G.R. No. L-20119. June 30, 1967
CENTRAL BANK OF THE PHILIPPINES, PETITIONER, VS. THE HONORABLE JUDGE JESUS P. MORFE AND FIRST MUTUAL SAVINGS AND LOANS ORGANIZATION, INC., RESPONDENTS.
CONCEPCION, C.J.:
This is an original action
for certiorari, prohibition and injunction, with preliminary injunction,
against an order of the Court of First Instance of Manila, the dispositive part of which reads:
“WHEREFORE, upon the petitioner filing an injunction bond in
the amount of P3,000.00, let a writ of preliminary preventive and/or mandatory
injunction issue, restraining the respondents, their agents or representatives,
from further searching the premises and properties and from taking custody of
the various documents and papers of the petitioner corporation, whether in its
main office or in any of its branches; and ordering the respondent Central Bank
and/or its co-respondents to return to the petitioner within five (5) days
from service on respondents of the writ of preventive and/or mandatory
injunction, all the books, documents, and papers so far seized from the petitioner pursuant to the aforesaid search warrant.”
Upon the filing of the petition herein and of the requisite
bond, we issued, on August 14, 1962, a writ of preliminary injunction
restraining and prohibiting respondents herein from enforcing the order above
quoted.
The main respondent in this case, the First Mutual Savings and
Loan Organization, Inc. — hereinafter referred to as the Organization — is a
registered non-stock corporation, the main purpose of which, according to its
Articles of Incorporation, dated February 14, 1961, is “to encourage x x x and implement savings and
thrift among its members, and to extend financial assistance in the form of
loans,” to them. The Organization
has three (3) classes of “members”[1]
namely: (a) founder members — who originally joined
the organization and have signed the pre-incorporation
papers — with the exclusive right
to vote and be voted for; (b) participating members — with “no right
to vote or be voted for” — to which category all other
members belong; except (c) honorary members, so made by the board
of trustees, — “at the exclusive discretion” thereof — due to
“assistance, honor, prestige or help extended in the propagation” of
the objectives of the Organization – without any pecuniary expenses on the part of said honorary members.
On February 14, 1962,
the legal department of the Central Bank of the Philippines — hereinafter
referred to as the Bank — rendered an opinion to the effect that the Organization and others of similar nature are
banking institutions, falling within the
purview of the Central Bank Act.[2]
Hence, on April 1 and 3, 1962, the Bank caused to be published in the
newspapers the following:
“A N N O U
N C E M E N T
“To correct any wrong impression which recent newspaper
reports on ‘savings and loan associations’ may have created in the minds of the
public and other interested parties, as well as to answer numerous inquires from the public, the Central Bank
of the Philippines wishes to announce that
all ‘savings and loan associations’ now in operation and other organizations
using different corporate names, but
engaged in operations similar in nature to said ‘associations’ HAVE NEVER
BEEN AUTHORIZED BY THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES TO
ACCEPT DEPOSIT OF FUNDS FROM THE PUBLIC NOR TO ENGAGE IN THE BANKING BUSINESS
NOR TO PERFORM ANY BANKING ACTIVITY OR FUNCTION IN THE PHILIPPINES.
“Such institutions violate Section 2 of the General Banking
Act, Republic Act No. 337, should they engage in the ‘lending of funds obtained
from the public through the receipts of deposits or the sale of bonds,
securities or obligations of any kind’ without authority from the Monetary
Board. Their activities and operations
are not supervised by the Superintendent of Banks and persons dealing with such
institutions do so at their risk.
