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8/13/2019 Banking Notes (Finals)
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BANKING NOTES (FINALS)
A. DEPOSIT FUNCTION
NATURE OF DEPOSIT
SERRANO v. CENTRAL BANK, 96 SCRA 96 (1980)
DOCTRINE: Bank deposits are in the nature of irregular deposits. They are
really loans because they earn interest. All kinds of bank deposits, whether
fixed, savings, or current are to be treated as loans and are to be covered
by the law on loans. Current and savings deposits are loans to a bank
because it can use the same.
GUINGONA, JR. v. CITY FISCAL OF MANILA, 128 SCRA 577 (1984)
DOCTRINE: The relationship between the depositor and the bank is that ofcreditor and debtor. Consequently, the ownership of the amount deposited
was transmitted to the Bank upon the perfection of the contract and it can
make use of the amount deposited for its banking operations, such as to
pay interests on deposits and to pay withdrawals.
BPI FAMILY BANK v. FRANCO, 538 SCRA 184 (2007)
DOCTRINE: Money bears no earmarks of peculiar ownership. Its primary
function is to pass from hand to hand as a medium of exchange, without
other evidence of its title. Money, which passed through varioustransactions in the general course of banking business, even if of traceable
origin, bears no earmarks of peculiar ownership.
FULTON IRON WORKS CO. v. CHINA BANKING CORP., 55 PHIL. 208
(1930)
DOCTRINE: A depositor is presumed to be the owner of funds standing in
his name in a bank deposit, and where a bank is not chargeable with
notice that the money deposited therein is the property of another person,
it is justified in paying out the money to the depositor, or upon his order,and in so doing cannot be held liable to any other person as the true
owner.
BPI v. CA, 232 SCRA 302 (1994)
DOCTRINE: A bank is under no duty or obligation to make the application.
To apply the deposit to the payment of the loan is a privilege, a right to set-
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off which the bank has the option to exercise.
The relationship then between a depositor and a bank is one of creditor
and debtor. The deposit under the questioned account was an ordinary
bank deposit; hence, it was payable on demand of the depositor.
BPI cannot be relieved of its duty to pay Eastern simply because it already
allowed the heirs of Velasco to withdraw the whole balance of the account.
The petitioner should not have allowed such withdrawal because it had
admitted in the Holdout Agreement the unceertain ownership of the money
deposited in the account.
Moreover, the order of the court in the intestate case merely authorized the
heirs of Velasco to withdraw the account. BPI was not specifically ordered
to release the account to the said heirs; hence, it was under no judicial
compulsion to do so. The authorization given to the heirs of Velascocannot be construed as a final determination or adjudication that the
account belonged to Velasco. We have ruled that when the ownership of a
particular property is disputed, the determination by a probate court of
whether that property is included in the estate of a deceased is merely
provisional in character and cannot be the subject of execution.
Because the ownership of the deposit remained undetermined, BPI, as the
debtor with respect thereto, had no right to pay to persons other than those
in whose favor the obligation was constituted or whose right or authority to
receive payment is indisputable. The payment of the money deposited withBPI that will extinguish its obligation to the creditor-depositor is payment to
the person of the creditor or to one authorized by him or by the law to
receive it. Payment made by the debtor to the wrong party does not
extinguish the obligation as to the creditor who is without fault or
negligence, even if the debtor acted in utmost good faith and by mistake as
to the person of the creditor, or through error induced by fraud of a third
person. The payment then by BPI to the heirs of Velasco, even if done in
good faith, did not extinguish its obligation to the true depositor, Eastern.
CENTRAL BANK v. MORFE, 63 SCRA 114 (1975)
Fixed, savings, and current deposits of money in banks and similar
institutions are not true deposits. They are considered simple loans and, as
such, are not preferred credits.
Evidently, one purpose in prohibiting the insolvent bank from doing
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business is to prevent some depositors from having an undue or
fraudulent preference over other creditors and depositors.
That purpose would be nullified if, as in this case, after the bank is
declared insolvent, suits by some depositors could be maintained and
judgments would be rendered for the payment of their deposits and thensuch judgments would be considered preferred credits under article 2244(14) (b) of the Civil Code.
The general principle of equity that the assets of an insolvent are to bedistributed ratably among general creditors applies with full force to
the distribution of the assets of a bank. A general depositor of a bank
is merely a general creditor, and, as such, is not entitled to any
preference or priority over other general creditors.
GULLAS v. PNB, 62 PHIL. 519 (1935)
DOCTRINE: A bank has the right of set off of the deposit in its hands for
the payment of any indebtedness to it on the part of the depositor.
REPUBLIC v. CA, 65 SCRA 186 (1975)
DOCTRINE: Since the relation between a depositor and a bank is that of a
creditor and debtor, the depositor has the right to apply his deposits/credit
with the bank against the loans he had obtained from his deposits.
BPI v. CA, 512 SCRA 620 (2007)
DOCTRINE: A bank generally has the right of set-off over the deposits
therein for the payment of any withdrawals on the part of a depositorthe
right of a collecting bank to debit a clients account for the value of a
dishonored check that has previously been credited has fairly been
established by jurisprudence.
CONSOLIDATED BANK AND TRUST COMPANY v. CA, 410 SCRA 562(2003)
DOCTRINE: The fiduciary relationship means that the banks obligation to
observe high standards of integrity and performance is deemed written
into every deposit agreement between a bank and its depositors. It
requires banks to assume a degree of diligence higher than that of a good
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father of a family.
B. KINDS OF DEPOSIT
(1) DEMAND DEPOSITS
All those liabilities of the Bangko Sentral and of other banks, which aredenominated in Philippine currency and are subject to payment in
legal tender upon demand by the presentation of checks.
