Salvacion vs. Central Bank of the Philippines

Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act No. 6426 (as amended by Presidential Decree No. 1246), which exempt foreign currency deposits from attachment, garnishment, or any court process, are inapplicable to foreign transient depositors (such as tourists) because the law was designed to encourage deposits from foreign lenders and investors to promote economic development, not to provide a safe haven for transient aliens to evade civil liability for wrongful acts committed in the Philippines.

The case arose from the brutal rape and four-day illegal detention of Karen Salvacion, a 12-year-old Filipino minor, by Greg Bartelli y Northcott, an American tourist who escaped from jail pending his criminal trial. The petitioners secured a favorable civil judgment awarding over One Million Pesos in damages. However, execution was thwarted when China Banking Corporation refused to garnish Bartelli’s foreign currency deposit, invoking the absolute confidentiality and exemption from attachment provisions of the Foreign Currency Deposit Act (RA 6426) and Central Bank Circular No. 960. This created a direct conflict between the statutory protection of foreign currency deposits and the victim’s fundamental right to recover damages from a judgment debtor who is a transient alien.

• On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coerced 12-year-old Karen Salvacion into accompanying him to his apartment in Makati.
• Bartelli detained Karen for four days (February 4-7, 1989), during which time he raped her ten times.
• Bartelli was arrested on February 7, 1989, but escaped from the Makati Municipal Jail on February 24, 1989, while his criminal cases (four counts of rape and serious illegal detention) were pending.
• During his arrest, police recovered from Bartelli items including a Dollar Check, a Peso passbook, and a Dollar Account passbook with China Banking Corporation (Account No. 54105028-2).
• Petitioners filed a civil suit for damages (Civil Case No. 89-3214) and secured a writ of preliminary attachment over Bartelli’s assets.
• On March 1, 1989, the Deputy Sheriff served a Notice of Garnishment on China Banking Corporation regarding Bartelli’s dollar deposit.
• China Banking Corporation refused to comply, invoking Section 113 of Central Bank Circular No. 960, which states that foreign currency deposits are exempt from attachment, garnishment, or any other court process.
• The Central Bank, in response to an inquiry, confirmed that Section 113 is absolute, admits no exception, and has not been repealed or amended.
• On March 29, 1990, the RTC of Makati rendered a default judgment in favor of petitioners, awarding P500,000 in moral damages to Karen, P300,000 to her parents, P100,000 in exemplary damages, and attorney’s fees.
• Bartelli’s dollar deposit was maintained for safekeeping during his temporary stay as a tourist; he was not a foreign lender or investor.

• Section 113 of CB Circular No. 960 is unconstitutional because:
  • It violates substantive due process by depriving petitioners of their right to garnish the deposit to satisfy a final judgment, rendering the judgment nugatory.
  • It violates the equal protection clause by granting foreign currency depositors an undue favor or class privilege unavailable to peso depositors.
  • It provides a safe haven for criminals to evade civil liability by simply converting their money into foreign currency.
  • The Monetary Board exceeded its quasi-legislative authority under Section 7 of RA 6426 by promulgating a rule that effectively repeals substantive rights granted under Rule 57 (Preliminary Attachment) and Rule 39 (Execution) of the Revised Rules of Court.
  • The law should not apply to transient aliens like Bartelli, as its purpose is to encourage foreign investment, not to protect tourists who commit crimes.

• Central Bank of the Philippines:
  • Section 113 is not an ultra vires act of the Monetary Board but is copied verbatim from Section 8 of RA 6426 as amended by PD 1246; thus, the exemption is granted by the legislature, not the Central Bank.
  • The provision does not violate due process because it is based on law, is reasonable, is enforced according to regular procedure, and applies to all members of a class (all foreign currency depositors).
  • The purpose of the law is to assure the development of the Foreign Currency Deposit System and the Offshore Banking System, encourage the inflow of foreign currency, and contribute to national economic development.
  • The law may be harsh, but it is still the law and must be complied with.
• China Banking Corporation:
  • Echoed the arguments of the Central Bank regarding the absolute nature of the exemption.
  • Expressed sympathy for the victim’s suffering but maintained that it is legally restrained from releasing the deposit and has no alternative but to follow the law.
  • Argued that the secrecy and exemption provisions apply to all foreign currency deposits without distinction as to the depositor’s status.

• Procedural Issues:
  • Whether the Supreme Court can entertain the instant petition for declaratory relief despite the general rule that original jurisdiction therefor rests with the lower courts.
• Substantive Issues:
  • Whether Section 113 of CB Circular No. 960 and Section 8 of RA 6426 (as amended by PD 1246) are unconstitutional for violating substantive due process and equal protection.
  • Whether the foreign currency deposit of a transient alien (tourist) is entitled to the statutory protection against attachment and garnishment.

