Doña Adela Export International, Inc. vs. TIDCORP

A stipulation in a compromise agreement between creditors requiring the insolvent debtor to waive confidentiality of its bank deposits is not binding on the debtor where the debtor was not a party or signatory to the agreement, gave no written permission as required by R.A. No. 1405, and the court-appointed receiver did not conform to the waiver — all pursuant to the doctrine of relativity of contracts and the statutory requirement of express written consent for disclosure of bank deposits.

Petitioner Doña Adela Export International, Inc. was a corporate debtor that filed a Petition for Voluntary Insolvency before the RTC of Mandaluyong City under the Insolvency Act (Act No. 1956). Among its creditors were respondent Trade and Investment Development Corporation of the Philippines (TIDCORP), the Bank of the Philippine Islands (BPI), and Technology Resource Center (TRC). Upon declaration of insolvency, all of petitioner's property, assets, and effects were assigned and conveyed to a court-appointed receiver, Atty. Arlene Gonzales, pursuant to Section 32 of the Insolvency Law. The dispute arose from the terms of compromise agreements entered into among the creditors for the settlement of petitioner's obligations, particularly a provision in the TIDCORP-BPI agreement requiring petitioner to waive its rights to bank-deposit confidentiality under R.A. No. 1405 (Law on Secrecy of Bank Deposits) and R.A. No. 8791 (General Banking Law of 2000).

On August 23, 2006, Doña Adela Export International, Inc. filed a Petition for Voluntary Insolvency before the RTC of Mandaluyong City, Branch 211, docketed as SEC Case No. MC06-103. Five days later, the RTC found the petition sufficient in form and substance and issued an order declaring petitioner insolvent, staying all civil proceedings against it, and setting the initial hearing for October 19, 2006. Atty. Arlene Gonzales was thereafter appointed as receiver, and upon taking her oath, she proceeded to make the necessary reports, engage appraisers, and require the creditors to submit proof of their respective claims. The creditors included Technology Resource Center (TRC), the Bank of the Philippine Islands (BPI), and Trade and Investment Development Corporation of the Philippines (TIDCORP), with claims amounting to ₱29,546,342.45, ₱11,069,575.82, and an amount yet to be submitted, respectively.

On October 22, 2010, Atty. Gonzales filed a Motion for Parties to Enter Into Compromise Agreement proposing a scheme for the distribution of petitioner's remaining assets — consisting of land, a building, sewing machines, and furniture and fixtures — among the creditors in proportion to their credits. On May 26, 2011, petitioner, through its President Epifanio C. Ramos, Jr., and TRC entered into a Dacion en Pago by Compromise Agreement, whereby petitioner agreed to transfer a 351-square meter parcel of land with improvements in Mandaluyong City to TRC in full payment of petitioner's obligation, with the conformity of Atty. Gonzales as receiver.

On August 11, 2011, creditors TIDCORP and BPI filed a Joint Motion to Approve Agreement setting forth the outstanding principal obligations of petitioner to TIDCORP (₱9,044,708.15) and to BPI (₱11,069,575.82), and agreeing to accept petitioner's machineries valued at ₱350,000.00 to be divided equally between them. The agreement contained a provision — paragraph 5, "Waiver of Confidentiality" — stipulating that petitioner and the members of its Board of Directors shall waive all rights to confidentiality under R.A. No. 1405 and R.A. No. 8791, and grant TIDCORP and BPI access to any deposit or other accounts maintained by them with any bank. Petitioner was not a party or signatory to this agreement. Epifanio Ramos, Jr. filed a Manifestation and Motion asserting that petitioner has a personality separate and distinct from its stockholders and officers, and that he should not be held liable for expenses and taxes; he likewise objected to being bound by the agreement. Atty. Gonzales, in her Manifestation and Comment, signified conformity only to the sharing scheme of the sewing machine inventories but did not approve the waiver of confidentiality provision.

