[4] GSIS v.

COURT OF APPEALS
G.R. No. 189206 | June 8, 2011 | Perez, J.

TOPIC: Foreign Currency Deposit Units

SUMMARY: Domsat Holdings obtained a surety bond from GSIS

to secure the payment of its loans from the banks (5 banks). GSIS
thereafter refused to comply with its obligation, claiming that the
proceeds weren’t used for its intended purpose which was to pay
for the Gorizon Satellite. During the trial, GSIS requested for the
issuance of a subpoena to Westmont Bank’s custodian of records
to produce documents covering Domsat/Philippine Agila’s
accounts. GSIS claimed that since the money is subject matter of
litigation, RA 1405 allows the disclosure of bank deposits. The
Court ruled that it is RA 6426 that applies and foreign currency
deposits may be examined only upon a written permission by the
depositor.

DOCTRINE: Intengan v. Court of Appeals: For foreign currency

deposits, such as U.S. dollar deposits, the applicable law is
Republic Act No. 6426.

RELEVANT PROVISIONS:
● SEC. 8, RA 9426. 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 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.

FACTS:

1. Domsat Holdings, Inc. and GSIS entered into a surety

agreement:
○ Domsat obtained a surety bond from GSIS to
secure the payment of its loans from the Banks
(Industrial Bank of Korea, Tong Yang Merchant
 Bank, First Merchant Banking Corporation,
Landbank of the Philippines, Westmont Bank).
■ Domsat’s loan to the banks amounts to
US$ 11 million, for the purpose of
financing the lease and/or purchase of
Gorizon Satellite from the Intersputnik
○ GSIS obliged itself to Guarantee the repayment
of the principal and interest on the loan
2. Domsat failed to pay its loan. Thus, GSIS refused to
comply with its obligation for the reason that Domsat
did not use the loan proceeds for the payment of rent
for the satellite.
○ GSIS alleged that with Westmont Bank as
conduit, Domsat transferred the 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
3. GSIS requested for the issuance of subpoena duces
tecum to Westmont Bank’s custodian of records to
produce the following documents:
○ All documents relating to Domsat’s account and
transactions for the period Jan 1997 to Dec 2002
with Westmont Bank
○ All applications for CC/MC and bank transfers
funded by the Domsat account with or through
Westmont Bank
○ All documents covering the account of Philippine
Agila Satellite, Inc. with/through Westmont Bank
for the period Jan 1997 - Dec 2002
○ All applications for CC/MC and bank transfers
funded by the Philippine Agila account with or
through Westmont Bank
4. The RTC issued a subpoena duces tecum, but upon
motion to quash filed by the banknson the following
grounds:
○ The subpoena is unreasonable, oppressive and does
not establish the relevance of the documents sought
○ The request for the documents will violate the
Law on Secrecy of Bank Deposits
○ GSIS failed to advance the reasonable cost of
production of the documents.
5. The previous subpoenas issued were quashed.
○ Intengan v. CA: Foreign currency deposit are
absolutely confidential and may be examined only
when there is a written permission from the
depositor.
 6. The CA upheld the RTC decision, but also upheld the
issuance of the subpoena for the applications for
CC/MC’s by Domsat through Westmont, and the
Agreement between Domsat/Philippine Agila and
Intersputnik for the lease of the Gorizon Satellite.
○ The production of these documents does not
involve the examination of Domsat’s account
since it will never be known how much money
was deposited into it or withdrawn therefrom
and how much remains therein.
7. Hence, petition by GSIS. GSIS argues:
○ Domsat’s deposit with Westmont Bank can be
examined and inquired into
○ Invokes RA 1405 of the Law on Secrecy of Bank
Deposits which allows the disclosure of bank
deposits in cases where the money deposited is the
subject matter of the litigation
8. Banks argue that RA 1405 is not the applicable law in the
instant case because the Domsat deposit is a foreign
currency deposit, thus covered by Republic Act No. 6426
○ Under RA 6426 only the consent of the depositor
shall serve as the exception for the disclosure of
his/her deposit.

