Oral defamation, slander - G.R. No. 160351

See - G.R. No. 160351





"x x x.

The issues are: (1) whether the Court of Appeals erred in sustaining the conviction of petitioner for grave oral defamation in Criminal Case No. 139-94, and (2) whether the Court of Appeals erred in sustaining the conviction of petitioner for serious slander by deed in Criminal Case No. 140-94.

Anent the first issue, Article 358 of the Revised Penal Code provides:

Art. 358. Slander. – Oral defamation shall be punished by arresto mayor in its maximum period to prision correccional in its minimum period if it is of a serious and insulting nature; otherwise, the penalty shall be arresto menor or a fine not exceeding 200 pesos.

Slander is libel committed by oral (spoken) means, instead of in writing. The term oral defamation or slander as now understood, has been defined as the speaking of base and defamatory words which tend to prejudice another in his reputation, office, trade, business or means of livelihood.[20]

There is grave slander when it is of a serious and insulting nature.  The gravity of the oral defamation depends not only (1) upon the expressions used, but also (2) on the personal relations of the accused and the offended party, and (3) the circumstances surrounding the case.[21]  Indeed, it is a doctrine of ancient respectability that defamatory words will fall under one or the other, depending not only upon their sense, grammatical significance, and accepted ordinary meaning judging them separately, but also upon the special circumstances of the case, antecedents or relationship between the offended party and the offender, which might tend to prove the intention of the offender at the time.[22]

In our previous rulings, we held that the social standing and position of the offended party are also taken into account and thus, it was held that the slander was grave, because the offended party had held previously the Office of Congressman, Governor, and Senator and was then a candidate for Vice-President,[23] for which no amount of sophistry would take the statement out of the compass of grave oral defamation.[24]  However, we have, likewise, ruled in the past that uttering defamatory words in the heat of anger, with some provocation on the part of the offended party constitutes only a light felony.[25]

In the case at bar, as a public official, petitioner, who was holding the position of Councilor at that time, is hidebound to be an exemplar to society against the use of intemperate language particularly because the offended party was a Vice-Mayor.  However, we cannot keep a blind eye to the fact that such scathing words were uttered by him in the heat of anger triggered by the fact, as found by the Court of Appeals, that complainant refused, without valid justification to approve the monetization of accrued leave credits of petitioner.  In a manner of speaking, she sowed the wind that reaped the storm.

          In the words of the Court of Appeals:

The already existing animosity between them does not vest in the complainant the prerogative to deny petitioner a right to which he was legally entitled.  Exemplary damages cannot be recovered as a matter of right.  They are designed to permit the court to mould behavior that has socially deleterious consequences.  Its imposition is required by public policy to suppress the wanton acts of the offender. It cannot be invoked as a matter of right. x x x [26]

The above findings of fact of the Court of Appeals supported by substantial evidence are conclusive and binding on the parties and are not reviewable by this Court.[27]  Considering this finding, the Court of Appeals not only should have struck out the award of exemplary damages but should have modified as well the offense committed to be of simple nature punishable by arresto mayor or a fine not exceeding P200.00 under the above-quoted Art. 358 of the Revised Penal Code.

In Pader v. People,[28] complainant was conversing with his political leaders at the terrace of his house at Morong, Bataan, when petitioner appeared at the gate and shouted “putang ina mo Atty. Escolango.  Napakawalanghiya mo!”  The latter was dumbfounded and embarrassed.  At that time, Atty. Escolango was a candidate for Vice Mayor of Morong, Bataan in the elections of 8 May 1995. We held that the offense committed was only slight slander.  We explained why in this wise:

The issue is whether petitioner is guilty of slight or serious oral defamation.  In resolving the issue, we are guided by a doctrine of ancient respectability that defamatory words will fall under one or the other, depending not only upon their sense, grammatical significance, and accepted ordinary meaning judging them separately, but also upon the special circumstances of the case, antecedents or relationship between the offended party and the offender, which might tend to prove the intention of the offender at the time.

