G.R. No. 71479 - Mellon Bank, N.A. vs. Magsino

Case Summary (G.R. No. 71479)

Factual Background

On May 27, 1977, the First National Bank of Moundsville, West Virginia, instructed MELLON BANK, N.A. to transmit US $1,000 to Victoria Javier in Manila. The wire, however, erroneously indicated US $1,000,000.00. Consequently, Manufacturers Hanover Bank transmitted one million dollars, less bank charges of $6.30, to the Prudential Bank for the account of Victoria Javier, and on June 3, 1977, account No. 343 was opened and credited with PHP-equivalent deposits totalling P999,943.70. Thereafter, withdrawals and transfers occurred in rapid sequence. On June 14, 1977, MELCHOR JAVIER, JR. withdrew P475,000 and converted it into eight cashier’s checks used to pay, inter alia, F. C. HAGEDORN & CO., INC., Elnor Investment Co., Inc., Paramount Finance Corporation, and for personal withdrawal by M. Javier, Jr. A 160-acre lot in the Mojave desert owned by Honorio Poblador, Jr. was purportedly purchased through Jose Marquez as agent for P3,236,800 (stated to be US $437,405), although the property had a much lower appraisal. Payment of the purchase price was routed through the corporate payees above rather than made directly to Poblador.

Proceedings in California and the Philippines

In July 1977, MELLON BANK, N.A. filed an action in the Superior Court of California, County of Kern, to impose a constructive trust on the California property and to recover title and possession. On July 29, 1977, MELLON BANK, N.A. filed Civil Case No. 26899 in the Court of First Instance of Rizal against the Javiers and numerous other persons and entities, later amended to add additional defendants. The Rizal complaint alleged conversion of the erroneously transmitted US $999,000, conspiracy to conceal and dissipate the funds, the imposition of implied trusts, and sought accounting and recovery of the funds and related reliefs.

Trial Court Evidence and Objections

At trial in Civil Case No. 26899, Jose Marquez testified regarding the delivery of cashier’s checks and the sale of the Kern property. MELLON BANK, N.A. sought to subpoena bank employees, including Erlinda Baylosis of Philippine Veterans Bank and Pilologo Red, Jr. of Hongkong & Shanghai Banking Corporation, to trace proceeds from stock sales and bank deposits. Defendants objected on grounds of confidentiality under Republic Act No. 1405, res inter alios acta, immateriality and irrelevancy, and moved to exclude the challenged testimony and exhibits. The trial court, initially conditionally admitting the testimonies, later, by resolution of September 10, 1982, ordered the testimonies and related documents stricken from the record and explained that the doctrine of election of remedies and bank secrecy barred inquiry into the purchase price and disposition of the Kern property proceeds.

Lower Court Orders and Motions for Reconsideration

After the September 10, 1982 resolution, MELLON BANK, N.A. moved for reconsideration. The trial court denied reconsideration on October 28, 1983. A further motion for reconsideration was denied on July 9, 1985 on the ground that such a motion was proscribed by the 1983 Interim Rules of Court because the September 10, 1982 resolution purportedly constituted a final and definitive disposition of the plaintiff’s claim to recover the purchase price. The lower court treated the election of remedies question as dispositive and relied on authorities equating pursuit of the res with a ratification that precluded subsequent personal claims against trustees.

Contentions of the Parties

MELLON BANK, N.A. contended that the September 10, 1982 resolution was interlocutory and limited to the admissibility of evidence, that the bank secrecy statute permits disclosure when the deposit is the subject matter of litigation, that the doctrine of election of remedies is inapplicable or obsolete and cannot be invoked prior to judgment on the merits, and that the defense of election of remedies had been waived because respondents, except the Javiers, failed to plead it under Section 2, Rule 9 of the Rules of Court. Defendants maintained that the California action to impose a constructive trust on the Kern property constituted pursuit of the res and therefore precluded the Filipino action to recover the purchase price, and they relied upon Republic Act No. 1405 to bar disclosure of bank records.

Supreme Court Holding

The Supreme Court annulled the September 10, 1982 resolution and the subsequent orders of October 28, 1983 and July 9, 1985. The Court held that the September 10, 1982 resolution was interlocutory because it addressed the admissibility of evidence and did not finally dispose of Civil Case No. 26899. The Court found that the trial court gravely abused its discretion in treating the resolution as a definitive adjudication of the plaintiff’s claim to recover the proceeds of the Kern property. The Court ordered the lower court to proceed with dispatch in the disposition of Civil Case No. 26899, directed service of this decision on the Javiers in accordance with Section 6, Rule 13 of the Rules of Court, and required that a copy of the decision be served on the Integrated Bar of the Philippines. Costs were imposed against private respondents. The decision was declared immediately executory.

