G.R. No. 189206 ; June 8, 2011
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. THE HONORABLE 15th DIVISION OF THE COURT OF APPEALS and INDUSTRIAL BANK OF KOREA, TONG YANG MERCHANT BANK, HANAREUM BANKING CORP., LAND BANK OF THE PHILIPPINES, WESTMONT BANK and DOMSAT HOLDINGS, INC., Respondents.

FACTS

This case is incident to Civil Case No. 99-1853, a collection of sum of money with damages filed by several banks (collectively “the Banks”) against Domsat Holdings, Inc. (Domsat) and the Government Service Insurance System (GSIS). The case stemmed from a Loan Agreement where the Banks lent US$11 Million to Domsat to finance the lease/purchase of a satellite from Intersputnik. GSIS issued a Surety Bond to secure the loan repayment. When Domsat defaulted, GSIS refused payment, alleging Domsat did not use the loan proceeds for the intended satellite rental but instead transferred the funds through Westmont Bank. During the hearing, GSIS requested a subpoena duces tecum for Westmont Bank’s custodian to produce ledgers and documents related to the accounts of Domsat and Philippine Agila Satellite, Inc. from 1997 to 2002. The RTC initially issued the subpoena but, upon the Banks’ motion to quash (arguing it was oppressive, violated bank deposit secrecy, and GSIS failed to advance costs), denied the quashal, finding the money deposited was the subject matter of litigation. However, upon a second motion for reconsideration, the RTC quashed the subpoena, invoking the ruling in Intengan v. Court of Appeals that foreign currency deposits are absolutely confidential and examinable only with the depositor’s written permission. GSIS’s motion for reconsideration was denied.

ISSUE

Whether the Regional Trial Court acted with grave abuse of discretion in quashing the subpoena duces tecum for the production of bank ledger and related documents, based on the alleged violation of the Foreign Currency Deposit Act.

RULING

The Supreme Court denied the petition. The Court held that the foreign currency deposits in question are governed by Republic Act No. 6426 (The Foreign Currency Deposit Act), which provides that such deposits are “absolutely confidential” and may be examined only upon the written permission of the depositor. The exception under Republic Act No. 1405 (The Bank Secrecy Law) for cases “where the money deposited or invested is the subject matter of the litigation” does not apply to foreign currency deposits under R.A. No. 6426 . The Court emphasized that the two laws have distinct coverage and purposes: R.A. No. 1405 applies to Philippine currency deposits, while R.A. No. 6426 applies to foreign currency deposits. Since the US$11 Million loan proceeds were deposited in a foreign currency account, the stricter confidentiality rule under R.A. No. 6426 applies. Therefore, without the written consent of the depositor (Domsat), the subpoena for the production of the bank ledger was properly quashed. The RTC did not commit grave abuse of discretion in issuing the assailed orders.