Unquestionably, the words uttered were defamatory.  Considering, however, the factual backdrop of the case, the oral defamation was only slight.  The trial court, in arriving at its decision, considered that the defamation was deliberately done to destroy Atty. Escolango’s reputation since the parties were political opponents.

We do not agree.  Somehow, the trial court failed to appreciate the fact that the parties were also neighbors; that petitioner was drunk at the time he uttered the defamatory words; and the fact that petitioner’s anger was instigated by what Atty. Escolango did when petitioner’s father died.  In which case, the oral defamation was not of serious or insulting nature.

In Reyes v. People [137 Phil. 112, 120 (1969)], we ruled that the expression “putang ina mo” is a common enough utterance in the dialect that is often employed, not really to slander but rather to express anger or displeasure.  In fact, more often, it is just an expletive that punctuates one’s expression of profanity.  We do not find it seriously insulting that after a previous incident involving his father, a drunk Rogelio Pader on seeing Atty. Escolango would utter words expressing anger.  Obviously, the intention was to show his feelings of resentment and not necessarily to insult the latter.  Being a candidate running for vice mayor, occasional gestures and words of disapproval or dislike of his person are not uncommon.

In similar fashion, the trial court erred in awarding moral damages without proof of suffering. Accordingly, petitioner may be convicted only of slight oral defamation defined and penalized under Article 358, Revised Penal Code, prescribing the penalty of arresto mayor or a fine not exceeding 200 pesos.[29] (Emphasis supplied.)

Similarly, in Cruz v. Court of Appeals,[30]  petitioner and complainant, a Municipal Judge, were next door neighbors.  Animosity grew between their two families because of some disputes. Petitioner resented the practice of complainant of throwing garbage and animal excrement into her premises. There was also a boundary dispute between petitioner's mother and complainant, which was the subject of a civil suit for "Recovery of Possession, Ownership, Enforcement of Legal Easement and Abatement of Nuisance" filed by the mother before the Court of First Instance of Iloilo against complainant.  Additionally, petitioner's mother had previously instituted an administrative complaint against the complainant before the Supreme Court, but the same was dismissed.  There was a pent-up feeling of being aggrieved, resentment, anger, and vexation on petitioner's part, culminating in her outburst against complainants.  For having called the complainant judge "land grabber," "shameless" and "hypocrite," petitioner was charged and subsequently convicted by the Court of First Instance of three separate offenses of Grave Oral Defamation committed on 5, 6 and 8 August 1976.  On appeal, the Court of Appeals affirmed the verdicts of conviction.  On review, however, we held that although the abusive remarks may ordinarily be considered as serious defamation, under the environmental circumstances of the case, there having been provocation on complainant's part, and the utterances complained of having been made in the heat of unrestrained anger and obfuscation, petitioner is liable only for the crime of Slight Oral Defamation.  Petitioner was sentenced to pay a fine of P200.00 in each of the criminal cases, with subsidiary imprisonment in case of insolvency, and to pay the costs.

Guided by the foregoing precedents, we find petitioner guilty only of slight oral defamationbecause of the attendant circumstances in the case at bar.

Lest we be misconstrued, the Court does not condone the vilification or use of scurrilous language on the part of petitioner, but following the rule that all possible circumstances favorable to the accused must be taken in his favor, it is our considered view that the slander committed by petitioner can be characterized as slight slander following the doctrine that uttering defamatory words in the heat of anger, with some provocation on the part of the offended party, constitutes only a light felony.[31] 

In fact, to be denied approval of monetization of leave without valid justification, but as an offshoot of a political dissension may have been vexing for petitioner and may have been perceived by him as provocation that triggered him to blow his top and utter those disparaging words.  In hindsight, to be denied monetization of leave credits must have stirred upon the petitioner a feeling akin to begging for money that he was legally entitled to.  This oppressive conduct on the part of complainant must have scarred petitioner’s self-esteem, too, to appear as begging for money.  But again, this is not an excuse to resort to intemperate language no matter how such embarrassment must have wreaked havoc on his ego.

x x x."