ISSUE, HOLDING & RATIO:

WHETHER THE DISCLOSURE OF THE US$11 MILLION

DEPOSIT DURING TRIAL MADE IT NO LONGER
SECRET AND CONFIDENTIAL - NO. RA 6426 provides only
one exception

RELEVANT LAWS
● Republic Act No. 1405 provides for four (4) exceptions
when records of deposits may be disclosed. These are under
any of the following instances:
(a) upon written permission of the depositor,
(b) in cases of impeachment,
(c) upon order of a competent court in the case of
bribery or dereliction of duty of public officials or,
(d) when the money deposited or invested is the
subject matter of the litigation, and
(e) in cases of violation of the Anti-Money Laundering
Act (AMLA), the Anti-Money Laundering Council
(AMLC) may inquire into a bank account upon
order of any competent court.
 ● On the other hand, RA 6426 only provides one lone
exception to the non-disclosure of foreign currency
deposits. That is the written permission of the depositor.

NO CONFLICT BETWEEN BOTH LAWS

● These two laws both support the confidentiality of bank
deposits. There is no conflict between them.

ITC, RA 6426 APPLIES BECAUSE IT IS THE SPECIFIC LAW

● Republic Act No. 1405 - LAW OF GENERAL
APPLICATION
○ Encouragement to the people to deposit their
money in banking institutions and to discourage
private hoarding so that the same may be properly
utilized by banks in authorized loans to assist in the
economic development of the country.
○ It covers all bank deposits in the Philippines and
no distinction was made between domestic and
foreign deposits. Thus, Republic Act No. 1405 is
considered a law of general application.
● Republic Act No. 6426 - SPECIFIC
○ Encourage deposits from foreign lenders and
investors
○ It is a special law designed especially for foreign
currency deposits in the Philippines
● A general law does not nullify a specific or special law.
Generalia specialibus non derogant. Therefore, it is
beyond cavil that Republic Act No. 6426 applies in this
case.
○ Intengan v. Court of Appeals: for foreign
currency deposits, such as U.S. dollar deposits,
the applicable law is Republic Act No. 6426.
■ In said case, Citibank filed an action against
its officers for persuading their clients to
transfer their dollar deposits to competitor
banks. Bank records, including dollar
deposits of petitioners, purporting to
establish the deception practiced by the
officers, were annexed to the complaint.
Petitioners now complained that Citibank
violated Republic Act No. 1405. This Court
ruled that since the accounts in question are
U.S. dollar deposits, the applicable law
therefore is not Republic Act No. 1405 but
Republic Act No. 6426.
 ○ China Banking Corporation v. Court of Appeals,
where respondent accused his daughter of stealing
his dollar deposits with Citibank. The latter
allegedly received the checks from Citibank and
deposited them to her account in China Bank. The
subject checks were presented in evidence. A
subpoena was issued to employees of China Bank to
testify on these checks. China Bank argued that
the Citibank dollar checks with both respondent
and/or her daughter as payees, deposited with
China Bank, may not be looked into under the
law on secrecy of foreign currency deposits. This
Court highlighted the exception to the non-
disclosure of foreign currency deposits, i.e., in the
case of a written permission of the depositor, and
ruled that respondent, as owner of the funds
unlawfully taken and which are indisputably now
deposited with China Bank, he has the right to
inquire into the said deposits.

APPLYING RA 6426, SEC. 8

● Absent the written permission from Domsat, Westmont
Bank cannot be legally compelled to disclose the bank
deposits of Domsat, otherwise, it might expose itself to
criminal liability under the same act.
● The basis for the application of subpoena is to prove that
the loan intended for Domsat by the Banks and guaranteed
by GSIS, was diverted to a purpose other than that stated in
the surety bond. The Banks, however, argue that GSIS is in
fact liable to them for the proper applications of the loan
proceeds and not vice-versa. We are however not prepared
to rule on the merits of this case lest we pre-empt the
findings of the lower courts on the matter.

Whether the 2nd MR filed by the banks was a mere scrap of

paper since it did not contain a notice of hearing - NO
● The Court of Appeals resorted to a liberal interpretation of
the rules to avoid miscarriage of justice when it allowed the
filing and acceptance of the second motion for
reconsideration. The appellate court also underscored the
fact that GSIS did not raise the defect of lack of notice in
its opposition to the second motion for reconsideration. The
appellate court held that failure to timely object to the
admission of a defective motion is considered a waiver of
its right to do so.
RULING: WHEREFORE, the petition for certiorari is
DISMISSED. The Decision dated 29 February 2008 and 19 June
2009 Resolution of the Court of Appeals are hereby AFFIRMED.