JRSA

CASE TITLE: REPUBLIC V EUGENIO

G.R. 174629 February 14, 2008

NATURE OF CASE: The present petition for certiorari and prohibition under
Rule 65 assails the orders and resolutions issued by two
different courts in two different cases

DOCTRINE/PRINCIPLE:

PETITIONERS: Republic of the Philippines

RESPONDENTS: Honarable Antonio M. Eugenio, JR.

FACTS:
Following the promulgation of Agan, a series of investigations concerning the award of the NAIA 3 contracts to
PIATCO (Philippine International Airport Terminal Corporation) were undertaken by the Ombudsman and the
Compliance and Investigation Staff (CIS) of petitioner AntiMoney Laundering Council (AMLC).

A series of investigations were undertaken by the Ombudsman. On 24 May 2005, the Office of the Solicitor
General (OSG) wrote the AMLC requesting the latter’s assistance “in obtaining more evidence to completely reveal
the financial trail of corruption surrounding the [NAIA 3] Project,” and also noting that petitioner Republic of the
Philippines was presently defending itself in two international arbitration cases filed in relation to the NAIA 3
Project. The CIS conducted an intelligence database search on the financial transactions of certain individuals
involved in the award, including respondent Pantaleon Alvarez (Alvarez) who had been the Chairman of the PBAC
Technical Committee, NAIAIPT3 Project. By this time, Alvarez had already been charged by the Ombudsman with
violation of Section 3(j) of R.A. No. 3019. The search revealed that Alvarez maintained eight (8) bank accounts
with six (6) different banks.

On June 27, 2005, the AMLC issued Resolution 75 Series of 2005 whereby the Council resolved to authorize the
Executive Director of the AMLC to “sign and very an application to inquire into and/or examine the deposits of
Alvarez, Wilfredo Trinidad, Alfred Liongson, and Cheng Yong and their relation web of accounts wherever these
may be found, as defined under Rule 10.4 of the Revised Implementing Rules and Regulations”; and to authorize
the AMLC Secretariat “to conduct an inquiry into subject accounts once the Regional Trial Court grants the
application to inquire into and/or examine the bank accounts” of those four individuals. Thereafter, on 4 July 2005,
the Makati RTC rendered an
Order (Makati RTC bank inquiry order) granting the AMLC the authority to inquire and examine the subject bank
accounts of Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being satisfied that there existed
“[p]robable cause [to] believe that the deposits in various bank accounts, details of which appear in paragraph 1 of
the Application, are related to the offense of violation of AntiGraft and Corrupt Practices Act now the subject of
criminal prosecution before the Sandiganbayan as attested to by the Informations.

Meanwhile, Special Prosec. to the Omb, Dennis Villa-Ignacio wrote a letter requesting the AMLC to investigate the
accounts of Alvarez and the others involved in the nullified contract. The letter adverted to probable cuase to
believe that the bank accounts were used in the commission of unlawful activities in relation to the criminal cases
then pending before the Sandiganbayan. AMLC responded authorizing the executive director of the AMLC to
inquire into and examine the accounts named in the latter, including one maintained by Alvarez with DBS Bank and
2 other accounts in the name of Cheng Yong with Metrobank.

Following the AMLC Resoluction, the Republic, through the AMLC, filed an application before the Manila RTC to
inquire into and examine the said accounts. The Manila RTC granted the Ex Parte Application expressing that the
allegations in said application to be impressed with merit, and in conformity with the Anti-Money Laundering Act of
2001, authority is granted to the AMLC to inquire into the bank accounts listed therein. Alvarez alleged that he
fortuitously learned of the bank inquiry order, which was issued following an ex parte application, and he argued
that nothing in R.A. No. 9160 authorized the AMLC to seek the authority to inquire into bank accounts ex parte.
The Republic filed an Omnibus Motion for Reconsideration seeking to strike our Alvarez’s motion that led to the
issuance of said order. Alvarez then filed a Reply and Motion to Dismiss the application for bank inquire order. In
the omnibus order, the Manila RTC reiterated that the material allegations in the application for bank inquiry order
filed by the Republic stood as “the probable cause for the investigation and examination of the bank accounts and
investments of the respondents.