Changes to investment rules pushed | Inquirer Business

See - Changes to investment rules pushed | Inquirer Business





"x x x.

MANILA, Philippines—The Joint Foreign Chambers has urged lawmakers to pass amendments to the Foreign Investments Act that will allow more foreign nationals to practice in the Philippines and make it easier for more foreign investors to set up shop in the country.

In a statement, JFC stressed that the “practice of professions is not a germane provision in the Foreign Investment Negative List (FINL), a document created by the Foreign Investment Act. The FINL is intended to catalogue limitations on foreign equity in non-banking business sectors.”

“The constitution creates a policy bias in favor of Philippine citizens, but not a strict legal barrier to the participation of foreign professionals,’” the group explained.

According to the JFC, there are 47 laws governing specific professions, and 42 contain “reciprocity” provisions allowing foreigners to practice their profession in the Philippines, provided their countries of origin also allow Filipino professionals to practice there.

A Supreme Court rule, meanwhile, limits the practice of law to Philippine nationals. Four laws regulating criminologists, foresters, pharmacists, and radio and X-ray technologists also state that these professions are restricted to Philippine nationals and contain no reciprocity provision, it added.

“Considering that certain laws governing each profession allow foreign nationals to practice in the Philippines under reciprocity arrangements, it is extremely misleading to include such item in the FINL as a nationalized activity. This effectively discourages foreign professionals who could otherwise be allowed to practice here by virtue of reciprocity from working in the Philippines and sharing their ideas and technical know-how, contrary to the inclusive policy of the [Foreign Investments Act],” the group stressed.

Meanwhile, the JFC noted that the existing Foreign Investment Act allows 100-percent foreign ownership in domestic market activities above a minimum investment of $100,000 for those with advanced technology or have at least 50 employees, or otherwise $200,000.

“Operationally speaking, a $100,000 enterprise—only a little over P4.3 million—cannot immediately sustain a labor force of 50 persons. When the law was enacted in 1991, the minimum wage in the National Capital Region was P142 and today, it is P466. P4.3 million is not enough to sustain a labor force of 50 persons at the current minimum wage,” the JFC explained.

“So as not to render pointless this provision of the law, and to align it with the spirit of the FlA, there is a need to retain the employment requirement but lower the threshold to a more reasonable number. This will allow smaller investments to come in and go into industries like tourism, which will facilitate the entry of more foreign nationals and investments,” it added.

Lowering this threshold is expected to benefit the country’s tourism industry, as it will allow more foreign nationals to invest in small retail establishments to meet the cultural and dietary needs of these nationals such as the provision of foreign language guide services, putting up restaurants and the like.

x x x ."

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Service incentive leave

Pol Sangalang shared Labor Law Made Easy's status update.

Labor Law Made Easy

Did you know that small retail and service establishments are exempted from granting SERVICE INCENTIVE LEAVE to their employees?

Article 95 of the Labor Code provides: 

"Right to service incentive leave. (a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay at least five days and those employed in establishments regularly employing less than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor after considering the viability or financial condition of such establishment."

Before an injunctive writ is issued, it is essential that the following requisites are present: (1) the existence of a right to be protected and (2) the acts against which the injunction is directed are violative of the right. - G.R. NO. 164324

See - G.R. NO. 164324





"x x x.