On November 15, 2011, the RTC rendered a Decision approving both the Dacion en Pago by Compromise Agreement and the Joint Motion to Approve Agreement, with the exception of paragraph 4 on expenses and taxes. The RTC ordered TRC to pay the receiver ₱106,000.00 in administrative expenses and directed the SEC to remove petitioner from the list of registered legal entities. Petitioner filed a motion for partial reconsideration, arguing that it was not a party or signatory to the TIDCORP-BPI agreement and that its silence or acquiescence could not bind it to the waiver of confidentiality. The RTC denied the motion on May 14, 2012, holding that petitioner's silence and acquiescence during the hearings was tantamount to admission and estopped it from questioning the agreement. Petitioner then elevated the matter directly to the Supreme Court via a petition for review on certiorari under Rule 45, raising a pure question of law.

• Express Written Waiver Required: Petitioner asserted that R.A. No. 1405 requires the express and written consent of the depositor before any third person or entity may examine bank deposits or bank records, and no such written consent was given by petitioner or its representative.
• Not a Party to the Agreement: Petitioner maintained that it was not a party or signatory to the compromise agreement between BPI and TIDCORP, and its silence or acquiescence is not tantamount to an admission that binds it to that agreement, especially the waiver of confidentiality of bank deposits.
• Relativity of Contracts: Petitioner invoked the rule on relativity of contracts, arguing that contracts can only bind the parties who entered into them and cannot favor or prejudice a third person, even if aware of and knowledgeable about such contract.
• Waivers Not Presumed: Petitioner maintained that waivers are not presumed but must be clearly and convincingly shown, either by express stipulation or acts admitting no other reasonable explanation.

• Estoppel (BPI): Respondent BPI countered that petitioner is estopped from questioning the BPI-TIDCORP compromise agreement because petitioner and its counsel participated in all the proceedings involving the subject compromise agreement and did not object when the compromise agreement was considered by the RTC.
• No Express Consent Required (TIDCORP): Respondent TIDCORP contended that the waiver of confidentiality under R.A. Nos. 1405 and 8791 does not require the express or written consent of the depositor, arguing that upon declaration of insolvency, the insolvency court obtains complete jurisdiction over the insolvent's property, including the authority to issue orders to look into the insolvent's bank deposits; since bank deposits are debts owed by the banks to petitioner, the receiver is empowered to recover them even without petitioner's express or written consent.
• Binding Force of Court-Approved Compromise (TIDCORP): TIDCORP argued that the BPI-TIDCORP compromise agreement approved by the RTC is binding on petitioner and its Board of Directors by reason of estoppel, and that since the compromise agreement was approved by the insolvency court, it has the force and effect of judgment, is immediately executory, and is not appealable except for vices of consent or forgery.

• Validity of Waiver of Confidentiality: Whether the petitioner is bound by the provision in the BPI-TIDCORP Joint Motion to Approve Agreement requiring petitioner to waive its rights to confidentiality of its bank deposits under R.A. No. 1405 and R.A. No. 8791, despite petitioner not being a party or signatory to the said agreement.

• Validity of Waiver of Confidentiality: No. The waiver-of-confidentiality provision is not binding on petitioner because it was inserted in an agreement to which petitioner was not a party or signatory, no written permission was given by petitioner as required by R.A. No. 1405, and the receiver did not conform to the waiver — all pursuant to the doctrine of relativity of contracts under Article 1311(1) of the Civil Code.