• Procedural:
  • While the Supreme Court has no original jurisdiction over petitions for declaratory relief, exceptions are recognized where the petition has far-reaching implications and raises questions of transcendental importance that should be resolved.
  • The Court treated the petition as one for mandamus to compel respondents to comply with the writ of execution issued by the RTC of Makati.
• Substantive:
  • The Court declined to rule that Section 113 and the underlying statutory provisions are unconstitutional, recognizing the State’s legitimate interest in encouraging foreign currency deposits for economic development.
  • However, the Court held that the absolute exemption from attachment does not apply to foreign transient depositors like Bartelli.
  • The legislative intent, as gleaned from the Whereas clauses of PD Nos. 1034 and 1035, was to encourage deposits from foreign lenders and investors to develop the economy, not to shield transient tourists who deposit money merely for safekeeping during a short stay.
  • Applying the law to a transient alien who commits a wrongful act would produce an unjust result, allowing the alien to escape civil liability and negating Article 10 of the New Civil Code, which presumes that the law intended right and justice to prevail.
  • Respondents are required to comply with the writ of execution and release Bartelli’s dollar deposit to satisfy the judgment in favor of petitioners.

• Interpretation of Laws in Accord with Justice (Article 10, New Civil Code): In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. The Court utilized this principle to limit the application of the foreign currency deposit exemption to transients, as strict application would result in manifest injustice.
• Substantive Due Process: Laws must not be arbitrary, unreasonable, or oppressive. While the Court found the law generally reasonable for its intended economic purpose, applying it to shield a transient criminal from liability would be oppressive and violative of due process.
• Inapplicability of Statutes Based on Legislative Intent and Purpose: Statutes must be interpreted in light of their purpose. The protection of foreign currency deposits was intended for foreign lenders and investors to encourage economic development, not for transient tourists; therefore, the law is inapplicable to depositors outside this contemplation.
• Nemo ex proprio dolo consequitur actionem (No one should enrich himself tortiously at the expense of another): Cited as "Ninguno non deue enriquecerse tortizerzmente con damo de otro," this principle supports the ruling that the law should not be used as a device to allow a wrongdoer to escape liability.

• "In our predisposition to discover the 'original intent' of a statute, courts become the unfeeling pillars of the status quo."
• "But I also know, that laws and institutions must go hand in hand with the progress of the human mind... We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors."
• "The application of the law depends on the extent of its justice."
• "Ninguno non deue enriquecerse tortizerzmente con damo de otro." (No one should enrich himself tortiously at the expense of another.)
• "Call it what it may – but is there no conflict of legal policy here? Dollar against Peso? Upholding the final and executory judgment of the lower court against the Central Bank Circular protecting the foreign depositor?... This situation calls for fairness legal tyranny."

• Alliance of Government Workers (AGW) v. Ministry of Labor and Employment, 124 SCRA 1: Cited to justify the treatment of the petition for declaratory relief as a petition for mandamus, recognizing exceptions to the rule on jurisdiction when the petition has far-reaching implications.
• Nationalista Party v. Angelo Bautista, 85 Phil. 101: Cited for the procedural principle that the Supreme Court may treat a petition as one for mandamus despite being labeled otherwise.
• Aquino v. Comelec, 62 SCRA 275: Cited for the same procedural principle regarding the treatment of petitions.
• Padilla v. Padilla, 74 Phil. 377: Cited for the principle that in case of doubt, the law intends right and justice to prevail, supporting the interpretation that the statute should not be used to perpetuate injustice.

• Article 10, New Civil Code: Presumption that the legislature intended right and justice to prevail in case of doubt in interpretation.
• Section 113, Central Bank Circular No. 960: Provision exempting foreign currency deposits from attachment, garnishment, or any court process.
• Section 8, Republic Act No. 6426 (Foreign Currency Deposit Act), as amended by Presidential Decree No. 1246: Statutory basis for the confidentiality and exemption from attachment of foreign currency deposits.
• Section 7, Republic Act No. 6426: Authority of the Monetary Board to promulgate rules and regulations.
• Presidential Decree No. 1034: Establishing the Offshore Banking System; cited for its Whereas clauses indicating the purpose of encouraging deposits from foreign lenders and investors.
• Presidential Decree No. 1035: Expanding the foreign currency lending authority of depository banks; cited for its Whereas clauses on legislative intent.
• Rule 57, Revised Rules of Court: Provisions on Preliminary Attachment, which petitioners argued were effectively repealed by the CB Circular.
• Rule 39, Revised Rules of Court: Provisions on Execution of Judgments, which petitioners argued were affected by the absolute exemption.

• Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco, and Panganiban, JJ.: Concur in the result. (No separate concurring opinions were written in the decision provided).