 Before an injunctive writ is issued, it is essential that the following requisites are present: (1) the existence of a right to be protected and (2) the acts against which the injunction is directed are violative of the right. The onus probandi is on the movant to show that the invasion of the right sought to be protected is material and substantial, that the right of the movant is clear and unmistakable, and that there is an urgent and paramount necessity for the writ to prevent serious damage.[35]

         San Miguel claims that the requisites for the valid issuance of a writ of preliminary injunction were clearly established. The clear and unmistakable right to the exclusive use of the mark “Ginebra” was proven through the continuous use of “Ginebra” in the manufacture, distribution, marketing and sale of gin products throughout the Philippines since 1834. To the gin-drinking public, the word “Ginebra” does not simply indicate a kind of beverage; it is now synonymous with San Miguel’s gin products.[36]

         San Miguel contends that “Ginebra” can be appropriated as a trademark, and there was no error in the trial court’s provisional ruling based on the evidence on record. Assuming that “Ginebra” is a generic word which is proscribed to be registered as a trademark under Section 123.1(h)[37] of Republic Act No. 8293 or the Intellectual Property Code (IP Code),[38] it can still be appropriated and registered as a trademark under Section 123.1(j)[39] in relation to Section 123.2[40] of the IP Code, considering that “Ginebra” is also a mark which designates the kind of goods produced by San Miguel.[41] San Miguel alleges that although “Ginebra,” the Spanish word for “gin,” may be a term originally incapable of exclusive appropriation, jurisprudence dictates that the mark has become distinctive of San Miguel’s products due to its substantially exclusive and continuous use as the dominant feature of San Miguel’s trademarks since 1834. Hence, San Miguel is entitled to a finding that the mark is deemed to have acquired a secondary meaning.[42] San Miguel states that Tanduay failed to present any evidence to disprove its claims; thus, there is no basis to set aside the grant of the TRO and writ of preliminary injunction.[43]

         San Miguel states that its disclaimer of the word “Ginebra” in some of its registered marks is without prejudice to, and did not affect, its existing or future rights over “Ginebra,” especially since “Ginebra” has demonstrably become distinctive of San Miguel’s products.[44] San Miguel adds that it did not disclaim “Ginebra” in all of its trademark registrations and applications like its registration for “Ginebra Cruz de Oro,” “Ginebra Ka Miguel,” “Ginebra San Miguel” bottle, “Ginebra San Miguel,” and “Barangay Ginebra.”[45]

         Tanduay asserts that not one of the requisites for the valid issuance of  a preliminary injunction is present in this case. Tanduay argues that San Miguel cannot claim the exclusive right to use the generic word “Ginebra” for its gin products based on its registration of the composite marks “Ginebra San Miguel,” “Ginebra S. Miguel 65,” and “La Tondeña Cliq! Ginebra Mix,” because in all of these registrations, San Miguel disclaimed any exclusive right to use the non-registrable word “Ginebra” for gin products.[46] Tanduay explains that the word “Ginebra,” which is disclaimed by San Miguel in all of its registered trademarks, is an unregistrable component of the composite mark “Ginebra San Miguel.” Tanduay argues that this disclaimer further means that San Miguel does not have an exclusive right to the generic word “Ginebra.”[47] Tanduay states that the word “Ginebra” does not indicate the source of the product, but it is merely descriptive of the name of the product itself and not the manufacturer thereof.[48]

         Tanduay submits that it has been producing gin products under the brand names Ginebra 65, Ginebra Matador, and Ginebra Toro without any complaint from San Miguel. Tanduay alleges that San Miguel has not filed any complaint against other liquor companies which use “Ginebra” as part of their brand names such as Ginebra Pinoy, a registered trademark of Webengton Distillery; Ginebra Presidente and Ginebra Luzon as registered trademarks of Washington Distillery, Inc.; and Ginebra Lucky Nine and Ginebra Santiago as registered trademarks of Distileria Limtuaco & Co., Inc.[49] Tanduay claims that the existence of these products, the use and registration of the word “Ginebra” by other companies as part of their trademarks belie San Miguel’s claim that it has been the exclusive user of the trademark containing the word “Ginebra” since 1834.