• Validity of Waiver of Confidentiality: Section 2 of R.A. No. 1405 enumerates the exceptions when bank-deposit records may be disclosed, one of which is "upon written permission of the depositor." In this case, the Joint Motion to Approve Agreement was executed solely by BPI and TIDCORP; no written consent was given by petitioner or its representative, Epifanio Ramos, Jr., waiving the confidentiality of its bank deposits. The waiver provision was merely inserted into the agreement without petitioner's express consent. Neither can petitioner be deemed to have given permission through its failure to object during the proceedings, because the existence of a waiver must be positively demonstrated — a waiver by implication is not normally countenanced. Mere silence on the part of the holder of the right should not be construed as a surrender thereof, and courts must indulge every reasonable presumption against the existence and validity of such waiver. Furthermore, because petitioner had been declared insolvent, all its property, assets, and effects had been assigned and conveyed to the receiver, Atty. Gonzales, pursuant to Section 32 of the Insolvency Law. The stipulation waiving confidentiality therefore required the approval and conformity of the receiver, since she had the right to recover all estate, assets, debts, and claims belonging to the insolvent debtor under Section 36 of the Insolvency Law. However, Atty. Gonzales did not sign or approve the Joint Motion to Approve Agreement; her Manifestation and Comment signified conformity only to the sharing scheme of the sewing machine inventories, with no indication that she conformed to the waiver of confidentiality. Finally, under the doctrine of relativity of contracts embodied in Article 1311(1) of the Civil Code, a compromise agreement as a contract is binding only upon the parties to the compromise and not upon non-parties. A judgment based entirely on a compromise agreement binds only the parties to the compromise and cannot bind a party litigant who did not take part in the compromise agreement. Since petitioner was not a party to the BPI-TIDCORP agreement, the waiver provision cannot bind it.

• Relativity of Contracts — Contracts take effect only between the parties, their assigns, and heirs, as provided in Article 1311(1) of the Civil Code. A compromise agreement, as a contract, is binding only upon the parties to the compromise and not upon non-parties. The sound reason for excluding non-parties is the absence of a vinculum or juridical tie — the efficient cause for the establishment of an obligation. Applied here, a judgment based entirely on a compromise agreement binds only the parties to the compromise approved by the court, and cannot bind a party litigant who did not take part in the compromise agreement or in the proceedings leading to its submission and approval.

• Waiver of Rights — The existence of a waiver must be positively demonstrated since a waiver by implication is not normally countenanced. A waiver must not only be voluntary but must have been made knowingly, intelligently, and with sufficient awareness of the relevant circumstances and likely consequences. There must be persuasive evidence to show an actual intention to relinquish the right. Mere silence on the part of the holder of the right should not be construed as a surrender thereof; courts must indulge every reasonable presumption against the existence and validity of such waiver.

• Secrecy of Bank Deposits — Under Section 2 of R.A. No. 1405, all deposits of whatever nature with banks or banking institutions in the Philippines are considered absolutely confidential and may not be examined, inquired, or looked into by any person, government official, bureau, or office, except in enumerated instances, including "upon written permission of the depositor." The exceptions are: (a) upon written permission of the depositor, (b) in cases of impeachment, (c) upon order of a competent court in cases of bribery or dereliction of duty of public officials, (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, the AMLC may inquire into a bank account upon order of any competent court.

• Effect of Insolvency on Debtor's Property — Upon declaration of insolvency and appointment of a receiver, all real and personal property, estate, and effects of the debtor are assigned and conveyed to the assignee/receiver pursuant to Section 32 of the Insolvency Law (Act No. 1956). Such assignment operates to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution. Under Section 36, the assignee has the power to sue and recover all estate, assets, debts, and claims belonging to or due to the debtor, and to take into possession all the estate of the debtor except property exempt by law from execution.

• "It is clear therefore that petitioner is not bound by the said provision since it was without the express consent of petitioner who was not a party and signatory to the said agreement. Neither can petitioner be deemed to have given its permission by failure to interpose its objection during the proceedings." — This passage states the ratio decidendi: that the absence of express written consent and the lack of party status render the waiver provision unenforceable, and that silence cannot substitute for the statutory requirement of written permission.

• "It is an elementary rule that the existence of a waiver must be positively demonstrated since a waiver by implication is not normally countenanced. The norm is that a waiver must not only be voluntary, but must have been made knowingly, intelligently, and with sufficient awareness of the relevant circumstances and likely consequences." — This passage articulates the canonical formulation of the waiver doctrine as applied to bank-deposit confidentiality, frequently cited in subsequent jurisprudence on the knowing and intelligent relinquishment of rights.

