Postal Bank waits for court order; Cebu city can’t touch P124M deposit

Only a court order will compel the Philippine Postal Bank to lift its tagging of accounts of the Cebu city government amounting to P124.16 million.

Cebu branch manager Ricardo Cordova told the Cebu City Council yesterday he was acting on the advice of the bank’s corporate counsel after Postal Bank received a court order garnishing assets of the city in relation to the P133 million claim of the Rallos family.

“I cannot act independently because I am just a subordinate unit. I am placed in a very difficult situation,” Cordova said.

The frozen accounts include the city’s Special Education Fund (SEF), and proceeds from its P3 million per month share of Pagcor funds, general funds and trust funds.

Cordova was invited to a special session yesterday along with City Administrator Jose Maria Poblete, City Treasurer Ofelia Oliva to clarify the situation.

Councilor Margot Osmeña, who asked for the session to clear the air, earlier said it was “very disturbing” to learn that some checks of the city were returned.

Poblete assured that the freeze order will not affect financial liquidity of the Cebu city government since the bulk of the city’s cash is in other government depository banks – Land Bank of the Philippines (LBP), the Veterans Bank and Banco de Oro.

As a remedy, Poblete said the city government is preparing to file a petition requesting the Court of Appeals to already lift the notice of garnishment in the Rallos case which is needed to compel Postal Bank to untag th city’s deposits.

A second petition will be filed asking the CA to lift the annotation of “lis penden” on land titles for lots at the South Road Properties (SRP) which heirs of the late Fr. Vicente Rallos earlier identified as payment for their claims from the city government.

The annotation is a notice to third parties that that property is under litigation.

“Rest assured we (in the executive department) are doing our very best to address the matter,” said Poblete.

Two checks for a total of P20, 338.14 issued by the city treasurers office to Chong Hua Hospital were returned because of the freezing of the city’s Postal Bank account.

The hospital deposited the checks in their Banco de Oro acount, but the checks were returned to the city government with a note that money cannot be drawn from the account because it was a tagged account.

Oliva said they already replaced the Postal Bank check issued to the hospital with a BDO check.

She told the council that her office received the advisory on the tagging of the city’s deposits with Postal Bank amounting to P133.6 million last May 25.

“We requested the manager (Cordova) not to tag because it would be embarrassing for the city. We had checks in transit issued to our supplier,” she said.

With the approval of Cebu City Mayor Michael Rama, said Oliva, she sent a June 27 letter closing the city’s deposits with Postal Bank.

The city government has 24 current and trust fund accounts with Postal Bank . These are depository accounts for the city’s Special Education Fund (SEF), and monthly proceeds from its share of Pagcor funds, general funds and trust funds.

Oliva said the city’s trust fund account cannot be garnished because “this does not belong to the city but various benefactors and the national government and is intended for a specific purpose.”

Cordova, the bank manager, told the City Council the city government has been a valued client for the last 17 years.

He said that when the bank received the notice for garnishment in the last quarter of 2011, Postal Bank made sure the city government had enough funds to satisfy the court-ordered confiscation.

When the cash deposits started to diminish and only had P133 million left, the bank’s corporal counsel advised them to tag the account to make sure enough cash was available for garnishment.

A June 19, 2012 letter was sent to the City Treasurer’s Office advising them of the tagging order.

The deposits went down to P124.16 million after Cordova agreed to the treasurer’s request to honor city checks issued before the June 19 enforcement of the freezing of Cebu city’s account.

Cordova said it was only last week when he was given a copy of the Court of Appeals decision granting a preliminary injunction against garnishment. He sent this to the bank’s corporate counsel.

Mayor Michael Rama said City Hall lawyers will look into the city’s legal options and whether they they need to file a complaint to compel Postal Bank to release the city’s money.

“Pahuwata lang sila sa kiha unya. Libog gyud ko why of all the banks sila ra ang mag ingon ana. Naa silay interest ana?”

“There is an element of malice gyud,” said Rama.

(They are waiting to be sued. I’m confused why of all the banks they are the only ones doing that. Do they have special interest in this?)

Oliva said it was also Postal Bank that released the first garnishment of about P34 million in city hall funds in 2002 in relation to the Rallos case.

The Rallos family is pursuing its P33 million claim.

This week they asked the Court of Appeals (CA) to set aside its ruling that stopped the lower court and its sheriffs from collecting funds or auctioning off city-owned properties in order to pay off P133 million to the family, whose lot was supposedly expropriated by the city in 1963.

They asked the appellate court to quash or recall the writ of preliminary injunction against the Regional Trial Court and the heirs of Rev. Fr. Vicente Rallos , among others.

Associate Justice Gabriel Ingles of the CA’s 18th division earlier said the dispute involved public funds and that the writ was urgently needed to prevent “serious damage” to the city while the case is being heard.