         Tanduay argues that before a court can issue a writ of preliminary injunction, it is imperative that San Miguel must establish a clear and unmistakable right that is entitled to protection. San Miguel’s alleged exclusive right to use the generic word “Ginebra” is far from clear and unmistakable. Tanduay claims that the injunction issued by the trial court  was based on its premature conclusion that “Ginebra Kapitan” infringes “Ginebra San Miguel.”[50]

         In Levi Strauss & Co. v. Clinton Apparelle, Inc.,[51] we held:

         While the matter of the issuance of a writ of preliminary injunction is addressed to the sound discretion of the trial court, this discretion must be exercised based upon the grounds and in the manner provided by law. The exercise of discretion by the trial court in injunctive matters is generally not interfered with save in cases of manifest abuse. And to determine whether there was grave abuse of discretion, a scrutiny must be made of the bases, if any, considered by the trial court in granting injunctive relief. Be it stressed that injunction is the strong arm of equity which must be issued with great caution and deliberation, and only in cases of great injury where there is no commensurate remedy in damages.[52]

         The CA upheld the trial court’s ruling that San Miguel has sufficiently established its right to prior use and registration of the word “Ginebra” as a dominant feature of its trademark.  The CA ruled that based on San Miguel’s extensive, continuous, and substantially exclusive use of the word “Ginebra,” it has become distinctive of San Miguel’s gin products; thus, a clear and unmistakable right was shown.

         We hold that the CA committed a reversible error. The issue in the main case is San Miguel’s right to the exclusive use of the mark “Ginebra.” The two trademarks “Ginebra San Miguel” and “Ginebra Kapitan” apparently differ when taken as a whole, but according to San Miguel, Tanduay appropriates the word “Ginebra” which is a dominant feature of San Miguel’s mark.

         It is not evident whether San Miguel has the right to prevent other business entities from using the word “Ginebra.” It is not settled (1) whether “Ginebra” is indeed the dominant feature of the trademarks, (2) whether it is a generic word that as a matter of law cannot be appropriated, or (3) whether  it is merely a descriptive word that may be appropriated based on the fact that it has acquired a secondary meaning.

         The issue that must be resolved by the trial court is whether a word like “Ginebra” can acquire a secondary meaning for gin products so as to prohibit the use of the word “Ginebra” by other gin manufacturers or sellers. This boils down to whether the word “Ginebra” is a generic mark that is incapable of appropriation by gin manufacturers. 

         In Asia Brewery, Inc. v. Court of Appeals,[53] the Court ruled that “pale pilsen” are generic words, “pale” being the actual name of the color and “pilsen” being the type of beer, a light bohemian beer with a strong hops flavor that originated in Pilsen City in Czechoslovakia and became famous in the Middle Ages,  and hence incapable of appropriation by any beer manufacturer.[54] Moreover, Section 123.1(h) of the IP Code states that a mark cannot be registered if it “consists exclusively of signs that are generic for the goods or services that they seek to identify.” 

         In this case, a cloud of doubt exists over San Miguel’s exclusive right relating to the word “Ginebra.”  San Miguel’s claim to the exclusive use of the word “Ginebra” is clearly still in dispute because of Tanduay’s claim that it has, as others have, also registered the word “Ginebra” for its gin products. This issue can be resolved only after a full-blown trial.

         In Ong Ching Kian Chuan v. Court of Appeals,[55] we held that in the absence of proof of a legal right and the injury sustained by the movant, the trial court’s order granting the issuance of an injunctive writ will be set aside,  for having been issued with grave abuse of discretion.

         We find that San Miguel’s right to injunctive relief has not been clearly and unmistakably demonstrated. The right to the exclusive use of the word “Ginebra” has yet to be determined in the main case.  The trial court’s grant of the writ of preliminary injunction in favor of San Miguel, despite the lack of a clear and unmistakable right on its part, constitutes grave abuse of discretion amounting to lack of jurisdiction.

x x x."

Redemption period; writ of possession - G.R. No. 167998

See - G.R. No. 167998





"x x x.

Essential to note, the injunction granted by the Makati RTC and upheld by this Court mainly enjoined respondent from consolidating its title over the foreclosed property.  It is not correct for petitioner to assume that the injunction also prohibits respondent from taking possession of the property.