• "It is basic in law that a compromise agreement, as a contract, is binding only upon the parties to the compromise, and not upon non-parties. This is the doctrine of relativity of contracts." — This passage defines the controlling doctrine and its application to court-approved compromise agreements in insolvency proceedings.

• "a court judgment made solely on the basis of a compromise agreement binds only the parties to the compromise, and cannot bind a party litigant who did not take part in the compromise agreement." — This passage extends the relativity-of-contracts principle to judgments based on compromise agreements, establishing that judicial approval does not expand the binding effect beyond the actual parties to the compromise.

• Domingo Realty, Inc. vs. Court of Appeals, 542 Phil. 39 (2007) — Cited for the proposition that a judgment rendered on the basis of a compromise agreement in a civil case is final, unappealable, and immediately executory, and that a party claiming vitiated consent must file a motion for new trial or reconsideration within 15 days from notice of judgment.

• Republic vs. Sagun, G.R. No. 187567, Feb. 15, 2012, 666 SCRA 321 — Cited for the distinction between questions of law and questions of fact, supporting the Court's jurisdiction over the petition as raising a pure question of law.

• Government Service Insurance System vs. 15th Division of the Court of Appeals, G.R. No. 189206, June 8, 2011, 651 SCRA 661 — Cited for the enumeration of exceptions to the secrecy of bank deposits under R.A. No. 1405, including the AMLA exception.

• Premiere Dev't. Bank vs. Central Surety & Insurance Co., Inc., 598 Phil. 827 (2009) — Cited for the doctrine that waiver must be positively demonstrated, must be voluntary, knowing, and intelligent, and that mere silence should not be construed as a surrender of a right.

• Philippine National Bank vs. Banatao, 602 Phil. 508 (2009) — Cited for the doctrine of relativity of contracts and the principle that a judgment based on a compromise agreement binds only the parties to the compromise, not non-parties.

• Limpo vs. Court of Appeals, 517 Phil. 529 (2006) — Cited for Article 1311(1) of the Civil Code on the relativity of contracts and the absence of a vinculum or juridical tie as the reason for excluding non-parties.

• Section 2, Republic Act No. 1405 (Law on Secrecy of Bank Deposits), as amended — Declares all bank deposits absolutely confidential and prohibits examination except in enumerated instances, including "upon written permission of the depositor." Applied to hold that no written permission was given by petitioner, so the waiver provision was ineffective.

• Republic Act No. 8791 (General Banking Law of 2000) — Cited alongside R.A. No. 1405 as the legal basis for the confidentiality of bank deposits that petitioner was purportedly waiving in the compromise agreement.

• Article 1311(1), Civil Code — Provides that contracts take effect only between the parties, their assigns, and heirs. Applied as the statutory basis for the doctrine of relativity of contracts to hold that the compromise agreement between TIDCORP and BPI cannot bind petitioner, which was not a party thereto.

• Section 32, Insolvency Law (Act No. 1956) — Governs the transfer of property to the assignee/receiver upon declaration of insolvency, vesting title to all property, estate, and effects of the insolvent debtor in the assignee. Applied to show that the receiver's conformity was necessary for the waiver provision but was not obtained.

• Section 36, Insolvency Law (Act No. 1956) — Enumerates the powers of the assignee/receiver, including the power to sue and recover all estate, assets, debts, and claims belonging to or due to the debtor, and to take into possession all the estate of the debtor. Applied to establish that the receiver had authority over petitioner's assets and that her conformity to the waiver was required but absent.

• Rule 45, 1997 Rules of Civil Procedure, as amended — Governs petitions for review on certiorari to the Supreme Court. Applied as the procedural vehicle for the petition, the Court finding that only a question of law was raised.

• Rule 37, 1997 Rules of Civil Procedure — Governs motions for new trial or reconsideration. Discussed in the context of available remedies for a party seeking to challenge a judgment based on a compromise agreement on grounds of fraud, mistake, or duress.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Bienvenido L. Reyes, and Francis H. Jardeleza concurred. No separate concurring opinions were written.