When Foreign Currency Deposit Secrecy Yields to the Pursuit of Justice

G.R. No. 94723, August 21, 1997

Imagine a law designed to attract foreign investment inadvertently shielding a perpetrator from facing justice. This is the dilemma at the heart of the Salvacion vs. Central Bank case. The case highlights the tension between protecting foreign currency deposits to bolster the economy and ensuring that wrongdoers are held accountable for their actions.

In this landmark case, the Supreme Court grappled with the applicability of the Foreign Currency Deposit Act (R.A. 6426) and its implementing circulars to a situation involving a foreign national who committed a heinous crime. The central question was whether the law’s guarantee of secrecy and exemption from attachment for foreign currency deposits should be absolute, even when the depositor is liable for damages resulting from criminal acts.

The Legal Framework Protecting Foreign Currency Deposits

The Foreign Currency Deposit Act (R.A. 6426), as amended, aims to encourage the inflow of foreign currency into the Philippine banking system. This law provides certain incentives and protections to depositors, primarily to attract foreign investment and stimulate economic growth.

A key provision of this law is the guarantee of secrecy for foreign currency deposits. This means that these deposits are generally protected from being examined, inquired into, or looked into by any person or entity, whether government or private. Section 8 of R.A. 6426, as amended by P.D. 1246, explicitly states:

‘All foreign currency deposits authorized under this Act… are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever.’

Central Bank Circular No. 960, implementing the Foreign Currency Deposit Act, echoes this provision, further emphasizing the exemption of foreign currency deposits from attachment or garnishment. These legal safeguards were put in place to foster confidence in the Philippine banking system and attract foreign capital.

The Heinous Crime and the Fight for Justice

The case stemmed from the reprehensible acts of Greg Bartelli, an American tourist, who was found guilty of raping a minor, Karen Salvacion. Bartelli was able to lure the 12-year-old victim to his apartment where he detained and abused her for several days. He was later arrested, but escaped from jail while facing criminal charges.

Karen and her parents filed a civil case for damages against Bartelli. The court ruled in their favor, awarding them substantial damages to compensate for the trauma and suffering inflicted upon Karen. When the Salvacions attempted to execute the judgment by garnishing Bartelli’s dollar deposit with China Banking Corporation, the bank refused, citing the protection afforded to foreign currency deposits under R.A. 6426 and Central Bank Circular No. 960.

The Salvacions then filed a petition for declaratory relief with the Supreme Court, arguing that the absolute exemption from attachment violated their right to due process and equal protection under the law. They contended that the law should not be used to shield criminals from civil liability.

The Supreme Court recognized the gravity of the situation and the need to balance the policy of protecting foreign currency deposits with the fundamental principles of justice and fairness. The Court noted:

‘In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court. Legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli.’

Key Events in the Case

• February 4-7, 1989: Greg Bartelli detains and rapes Karen Salvacion.
• February 16, 1989: Criminal cases filed against Bartelli; civil case for damages filed by the Salvacions.
• February 24, 1989: Bartelli escapes from jail.
• March 1, 1989: Notice of Garnishment served on China Banking Corporation.
• March 13 & 20, 1989: China Banking Corporation invokes R.A. 1405 and Central Bank Circular No. 960 to refuse garnishment.
• March 29, 1990: Court renders judgment in favor of the Salvacions in the civil case.

The Court emphasized that the purpose of the Foreign Currency Deposit Act was to attract foreign lenders and investors who would contribute to the country’s economic development, not to protect transient individuals from their criminal liabilities.

‘Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encourage by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time.’

The Impact and Lessons from Salvacion vs. Central Bank

The Supreme Court ultimately ruled that the exemption from attachment under R.A. 6426 and Central Bank Circular No. 960 was not applicable in this particular case. The Court ordered China Banking Corporation to comply with the writ of execution and release Bartelli’s dollar deposit to satisfy the judgment in favor of the Salvacions.

This decision established an important precedent, clarifying that the protection afforded to foreign currency deposits is not absolute and cannot be used to shield individuals from the consequences of their criminal acts. The Court balanced the need to promote foreign investment with the fundamental right of victims to seek redress for their grievances.

Key Lessons

• The protection of foreign currency deposits is not absolute and can be overridden in cases involving criminal liability.
• Laws designed for economic development should not be interpreted in a way that leads to injustice or inequity.
• Courts have the power to adapt legal principles to address unique circumstances and ensure fairness.

Frequently Asked Questions

Q: Does the Foreign Currency Deposit Act always protect foreign currency deposits from garnishment?

A: No, the Salvacion vs. Central Bank case clarified that the protection is not absolute and may not apply in cases where the depositor is liable for damages arising from criminal acts.

Q: What is the main purpose of the Foreign Currency Deposit Act?

A: The primary purpose is to encourage the inflow of foreign currency into the Philippine banking system to promote economic development.

Q: Can a foreign tourist’s dollar deposit be garnished to satisfy a judgment against them?

A: It depends on the circumstances. If the judgment arises from a criminal act committed by the tourist, the deposit may be subject to garnishment, as ruled in the Salvacion case.

Q: What factors did the Supreme Court consider in the Salvacion case?

A: The Court considered the heinous nature of the crime, the need to provide redress to the victim, and the fact that the depositor was a transient rather than a long-term investor.

Q: How does this case affect banks in the Philippines?

A: Banks must exercise caution and consider the potential liabilities of foreign currency depositors, especially in cases involving criminal acts.

Q: What are the implications of this ruling for victims of crimes committed by foreigners in the Philippines?

A: The ruling provides a legal avenue for victims to seek compensation from foreign perpetrators, even if their assets are held in foreign currency deposits.

Q: How can I ensure my rights are protected if I am a victim of a crime committed by a foreigner?

A: Seek legal advice immediately to explore your options for filing criminal and civil cases, and to determine if assets can be garnished to satisfy any judgment in your favor.

ASG Law specializes in Criminal Law and Civil Litigation. Contact us or email hello@asglawpartners.com to schedule a consultation.