          A writ of possession is a writ of execution employed to enforce a judgment to recover the possession of land.  It commands the sheriff to enter the land and give possession of it to the person entitled under the judgment.[20]  It may be issued in case of an extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No. 3135, as amended by Act No. 4118.[21]

          Under said provision, the writ of possession may be issued to the purchaser in a foreclosure sale either within the one-year redemption period upon the filing of a bond, or after the lapse of the redemption period, without need of a bond.[22]

          We have consistently held that the duty of the trial court to grant a writ of possession is ministerial.  Such writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond.  No discretion is left to the trial court.  Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8[23] of Act No. 3135.  Such question cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte.  The recourse is available even before the expiration of the redemption period provided by law and the Rules of Court.[24]

          To emphasize the writ’s ministerial character, we have in previous cases disallowed injunction to prohibit its issuance, just as we have held that issuance of the same may not be stayed by a pending action for annulment of mortgage or the foreclosure itself.[25]

          A writ of possession may also be issued after consolidation of ownership of the property in the name of the purchaser.  It is settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of sale. Hence, he is entitled to the possession of the property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title.  In such a case, the bond required in Section 7 of Act No. 3135 is no longer necessary.  Possession of the land then becomes an absolute right of the purchaser as confirmed owner.  Upon proper application and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court.[26]

          Inasmuch as respondent was enjoined to consolidate its title over the foreclosed property, possession thereof did not become an absolute right of respondent.  The temporary restraining order issued on March 13, 2000 and the writ of injunction that followed effectively halted the tolling of the redemption period three days short of its expiration.[27]

Nonetheless, respondent, as the purchaser in the foreclosure sale, may apply for a writ of possession during the redemption period.  In fact, it did apply for a writ on December 27, 1999, wellwithin the redemption period.  The San Fernando RTC, given its ministerial duty to issue the writ, therefore, should have acted on the ex parte petition.  The injunction order is of no moment because it should be understood to have merely stayed the consolidation of title.  As previously stated, an injunction is not allowed to prohibit the issuance of a writ of possession.  Neither does the pending case for annulment of foreclosure sale, mortgage contract, promissory notes and damages stay the issuance of said writ.

x x x."

PDIC power to investigate and examine banks - G.R. No. 176438

See - G.R. No. 176438





"x x x.

After an evaluation of the respective positions of the parties, the Court is of the view that the Monetary Board approval is not required for PDIC to conduct an investigation on the Banks.

          The disagreement stems from the interpretation of these two key provisions of the PDIC Charter.  The confusion can be attributed to the fact that although “investigation” and “examination” are two separate and 
distinct procedures under the charter of the PDIC and the BSP, the words seem to be used loosely and interchangeably.

          It does not help that indeed these terms are very closely related in a generic sense.  However, while “examination” connotes a mere generic perusal or inspection, “investigation” refers to a more intensive scrutiny for a more specific fact-finding purpose.  The latter term is also usually associated with proceedings conducted prior to criminal prosecution.

          The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of deposits in all banks entitled to the benefits of insurance under the PDIC Charter to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage of all insured deposits.  It is a government instrumentality that operates under the Department of Finance.  Its primary purpose is to act as deposit insurer, as a co-regulator of banks, and as receiver and liquidator of closed banks.[71]

          Section 1 of the PDIC Charter states:

          SECTION 1.    There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the “Corporation” which shall insure, as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted.

            The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits.

          Section 1 of R.A. No. 9576 further provides:  An Act Increasing the Maximum Deposit Insurance Coverage, and in connection therewith, to Strengthen the Regulatory and Administrative Authority, and Financial  Capability of the Philippine Deposit Insurance Corporation (PDIC), amending for this purpose R.A. No. 3591, as Amended, otherwise known as the PDIC Charter.

            SECTION 1.  Statement of State Policy and Objectives. -  It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate,  preserve, maintain faith and confidence in the country’s banking system, and protect it from illegal schemes and machinations.

            Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at all times.

Under its charter, the PDIC is empowered to conduct examination of banks with prior approval of the Monetary Board:

            Eighth – To conduct examination of banks with prior approval of the Monetary Board:  Provided, That no examination can be conducted within twelve (12) months from the last examination date:  Provided, however, That the Corporation may, in coordination with the Bangko Sentral, conduct a special examination as the Board of Directors, by an affirmative vote of a majority of all its members, if there is a threatened or impending closure of a bank; Provided, further, That, notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may inquire into or examine deposit accounts and all information related thereto          in case there is a finding of unsafe or unsound banking practice; Provided, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports,   information, and findings of the Bangko Sentral, which it shall make available to the Corporation; (As amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)

            xxx.  [Underlining supplied]

Section 9(b-1) of the PDIC Charter further provides that the PDIC Board shall have the power to:

POWERS AND RESPONSIBILITIES AND PROHIBITIONS

            SECTION 9. xxx

            (b) The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation to examine any insured bank.  Each such examiner shall have the power to make a thorough examination of all the affairs of the bank and in doing so, he shall have the power to administer oaths, to examine and take and preserve the testimony of any of the officers and agents thereof,  and, to compel the presentation of books, documents, papers, or records necessary in his judgment to ascertain the facts relative to the condition of the bank; and shall make a full and detailed report of the condition of the bank to the Corporation. The Board of Directors in like manner shall appoint claim agents who shall have the power to investigate and examine all claims for insured  deposits and transferred deposits.  Each claim agent shall have the power to administer oaths and to examine under oath and take and preserve testimony of any person relating to such claim.  (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)

            (b-1)  The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the Corporation andBangko Sentral ng Pilipinas or complaints from depositors or from other government agency. Each such investigator shall have the power to administer oaths, and to examine and take and preserve the testimony of any person  relating to the subject of investigation.(As added by R.A. 9302, 12 August 2004)

xxx.  [Underscoring supplied]

As stated above, the charter empowers the PDIC to conduct an investigation of a bank and to appoint examiners who shall have the power to examine any insured bank.  Such investigators are authorized to conduct investigations on frauds, irregularities and anomalies committed in banks, based on an examination conducted by the PDIC and the BSP or on complaints from depositors or from other government agencies.

The distinction between the power to investigate and the power to examine is emphasized by the existence of two separate sets of rules governing the procedure in the conduct of investigation and examination.  Regulatory Issuance (RI) No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed in Banks covers the procedural requirements of the exercise of the PDIC’s power of investigation.  On the other hand, RI No. 2009-05 sets forth the guidelines for the conduct of the power of examination.

The definitions provided under the two aforementioned regulatory issuances elucidate on the distinction between the power of examination and the power of investigation.

Section 2 of RI No. 2005-02 states that its coverage shall be applicable to “all fact-findinginvestigations on fraud, irregularities and/or anomalies committed in banks that are conducted by PDIC based on: [a] complaints from depositors or other government agencies; and/or [b] final reports of examinations of banks conducted by the Bangko Sentral ng Pilipinas and/or PDIC.”

The same issuance states that the Final Report of Examination[72] is one of the three pre-requisites to the conduct of an investigation, in addition to the authorization of the PDIC Board[73]and a complaint.[74]  Juxtaposing this provision with Section 9(b-1) of the PDIC Charter, since an examination is explicitly made the basis of a fact-finding examination, then clearly examination and investigation are two different proceedings.  It would obviously defy logic to make the result of an “investigation” the basis of the same proceeding.  Thus, RI No. 2005-02 defines an “investigation” as a “fact-finding examination, study or inquiry for determining whether the allegations in a complaint or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action.”[75]

The Banks cite the dictionary definitions of “examination” and “investigation” to justify their conclusion that these terms refer to one and the same proceeding.  It is tempting to use these two terms interchangeably, which practice may be perfectly justified in a purely literary sense.  Indeed, a reading of the PDIC Charter shows that the two terms have been used interchangeably at some point. However, based on the provisions aforecited, the intention of the laws is clearly to differentiate between the process of investigation and that of examination.