“CENTRAL BANK OF THE
PHILIPPINES”,
Moreover, on April 23, 1962, the Governor of the Bank directed
the coordination of the investigation and gathering of evidence on the activities of the savings and loan
associations which are operating contrary to law.” Soon thereafter, or on
May 18, 1962, a member of the intelligence division of the Bank filed with the Municipal Court of Manila a
verified application for a search warrant against the Organization, alleging
that “after close observation and personal investigation, the premises at
No. 2745 Rizal Avenue, Manila” — in which the
offices of the Organization were housed — “are being used
unlawfully,” because said Organization is illegally engaged in banking
activities, “by receiving deposits
of money for deposit, disbursement, safekeeping or otherwise or transacts the
business of a savings and mortgage bank and/or building and loan association x x x without having first complied with the provisions
of Republic Act No. 337″
and that the articles, papers, or effects enumerated in a list attached to said
application, as Annex A thereof,3
are kept in said premises, and “being used or intended to be used
in the commission of a felony, to wit:
violation of Sections 2 and 6 of Republic Act No. 337.”4
Said articles, papers or effects are described in the aforementioned Annex A, as follows:
“I. BOOKS OF ORIGINAL ENTRY
(1) General Journal
(2) Columnar Journal
or Cash Book
(a) Cash Receipts
Journal or Cash Receipt Book
(b) Cash
Disbursements Journal or Cash Disbursement Book
“II. BOOKS OF FINAL ENTRY
(1)
General Ledger
(2) Individual
Deposits and Loans Ledgers
(3) Other Subsidiary
Ledgers
“III. OTHER
ACCOUNTING RECORDS
(1)
Application for Membership
(2)
Signature Card
(3)
Deposit Slip
(4) Passbook Slip
(5)
Withdrawal Slip
(6)
Tellers Daily Deposit Report
(7)
Application for Loan Credit Statement
(8)
Credit Report
(9)
Solicitor’s Report
(10)
Promissory Note
(11) Indorsement
(12)
Co-makers’ Statements
(13)
Chattel Mortgage Contracts
(14)
Real Estate Mortgage Contracts
(15)
Trial Balance
(16)
Minutes Book – Board of Directors
“IV. FINANCIAL STATEMENTS
(1) Income and
Expenses Statements
(2) Balance Sheet
or Statement of Assets and Liabilities
“V. OTHERS
(1) Articles of
Incorporation
(2) By-Laws
(3) Prospectus,
Brochures, Etc.
(4) And other
documents and articles which are being used or intended to be used in unauthorized
banking activities and operations contrary to law.”
Upon the filing of said application, on May 18, 1962, Hon. Roman Cancino, as Judge of the said municipal court, issued the
warrant above referred to,5 commanding the search of the
aforesaid premises at No. 2745 Rizal Avenue, Manila,
and the seizure of the foregoing articles, there being “good and
sufficient reasons to believe” – upon examination, under oath, of a
detective of the Manila Police Department and said intelligence officer of the
Bank — that the Organization has under its control, in the address given,
the aforementioned articles, which are the subject of the offense adverted to
above or intended to be used as means for the commission of said offense.
Forthwith, or on the same date, the Organization commenced Civil
Case No. 50409 of the Court of First Instance of Manila, an original action for
“certiorari, prohibition, with writ of preliminary injunction and/or writ
of preliminary mandatory injunction,” against said municipal court, the
Sheriff of Manila, the Manila Police Department, and the Bank, to annul the
aforementioned search warrant, upon the ground that, in issuing the same, the
municipal court had acted “with grave abuse of discretion, without
jurisdiction and/or in excess of jurisdiction” because: (a) “said
search warrant is a roving commission, general in its terms x x x;” (b) “the use of
the word ‘and others’ in the search warrant x x x permits the
unreasonable search and seizure of documents which have no relation, whatsoever to any specific criminal act x x x;” and (c) “no
court in the Philippines has any
jurisdiction to try a criminal case against a corporation x x x.”
The Organization,
likewise, prayed that, pending hearing of the case on the merits, a writ of
preliminary injunction be issued ex–parte
restraining the aforementioned search
and seizure, or, in the alternative, if the acts complained of, have been
partially performed, that a writ of preliminary mandatory injunction be
forthwith issued ex–parte, ordering the
preservation of the status quo of the parties, as well as the immediate return to the Organization of the documents and papers so far seized under the search warrant in question. After
due hearing, on the petition for said injunction, respondent, Hon. Jesus P. Morfe,
Judge, who presided over the branch of the Court of First Instance of Manila to
which said Case No. 50409 had been assigned, issued, on July 2, 1962, the order
complained of.
Within the period stated
in said order, the Bank moved for a reconsideration thereof, which was
denied on August 7, 1962. Accordingly, the Bank commenced, in the Supreme Court, the present
action, against Judge Morfe and the Organization,
alleging that respondent Judge
had acted with grave abuse of discretion and in excess of his jurisdiction in
issuing the order in question.