Alvarez filed an Urgent Motion expressing his apprehension that the AMLC would immediately enforce the
omnibus order and would thereby render the motion for reconsideration he intended to file as moot and academic;
thus he sought that the Republic be refrained from enforcing the omnibus order in the meantime. Acting on this
motion, the Manila RTC, on 11 May 2006, issued an Order requiring the OSG to file a comment/opposition and
reminding the parties that judgments and orders become final and executory upon the expiration of fifteen (15)
days from receipt thereof, as it is the period within which a motion for reconsideration could be filed. Alvarez filed
his Motion for Reconsideration by the motion was denied by the Manila RTC. One month later, Alvarez filed an
Urgent Motion and Manifestation wherein he manifested having received reliable information that the AMLC was
about to implement the bank inquiry order even though he was intending to appeal from it. Considering that the
Manila RTC bank inquiry order was issued ex parte, without notice to those other persons, Alvarez prayed that the
AMLC be ordered to refrain from inquiring into any of the other bank deposits and alleged web of accounts
enumerated in AMLC’s application with the RTC; and that the AMLC be directed to refrain from using, disclosing or
publishing in any proceeding obtained in violation of the stop-order that was issued in May 11 2006. Manila RTC
approved the motion.

Meanwhile, Lilia Cheng filed with the CA a Petitio for Certiorari, Prohibition, and Mandamus with Application for
TRO and/or Writ of Preliminary InjuNction directed against Eusebio. She identified herself as the wife of Cheng
Yong, with whom she jointly owns a conjugal bank account with. She imputed grave abuse of discretion on the
part of Makati and Manila RTC in grating the AMLC’s ex parte applications saying that her constitutional
right to due process is violated and that the bank inquiry order can only be granted in violation of the
AMLA and that the AMLA can not apply to bank accounts entered into prior to the affectivity of the AMLA
or to bank accounts located outside the Philippines. The Court granted the TRO.

Petitioner’s Arguments: Petitioner’s general advocacy is that the bank inquiry orders issued by the Manila and
Makati RTCs are valid and immediately enforceable whereas the assailed rulings, which effectively stayed the
enforcement of the Manila and Makati RTCs bank inquiry orders, are sullied with grave abuse of discretion. These
conclusions flow from the posture that a bank inquiry order, issued upon a finding of probable cause, may be
issued ex parte and, once issued, is immediately executory. Petitioner further argues that the information obtained
following the bank inquiry is necessarily beneficial, if not indispensable, to the AMLC in discharging its awesome
responsibility regarding the effective implementation of the AMLA and that any restraint in the disclosure of such
information to appropriate agencies or other judicial fora would render meaningless the relief supplied by the bank
inquiry order.

Petitioner argues that Alvarez cannot assert any violation of the right to financial privacy in behalf of other persons
whose bank accounts are being inquired into, particularly those other persons named in the Makati RTC bank
inquiry order who did not take any step to oppose such orders before the courts.

Respondent's Arguments: Respondents posit that a bank inquiry order under Section 11 may be obtained only
upon the preexistence of a money laundering offense case already filed before the courts.

The conclusion is based on the phrase “upon order of any competent court in cases of violation of this Act,” the
word “cases” generally understood as referring to actual cases pending with the courts

ISSUE: Did the RTCManila, and the Court of Appeals, both of which authorized the examination of bank accounts
under Section 11 of Rep. Act No. 9160, commit grave abuse of discretion?

FALLO: WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs. SO ORDERED.

HELD:

The Court is unconvinced by the proposition of the respondent. The Court agrees with the SolGen in stating that
the useof the phrase “incases of” was unfortunate, yet submitted that it should be interpreted to mean “in the event
there are violations” of the AMLA and not in cases already pending upon the Court. If the contrary position is
adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and
wholly inutile as a means for the government to ascertain whether there is sufficient evidence to sustain an
intended prosecution of the account holder for violation of the AMLA. Should that be the situation, in all likelihood
the AMLC would be virtually deprived of its character as a discovery tool, and thus would become less circumspect
in filing complaints against suspect account holders. After all, under such setup the preferred strategy would be to
allow or even encourage the indiscriminate filing of complaints under the AMLA with the hope or expectation that
the evidence of money laundering would somehow surface during the trial. Since the AMLC could not make use of
the bank inquiry order to determine whether there is evidentiary basis to prosecute the suspected malefactors, not
filing any case at all would not be an alternative. Such unwholesome setup should not come to pass. Thus Section
11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the
unfounded initiation of complaints for money laundering.

