Appeals to
be due. The balance of the amount garnished,
The respondent court in its questioned resolution dated June 27, therefore, remained all the time in the possession
1988, held that the petitioners were liable, in this wise: of the bank as part of the funds of the Luzon
Surety Co. although the same could not be
In the case at bar, defendant-appellant PCIB, despite disposed of by the owner. (De la Rama vs.
vigorous objections from plaintiff-appellee, with indecent Villarosa, et al., L-17927, June 29, 1963, 8 SCRA
haste disclosed and released the deposit of plaintiff- 413, 418-419; Emphasis supplied). 12

appellee on the strength of a mere notice of garnishment

The above-mentioned contention citing De la Rama is not exactly MERALCO, the garnishee, from its obligations to NPC
on all fours with the facts of the case at bar. In De la Rama, the with respect to the payment to ECI of P1,114,543.23, thus
amount garnished was not actually taken possession of by the in effect subjecting MERALCO to double liability.
sheriff, even from the time of garnishment, because the judgment MERALCO should not have been faulted for its prompt
debtor was able to appeal to the Court of Appeals and obtain obedience to a writ of garnishment. Unless there are
from the Court an injunction prohibiting execution of the compelling reasons such as: a defect on the face of the
judgment. writ or actual knowledge on the part of the garnishee of
lack of entitlement on the part of the garnisher, it is not
On the other hand, nowhere in the record of the present case is incumbent upon the garnishee to inquire or to judge for
there any evidence of an appeal by the private respondent from itself whether or not the order for the advance execution
the decision of the NLRC or the existence of any restraining order of a judgment is valid.
to prevent the release of the private respondent's deposit to the
deputy sheriff at the time of the service of the notice of Section 8, Rule 57 of the Rules of Court provides:
garnishment and writ of execution to the petitioners.
Effect of attachment of debts and credits. — All
On the contrary, the uncontroverted statements in the deposition persons having in their possession or under their
of the petitioner Henares that he had previously sought the advice control any credits or other similar personal
of the bank's counsel and that he had checked twice with the property belonging to the party against whom
Acting Provincial Sheriff who had informed him of the absence of attachment is issued, or owing any debts to the
any restraining order, belie any allegation of undue and indecent same, at the time of service upon them of a copy
haste in the release of the said deposit in question. of the order of attachment and notice as provided
in the last preceding section, shall be liable to the
The cases more in point to the present controversy are the recent applicant of the amount of such credits, debts or
decisions in Engineering Construction Inc. v. National Power other property, until the attachment be
Corporation  and Rizal Commercial Banking Corporation (RCBC)
13 discharged, or any judgment recovered by him be
vs. De Castro  where the Court absolved both garnishees,
14 satisfied, unless such property be delivered or
MERALCO and RCBC, respectively, from any liability for their transferred, or such debts be paid, to the clerk,
prompt compliance in the release of garnished funds, sheriff or other proper officer of the court issuing
the attachment. 1âwphi1

The rationale behind Engineering Construction, Inc. and which

was quoted in Rizal Commercial Banking Corporation is Garnishment is considered as a specie of attachment for
persuasive reaching credits belonging to the judgment debtor and
owing to him from a stranger to the litigation. Under the
x x x           x x x          x x x above-cited rule, the garnishee [the third person] is
obliged to deliver the credits, etc. to the proper officer
issuing the writ and "the law exempts from liability the
But while partial restitution is warranted in favor of NPC,
person having in his possession or under his control any
we find that the Appellate Court erred in not absolving
credits or other personal property belonging to the
 defendant, . . . if such property be delivered or the officer's receipt shall be a sufficient discharge for the
transferred, . . . to the clerk, sheriff, or other officer of the amount so paid or directed to be credited by the judgment
court in which the action is pending." creditor on the execution.

Applying the foregoing to the case at bar, MERALCO, as x x x           x x x          x x x

garnishee, after having been judicially compelled to pay
the amount of the judgment represented by funds in its Finally, we likewise take cognizance of the subject of the
possession belonging to the judgment debtor or NPC, judgment sought to be enforced in the writ of execution in
should be released from all responsibilities over such question, namely, laborers' backwages. We believe that the
amount after delivery thereof to the sheriff. The reason for petitioners should rather be commended for having acted with
the rule is self evident. To expose garnishees to risks for urgent dispatch despite attempts by the private respondent, as
obeying court orders and processes would only with so many scheming employers, to frustrate or unjustifiably
undermine the administration of justice. (Emphasis ours.) 15
delay the prompt satisfaction of final judgments which often result
in undue prejudice to the legitimate claims of labor.
x x x           x x x          x x x
With regard to the second issue, we find no violation whatsoever
Moreover, there is no issue concerning the indebtedness of the by the petitioners of Republic Act No. 1405, otherwise known as
petitioner bank to the private respondent since the latter has the Secrecy of Bank Deposits Act. The Court in China Banking
never denied the existence of its deposit with the former, the said Corporation vs. Ortega  had the occasion to dispose of this issue
18

deposit being considered a credit in favor of the depositor against when it stated, thus:
the bank.  We therefore see no application for Sec. 39, Rule 39
16

of the Rules of Court invoked by the private respondent as to It is clear from the discussion of the conference
necessitate the "examination of the debtor of the judgment committee report on Senate Bill No. 351 and House Bill
debtor."17
No. 3977, which later became Republic Act 1405, that the
prohibition against examination of or inquiry into a bank
Rather, we find the immediate release of the funds by the deposit under Republic Act 1405 does not preclude its
petitioners on the strength of the notice of garnishment and writ of being garnished to insure satisfaction of a judgment.
execution, whose issuance, absent any patent defect, enjoys the Indeed there is no real inquiry in such a case, and if
presumption of regularity, sufficiently supported by Sec. 41, Rule existence of the deposit is disclosed the disclosure is
39 of the Rules of Court which reads: purely incidental to the execution process. It is hard to
conceive that it was ever within the intention of Congress
x x x           x x x          x x x to enable debtors to evade payment of their just debts,
even if ordered by the Court, through the expedient of
After an execution against property has issued, a person converting their assets into cash and depositing the same
indebted to the judgment debtor, may pay to the officer in a bank.
holding the execution the amount of his debt or so much
thereof as may be necessary to satisfy the execution, and
Since there is no evidence that the petitioners themselves
divulged the information that the private respondent had an
account with the petitioner bank and it is undisputed that the said
account was properly the object of the notice of garnishment and
writ of execution carried out by the deputy sheriff, a duly
authorized officer of the court, we can not therefore hold the
petitioners liable under R.A. 1405.

While the general rule is that the findings of fact of the appellate
court are binding on this Court, the said rule however admits of
exceptions, such as when the Court of Appeals clearly
misconstrued and misapplied the law, drawn from the incorrect
conclusions of fact established by evidence and otherwise at
certain conclusions which are based on misapprehension of
facts,  as in the case at bar.
19

The petitioners are therefore absolved from any liability for the
disclosure and release of the private respondent's deposit to the
custody of the deputy sheriff in satisfaction of the final judgment
for the laborers' backwages.

WHEREFORE, the petition is GRANTED and the challenged

Resolutions dated June 27, 1988 and August 13, 1988 of the
Court of Appeals are hereby ANNULLED and SET ASIDE and its
Decision dated February 26, 1988 dismissing the complaint is
hereby REINSTATED. With costs against the private respondent.

SO ORDERED.