Legal Basis and Reasoning

The Court reasoned that the September 10, 1982 resolution resolved only the narrow question of admissibility of testimony by bank witnesses and was therefore interlocutory. The Court emphasized that election of remedies, in its technical sense, precludes resort to alternative remedies only when those remedies are inconsistent or when one remedy has been finally adjudicated or has caused a change of position detrimental to another party. The Court reiterated that ordinarily no binding election occurs before a decision on the merits. It noted that where remedies arise from the same facts but are alternative and not inconsistent, the invocation of one remedy does not bar the other unless a final adjudication has intervened. The Court further observed that election of remedies was not timely pleaded by most defendants and thus was waived under Section 2, Rule 9 of the Rules of Court. With respect to bank secrecy, the Court held that Republic Act No

Case Syllabus (G.R. No. 71479)

Parties and Posture

MELLON BANK, N.A. is the petitioner who filed a special civil action of certiorari assailing orders of HON. CELSO L. MAGSINO as Presiding Judge of Branch CLIX, Regional Trial Court, Pasig.
MELCHOR JAVIER, JR. and VICTORIA JAVIER are principal private respondents alleged to have received an erroneous dollar remittance and dissipated the funds.
Other private respondents include the named heirs of HONORIO POBLADOR, JR., F. C. HAGEDORN & CO., INC., ELNOR INVESTMENT CO., INC., PARAMOUNT FINANCE CORPORATION, TRI-ARC INVESTMENT AND MANAGEMENT CO., INC., JOSE MARQUEZ, ROBERTO GARINO, DOMINGO JHOCSON, JR., and RAFAEL CABALLERO.
The petition directly challenges the lower court resolutions of September 10, 1982 and October 28, 1983 and the order of July 9, 1985 which struck certain evidence and invoked the doctrine of election of remedies.
The underlying civil case in the trial court is Civil Case No. 26899, now pending with the RTC of Pasig, Branch 159, for disposition on the merits.

Key Facts

On May 27, 1977, a remittance instruction intended to transfer US $1,000 was erroneously described as US $1,000,000 and resulted in the transfer of approximately US $999,943.70 to VICTORIA JAVIER's Prudential Bank account.
MELCHOR JAVIER, JR. and VICTORIA JAVIER allegedly withdrew and laundered substantial portions of the erroneously transmitted funds and used part of the proceeds to purchase a 160-acre lot in California owned by HONORIO POBLADOR, JR..
Cashier's checks and subsequent transfers totalling several million pesos were delivered to entities and persons associated with POBLADOR and to brokers who converted funds into shares and promissory notes.
MELLON BANK, N.A. filed a California suit to impose a constructive trust on the Kern County, California property and, shortly thereafter, filed Civil Case No. 26899 in the Philippines to recover the converted purchase price and related moneys from the Javiers and other alleged recipients and conspirators.

California Action

MELLON BANK, N.A. filed Complaint No. 148056 in the Superior Court of California, County of Kern, seeking to impose a constructive trust on the Kern County property and to compel transfer of title and possession to the bank.
The California complaint alleged that defendants used the mistakenly transferred funds to purchase real property in Kern County and sought equitable relief in rem against that property.
The California proceedings were later stayed pending determination of the Philippine action in accordance with motions and rulings in the California court.

Philippine Action

In Civil Case No. 26899, MELLON BANK, N.A. amended and supplemented its complaint to allege conversion, conspiracy, accounting, and claims for US$999,000.00 plus increments against the Javiers and numerous other defendants.
The Philippine complaint alleged specific transactions showing the movement of proceeds into bank accounts, stock purchases, promissory notes and distributions allegedly traceable to the erroneously transmitted funds.
Trial proceeded with contested documentary and testimonial proof tracing the disposition of proceeds, including testimony and bank records implicating accounts in the names of lawyers and associates.

Lower Court Rulings

On September 10, 1982, the trial court issued a resolution conditionally striking the testimonies of two bank witnesses, Baylosis and Red, and the documents they testified to, concluding that the doctrine of election of remedies precluded recovery of the purchase price in the Philippine action.
On October 28, 1983, the trial court denied petitioner’s motion for reconsideration and ordered continuation of the hearing while reaffirming the striking of the evidence.
On July 9, 1985, the trial court denied petitioner’s second motion for reconsideration on the ground that such motion was proscribed under the 1983 Interim Rules of Court because the earlier resolution was deemed final.

Legal Issues

Whether the trial court gravely abused its discretion in treatin