FACTS:

This case involves two separate incidents concerning the collection case filed by several banks against two entities, Domsat Holdings, Inc. (Domsat) and the Government Service Insurance System (GSIS). The main case is for the collection of a sum of money with damages. The controversy arises from a surety agreement wherein Domsat obtained a surety bond from GSIS to secure the payment of a loan from the aforementioned banks.

The first incident involves GSIS's request for the issuance of a subpoena to the custodian of records of Westmont Bank (now United Overseas Bank) to produce documents related to the account or transactions of Domsat Holdings, Inc. with the bank. GSIS claims that Domsat did not use the loan proceeds for the payment of satellite rental but instead transferred the funds to various accounts. The Regional Trial Court (RTC) initially denied the motion to quash the subpoena, citing the relevance of the documents and the exception to the law on secrecy of bank deposits. However, in a subsequent order, the RTC granted the motion for reconsideration and quashed the subpoena, relying on a ruling that foreign currency deposits are absolutely confidential. GSIS filed a petition for certiorari before the Court of Appeals questioning the said orders.

The second incident involves GSIS seeking the production of documents from Domsat and Westmont Bank to support its defense in the collection case. GSIS claims that the loan proceeds obtained by PASI, with GSIS serving as the surety, were used for purposes other than what they were intended for. The RTC also initially denied the motion to quash filed by the banks with regards to these documents, but subsequently granted the motion for reconsideration and quashed the subpoenas, relying on the same ruling regarding the absolute confidentiality of foreign currency deposits. GSIS then filed a petition for certiorari before the Court of Appeals challenging these orders as well.

ISSUES:

1. Whether the deposit of USD 11 million by Domsat with Westmont Bank is covered by the Secrecy of Bank Deposits Law (Republic Act No. 1405) or the Secrecy of Foreign Currency Deposits Law (Republic Act No. 6426).

2. Whether the issuance of the second motion for reconsideration lacking a notice of hearing was procedurally acceptable.

RULING:

1. The Supreme Court ruled that Republic Act No. 6426 (Secrecy of Foreign Currency Deposits Law), and not Republic Act No. 1405 (Secrecy of Bank Deposits Law), applies to Domsat's deposit of USD 11 million with Westmont Bank as it involves foreign currency deposits. The court found that absent a written permission from Domsat, the foreign currency deposit cannot be disclosed even if it is the subject matter of litigation.

2. The Supreme Court held that the acceptance of the second motion for reconsideration by the trial court, even if it lacked a notice of hearing, is procedurally acceptable. The appellate court emphasized substantive justice over technicality and found that the failure to object to the defect timely amounted to a waiver of the right to raise the issue.

PRINCIPLES:

• Confidentiality of Foreign Currency Deposits Republic Act No. 6426 provides that foreign currency deposits are absolutely confidential and their disclosure can only be made with the written consent of the depositor.

• Special Law vs. General Law Republic Act No. 6426 is a special law compared to Republic Act No. 1405 (a general law of general application), and as per the principle of generalia specialibus non derogant, the special law prevails in cases involving foreign currency deposits.

• Substantive Justice over Technicality Procedural defects may be overlooked in favor of substantive justice, especially when the right to object to a defect is waived by the party's failure to raise it timely.