It is evident that Section 11 does not specifically authorize, as a general rule, the issuance ex parte of the bank
inquiry order. We quote the provision in full:
“SEC. 11. Authority to Inquire into Bank Deposits.
—Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended,
Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment
with any banking institution or non bank financial institution upon order of any competent court in cases of violation
of this Act, when it has been established that there is probable cause that the deposits or investments are
related to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under
Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined
in Sections 3(i)1, (2) and (12).

To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit
of investment with any banking institution or non bank financial institution when the examination is made in the
course of a periodic or special examination, in accordance with the rules of examination of the BSP.”

Of course, Section 11 also allows the AMLC to inquire into bank accounts without having to obtain a judicial order
in cases where there is probable cause that the deposits or investments are related to kidnapping for ransom,
certain violations of the Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations under R.A.
No. 6235, destructive arson and murder. Since such special circumstances do not apply in this case, there is no
need for us to pass comment on this proviso. Suffice it to say, the proviso contemplates a situation distinct from
that which presently confronts us, and for purposes of the succeeding discussion, our reference to Section 11 of
the AMLA excludes said proviso.

Freeze order vs. bank inquiry order

The freeze order under Section 10 and the bank inquiry order under Section 11 are similar in that they are
extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute money
laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the
provisional relief therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize
ex parte proceedings for the issuance of the bank inquiry order, then it could have easily expressed such intent in
the law, as it did with the freeze order under Section 10. the Court of Appeals, has authority to issue a freeze order,
whereas a bank inquiry order always then required, without exception, an order from a competent court. A freeze
order is aimed at preserving monetary instruments or property from unlawful activities while a bank inquiry order
does not necessitate any form of physical seizure of property of the account holder. What the bank inquiry
order authorizes is the examination of the particular deposits or investments in banking institutions or nonbank
financial institutions. The monetary instruments or property deposited with such banks or financial
institutions are not seized in a physical sense, but are examined on particular details such as the account
holder’s record of deposits and transactions. Unlike the assets subject of the freeze order, the records to
be inspected under a bank inquiry order cannot be physically seized or hidden by the account holder. Said
records are in the possession of the bank and therefore cannot be destroyed at the instance of the
account holder alone as that would require the extraordinary cooperation and devotion of the bank.

REGARDING PETITIONER’S CONTENTION THAT BANK INQUIRY NEEDS PROBABLE CAUSE:

The Constitution and the Rules of Court prescribe particular requirements attaching to search warrants that are not
imposed by the AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge
personally examine under oath or affirmation the complainant and the witnesses he may produce, such
examination being in the form of searching questions and answers. Those are impositions which the legislative did
not specifically prescribe as to the bank inquiry order under the AMLA, and we cannot find sufficient legal basis to
apply them to Section 11 of the AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest
as it contemplates a direct object but not the seizure of persons or property.

FINALLY, Section 2 of the Bank Secrecy Act of 1955 states that,

“SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except upon written permission of the
depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty
of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.”

Because of this Act, the confidentiality of bank deposits remain a basic state policy in the Philippines. This falls
within THE ZONES OF PRIVACY RECOGNIZED BY OUR LAWS. The framers of the 1987 Constitution likewise
recognized that bank accounts are not covered by either the right to information under Section 7, Article III or under
the requirement of full public disclosure. There are, however, EXCEPTIONS:
1. upon written permission of the depositor
2. in cases of impeachment
3. the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of
duty of public officials
4. the money deposited or invested is the subject matter of litigation

A subsequent law, the Ombudsman Act of 1989, contains a provision relating to “access to bank account and records.” The
AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may inquire into a bank account upon
order of any competent court in cases of violation of the AMLA, it having been established that there is probable cause that the
deposits or investments are related to unlawful activities as defined in Section 3(i) of the law, or a money laundering offense
under Section 4 thereof. Further, in instances where there is probable cause that the deposits or investments are related to
kidnapping for ransom, certain violations of the Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations
under R.A. No. 6235, destructive arson and murder, then there is no need for the AMLC to obtain a court order before it could
inquire into such accounts

Notes:
Money laundering has been generally defined by the International Criminal Police Organization (Interpol) as
“any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to
have originated from legitimate sources.”