At the outset, it should
be noted that the action taken by
the Bank, in causing the aforementioned
search to be made and the articles above listed to be seized, was predicated
upon the theory that the Organization
was illegally engaged in banking
– by receiving money for deposit, disbursement, safekeeping or otherwise, or transacting
the business of a savings and
mortgage bank and/or building and loan
association, — without first complying with the provisions of R. A. No. 337,
and that the order complained of assumes that the Organization had violated
sections 2 and 6 of said Act.6 Yet respondent Judge found the searches and seizures in question to be
unreasonable, through the following process of reasoning: the deposition given in support of the
application for a search warrant states that the deponent personally knows
that the premises of the Organization, at No. 2745 Rizal
Avenue, Manila, were being used unlawfully for banking
purposes. Respondent Judge deduced, from
this premise, that the deponent “knows specific banking transactions of
the petitioner with specific persons,” and, then concluded, that said deponent
“x x x could have, if
he really knew of actual violation of the law, applied for a warrant to search
and seize only books” or records
“covering the specific
purportedly illegal banking transactions of the petitioner with specific
persons who are the supposed victims of said illegal banking transactions
according to his knowledge. To authorize
and seize all the records listed in Annex A to said application for
search warrant, without reference to specific alleged victims of the purported
illegal banking transactions, would be to harrass the
petitioner, and its officers with a roving commission or fishing expedition for
evidence which could be discovered by normal intelligence operations or
inspection (not seizure) of books and records pursuant to Section 4 of Republic
Act No. 337 x x x.”
The concern thus shown by respondent Judge for the civil liberty
involved is, certainly, in line with the function of courts, as ramparts of
justice and liberty, and deserves the greatest encouragement and warmest
commendation. It lives up to the highest
traditions of the Philippine Bench, which underlies the people’s faith in and
adherence to the Rule of Law and the democratic principles in this part of the
World.
At the same time, it cannot be gainsaid that the Constitutional injunction against
unreasonable searches and seizures seeks to forestall, not purely abstract or
imaginary evils, but specific and concrete ones. Indeed, unreasonableness is, in the very nature of things, a
condition dependent upon the circumstances surrounding each case, in much the
same way as the question whether or not “probable cause” exists is
one which must be decided in the light of the conditions obtaining in given
situations.
Referring particularly to the one at bar, it is not clear from
the order complained of whether respondent Judge opined that the above mentioned
statement of the deponent – to the effect that the Organization was engaged in
the transactions mentioned in his deposition – deserved credence or not. Obviously, however, a mere disagreement with
Judge Cancino, who issued the warrant, on the
credibility of said statement, would not justify the conclusion that said
municipal Judge had committed a
grave abuse of discretion, amounting to lack of jurisdiction or excess of
jurisdiction. Upon the other hand, the
failure of the witness to mention particular individuals does not necessarily
prove that he had no personal knowledge of specific illegal
transactions of the Organizations, for the witness might be acquainted with
such specific transactions, even if the names of the individuals
concerned were unknown to him.
Again, the aforementioned order would seem to assume that an
illegal banking transaction, of the kind contemplated in the contested action
of the officers of the Bank, must always connote the existence of a
“victim.” If this term is used to denote a party whose interests have
been actually injured, then the assumption is not necessarily
justified. The law requiring compliance
with certain requirements before anybody can engage in banking obviously seeks
to protect the public against actual, as well as potential, injury. Similarly,
we are not aware of any rule limiting the use of search warrants to papers or
effects which cannot be secured otherwise.
The line of reasoning of
respondent Judge might, perhaps, be
justified if the acts imputed to the Organization consisted of isolated
transactions, distinct and detached from the type of business in which it is generally engaged. In
such case, it may be necessary to specify or identify the parties involved in
said isolated transactions, so that the search and seizure be limited to the
records pertinent thereto. Such, however, is not the situation
confronting us. The records suggest
clearly that the transactions objected to by the Bank constitute the general pattern of the business of the
Organization. Indeed, the main
purpose thereof, according to its By-laws, is “to extend financial assistance, in the form of loans, to its
members,” with funds deposited by them.