In 2009, to clarify procedural matters, PDIC released RI No. 2009-05 or the Rules and Regulations on Examination of Banks.  Section 2 thereof differentiated between the two types of examination as follows:

Section 2.  Types of Examination

            a. Regular Examination -  An examination conducted independently or jointly with the BSP.  It requires the prior approval of the PDIC Board of Directors and the Monetary Board (MB).  It may be conducted only after an interval of at least twelve (12) months from the closing date of the last Regular Examination.

            b.  Special Examination – An examination conducted at any time in coordination with the BSP, by an affirmative vote of a majority of all the members of the PDIC Board of Directors,  without need of prior MB approval, if there is a threatened or impending bank closure as determined by the PDIC Board of Directors. [Underscoring supplied]

Section 3 of RI No. 2009-05 provides for the general scope of the PDIC examination:

Section 3.  Scope of Examination

            The examination shall include, but need not be limited to, the following:

            a. Determination of the bank’s solvency and liquidity position;

            b. Evaluation of asset quality as well as determination of sufficiency of valuation reserves on loans and other risk assets;

c.       Review of all aspects of bank operations;

d. Assessment of risk management system, including the evaluation of the effectiveness of the bank management’s oversight functions, policies, procedures, internal control and audit;

e.  Appraisal of overall management of the bank;

f. Review of compliance with applicable banking laws, and rules and regulations, including PDIC issuances;

g. Follow-through of specific exceptions/ violations noted during a previous examination; and

h.     Any other activity relevant to the above.

Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed in Banks provides for the scope of fact-finding investigations as follows:

SECTION 1.  Scope of the Investigation.

Fact-finding Investigations shall be limited to the particular acts or omissions subject of a complaint or a Final Report of Examination.

From the above-cited provisions, it is clear that the process of examination covers a wider scope than that of investigation.

Examination involves an evaluation of the current status of a bank and determines its compliance with the set standards regarding solvency, liquidity, asset valuation, operations, systems, management, and compliance with banking laws, rules and regulations.

Investigation, on the other hand, is conducted based on specific findings of certain acts or omissions which are subject of a complaint or a Final Report of Examination.

Clearly, investigation does not involve a general evaluation of the status of a bank.  An investigation zeroes in on specific acts and omissions uncovered via an examination, or which are cited in a complaint.

An examination entails a review of essentially all the functions and facets of a bank and its operation.  It necessitates poring through voluminous documents, and requires a detailed evaluation thereof.  Such a process then involves an intrusion into a bank’s records.

In contrast, although it also involves a detailed evaluation, an investigation centers on specific acts of omissions and, thus, requires a less invasive assessment.

The practical justification for not requiring the Monetary Board approval to conduct an investigation of banks is the administrative hurdles and paperwork it entails, and the correspondent time to complete those additional steps or requirements.  As in other types of investigation, time is always of essence, and it is prudent to expedite the proceedings if an accurate conclusion is to be arrived at, as an investigation is only as precise as the evidence on which it is based.  The promptness with which such evidence is gathered is always of utmost importance because evidence, documentary evidence in particular, is remarkably fungible.  A PDIC investigation is conducted to “determine[e] whether the allegations in a complaint or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action.”[76]  In other words, an investigation is based on reports of examination and an examination is conducted with prior Monetary Board approval. Therefore, it would be unnecessary to secure a separate approval for the conduct of an  investigation. Such would merely prolong the process and provide unscrupulous individuals the opportunity to cover their tracks.

Indeed, while in a literary sense, the two terms may be used interchangeably, under the PDIC Charter, examination and investigation refer to two different processes.  To reiterate, an examination of banks requires the prior consent of the Monetary Board, whereas an investigation based on an examination report, does not.

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