Even before the passage of the AMLA, the problem was addressed by the Philippine government through the
issuance of various circulars by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative proscription was
necessary, especially with the inclusion of the Philippines in the Financial Action Task Force’s list of
noncooperative countries and territories in the fight against money laundering.

Section 4 of the AMLA states that “[m]oney laundering is a crime whereby the proceeds of an unlawful activity as
[defined in the law] are transacted, thereby making them appear to have originated from legitimate sources.”

The section further provides the three modes through which the crime of money laundering is committed. Section 7
creates the AMLC and defines its powers, which generally relate to the enforcement of the AMLA provisions and
the initiation of legal actions authorized in the AMLA such as civil forfeiture proceedings and complaints for the
prosecution of money laundering offenses.

ON EX POST FACTO LAWS: No ex post facto law may be enacted, and no law may be construed in such fashion
as to permit a criminal prosecution offensive to the ex post facto clause. As applied to the AMLA, it is plain that no
person may be prosecuted under the penal provisions of the AMLA for acts committed prior to the enactment of the
law on 17 October 2001. As much was understood by the lawmakers since they deliberated upon the AMLA, and
indeed there is no serious dispute on that point. Does the proscription against ex post facto laws apply to the
interpretation of Section 11, a provision which does not provide for a penal sanction but which merely authorizes
the inspection of suspect accounts and deposits? The answer is in the affirmative. In this jurisdiction, we have
defined an ex post facto law as one which either: (1)  makes criminal an act done before the passage of the law
and which was innocent when done, and punishes such an act; (2)  aggravates a crime, or makes it greater than it
was, when committed; (3)  changes the punishment and inflicts a greater punishment than the law annexed to the
crime when committed; (4)  alters the legal rules of evidence, and authorizes conviction upon less or different
testimony than the law required at the time of the commission of the offense; (5)  assuming to regulate civil rights
and remedies only, in effect imposes penalty or deprivation of a right for something which when done was lawful;
and (6)  deprives a person accused of a crime of some lawful protection to which he has become entitled,
such as the protection of a former conviction or acquittal, or a proclamation of amnesty.

Prior to the enactment of the AMLA, the fact that bank accounts or deposits were involved in activities later on
enumerated in Section 3 of the law did not, by itself, remove such accounts from the shelter of absolute
confidentiality. Prior to the AMLA, in order that bank accounts could be examined, there was need to secure either
the written permission of the depositor or a court order authorizing such examination, assuming that they were
involved in cases of bribery or dereliction of duty of public officials, or in a case where the money deposited or
invested was itself the subject matter of the litigation. The passage of the AMLA stripped another layer off the rule
on absolute confidentiality that provided a measure of lawful protection to the account holder. For that reason, the
application of the bank inquiry order as a means of inquiring into records of transactions entered into prior to the
passage of the AMLA would be constitutionally infirm, offensive as it is to the ex post facto clause. Still, we must
note that the position submitted by Lilia Cheng is much broader than what we are willing to affirm. She argues that
the proscription against ex post facto laws goes as far as to prohibit any inquiry into deposits or investments
included in bank accounts opened prior to the effectivity of the AMLA even if the suspect transactions were entered
into when the law had already taken effect. The Court recognizes that if this argument were to be affirmed, it would
create a horrible loophole in the AMLA that would in turn supply the means to fearlessly engage in money
laundering in the Philippines; all that the criminal has to do is to make sure that the money laundering activity is
facilitated through a bank account opened prior to 2001. Lilia Cheng admits that “actual money launderers could
utilize the ex post facto provision of the Constitution as a shield” but that the remedy lay with Congress to amend
the law. We can hardly presume that Congress intended to enact a selfdefeating law in the first place, and the
courts are inhibited from such a construction by the cardinal rule that “a law should be interpreted with a view to
upholding rather than destroying it.”