It is true, that such funds are referred to – in the Articles of
Incorporation and the By-laws – as their “savings,” and that the
depositors thereof are designated as “members,” but, even a cursory
examination of said documents will readily show that anybody can be a
depositor and thus be a “participating member.” In other words, the
Organization is, in effect, open to the “public” for deposit
accounts, and the funds so raised may be lent by the Organization. Moreover, the power to so dispose of said
funds is placed under the exclusive authority of the “founder
members,” and “participating members” are expressly denied
the right to vote or be voted for, their “privileges and
benefits,” if any, being limited to those which the board of trustee may, in
its discretion, determine from time to time. As a consequence, the “membership” of
the ”participating members” is purely nominal in nature. This situation is fraught, precisely, with the very dangers or evils which
Republic Act No. 337 seeks to forestall, by exacting compliance with the
requirements of said Act, before the transactions in question could be
undertaken.
It is interesting to
note, also, that the Organization does not seriously contest the main facts,
upon which the action of the Bank is based. The principal issue raised by the Organization is predicated upon the
theory that the aforementioned transactions of the Organization do not amount
to “banking,” as the term is used in Republic Act No. 337. We are satisfied, however, in the light of
the circumstances obtaining in this
case, that the Municipal Judge did not commit a grave abuse of discretion in finding that there was probable cause that the
Organization had violated Sections 2 and 6 of the aforesaid law and in issuing
the warrant in question, and that, accordingly, and in line with Alvarez vs.
Court of First Instance (64 Phil. 33), the search and seizure complained of
have not been proven to be unreasonable.
WHEREFORE, the order of respondent Judge dated July 2,
1962, and the writ of preliminary mandatory injunction issued in compliance
therewith are hereby annulled, and the writ of preliminary injunction issued by
this Court on August 14, 1962, accordingly, made permanent, with costs against
respondent First Mutual Savings and Loan Organization, Inc.
IT IS SO ORDERED.
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez,
and Ruiz Castro, JJ., concur.
[1] Pursuant
to the by-laws of the Organization, as
amended, on March 29, 1961.
[2]
Republic Act No. 337.
3
P. 106, Rollo.
4
Annex 6 to Annex E, p. 105 of the Rollo.
5
P. 107, Rollo.
6
“Section 2. Only duly authorized persons and entities may
engage in the lending of funds obtained from the public through the receipt of deposits or the sale
of bonds securities or obligations of any kind, and all entities regularly conducting
such operations shall be considered as
banking institutions and shall be subject to the provisions of this Act, of the
Central Bank Act, and of other
pertinent laws. The terms ‘banking
institution’ and ‘bank,’ as used in
this Act, are synonymous and interchangeable and specifically include banks, banking institutions, commercial banks, savings banks, mortgage
banks, trust companies, building and loan associations, branches and agencies
in the Philippines of foreign banks,
hereinafter called Philippine
branches, and all other corporations, companies, partnerships, and associations
performing banking functions in the Philippines.
“Persons
and entities which receive deposits only occasionally shall not be considered
as banks, but such persons and entities shall be subject to regulations by the
Monetary Board of the Central Bank; nevertheless, in no case may the Central
Bank authorize the drawing of checks against deposits not maintained in banks,
or branches or agencies thereof.
“The
Monetary Board may similarly regulate the activities of persons and entities
which act as agents of banks.”
“Section 6. No
person, association or corporation not conducting the business of a commercial
banking corporation, trust corporation, savings and mortgage bank, or building
and loan association, as defined in this Act, shall advertise or hold itself
but as being engaged in the business of such bank, corporation or association,
or use in connection with its business title the word or words ‘bank,’
‘banking,’ ‘banker,’ ‘building and loan association,’ ‘trust company,’ or other
words of similar import, or solicit or receive deposits of money for deposit,
disbursement, safekeeping, or otherwise, or transact in any manner the business
of any such bank, corporation or association, without having first complied
with the provisions of this Act in so
far as it relates to commercial banking corporations, trust corporations,
savings and mortgage banks, or building
and loan associations, as the case may be. For any violation of the provisions of this section by a corporation,
the officers and directors thereof
shall be jointly and severally
liable. Any violation of the provisions
of the section shall be punished by a fine of five hundred pesos for each day
during which such violation is continued or repeated, and in default of the
payment thereof, subsidiary imprisonment
as prescribed by law.”