BPI FAMILY SAVINGS BANK v. FIRST METRO INVESTMENT CORP,
429 SCRA 30 (2004)
DOCTRINE: Demand Deposits are all those liabilities of the Bangko
Sentral and of other banks which are denominated in the Philippine
currecncy and are subject to payment in legal tender upon demand by the
presentation of depositors checks. Under CB Circular No. 22 (Series of
1994), demand deposits shall not be subject to any interest rate ceiling.
This, in effect, is an open authority to pay interest on demand deposits,
such interest not being subject to any rate ceiling.
(2) SAVINGS DEPOSITS
INTERNATIONAL EXCHANGE BANK v. CIR, 520 SCRA 688 (2007)
DOCTRINE: A Fixed Savings Deposit (FSD), like a time deposit, provides
for a higher interest rate when the deposit is not withdrawn within the
required fixed period, otherwise, it earns interest pertaining to a regular
savings deposit.
A depositor of a savings deposit-FSD is required to keep the money
with the bank for at least thirty (30) days in order to yield a higherinterest rate. Otherwise, the deposit earns interest pertaining only to aregular savings deposit. The same feature is present in a time deposit.
A depositor is allowed to withdraw his time deposit even before its
maturity subject to bank charges on its pre-termination and thedepositor loses his entitlement to earn the interest rate corresponding
to the time deposit. Instead, he earns interest pertaining only to a
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regular savings deposit.
In both cases, the deposit may be withdrawn anytime but the depositor
gets to earn a lower rate of interest. The only difference lies on the
evidence of deposit, a savings deposit-FSD is evidenced by a passbook,
while a time deposit is evidenced by a certificate of time deposit." In orderfor a depositor to earn the agreed higher interest rate in a SA-FSD, the
amount of deposit must be maintained for a fixed period. Thus, SA-FSD is
a deposit account with a fixed term. Withdrawal before the expiration of
said fixed term results in the reduction of the interest rate. Having a fixed
term and reduction of interest rate in case of pre-termination are essentially
the features of a time deposit. Ultimately, the Banks SA-FSD and time
deposit are substantially the same.
To claim that time deposits evidenced by passbooks should not be
subject to DST is a clear evasion of the rule on equality and uniformityin taxation that requires the imposition of DST on documents
evidencing transactions of the same kind, in this particular case, on all
certificates of deposits drawing interest.
CHINA BANKING CORP. v. CIR, 602 SCRA 316 (2009)
A certificate of deposit is a written acknowledgment by a bank or banker of
the receipt of a sum of money on deposit which the bank or bankerpromises to pay to the depositor, to the order of the depositor, or to some
other person or his order, whereby the relation of debtor and creditor
between the bank and the depositor is created.
(3) NEGOTIABLE ORDER OF WITHDRAWAL (NOW) ACCOUNTS
Section X223 of the Manual of Regulations for Banks definesNegotiable Order of Withdrawal (NOW) Accounts as "interest-
bearing deposit accounts that combine the payable on demandfeature of checks and the investment feature of savings
accounts."
PEOPLE v. REYES, 454 SCRA 635 (2005)
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DOCTRINE: NOW Accounts are defined as interest-bearing deposit
accounts that combine the payable on demand feature of checks and the
investment feature of savings accounts.
There is no estafa through bouncing checks when it is shown thatprivate complainant knew that the drawer did not have sufficientfunds in the bank at the time the check was issued to him. Such
knowledge negates the element of deceit and constitutes a
defense in estafa through bouncing checks.
(4) TIME DEPOSITS
SEC. X231, MRB: Time deposits shall be issued for a specific period ofterm.
BPI FAMILY SAVINGS BANK v. FIRST METRO INVESTMENT
CORP., 429 SCRA 30 (2004)
DOCTRINE: A Time Deposit is defined as one the payment of which
cannot legally be required within such a specified number of days.
INTERNATIONAL EXCHANGE BANK v. CIR, 520 SCRA 688 (2007)
DOCTRINE: Having a fixed term and the reduction of interest rate in case
of pre-termination are essential features of a time deposit.
(5) FOREIGN CURRENCY DEPOSITS
(6) MONEY MARKET PLACEMENTS
ALLIED BANKING CORP. v. LIM SIO WAN, 549 SCRA 504 (2008)
DOCTRINE: A Money Market is a market dealing in standardized short-
term credit instruments (involving large amounts) where lenders and
borrowers do not deal directly with each other by through a middle man or
dealer in open marketin a money market transaction, the investor is a
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lender who loans his money to a borrower through a middleman or dealer.
a money market placement is a simple loan or mutuum. In a moneymarket transaction, the investor is a lender who loans his money to a
borrower through a middleman or dealer.
C. CAPACITY OF DEPOSITORS
D. OPENING OF DEPOSIT ACCOUNTS
KYCS: Know Your Customer Standards - Specimen signatures, IDphotos.
Joint Accounts:
ART. 485, NCC: The share of the co-owners, in the benefits as well as in
the charges, shall be proportional to their respective interests. Any
stipulation in a contract to the contrary shall be void.
The portions belonging to the co-owners in the co-ownership shall be
presumed equal, unless the contrary is proved.
ART. 1207, NCC: The concurrence of two or more creditors or of two or
more debtors in one and the same obligation does not imply that each one
of the former has a right to demand, or that each one of the latter is bound
to render, entire compliance with the prestation. There is a solidary liability
only when the obligation expressly so states, or when the law or the nature
of the obligation requires solidarity.
ART. 1208, NCC: If from the law, or the nature or the wording of the
obligations to which the preceding article refers the contrary does not
appear, the credit or debt shall be presumed to be divided into as many
shares as there are creditors or debtors, the credits or debts being
considered distinct from one another, subject to the Rules of Court
governing the multiplicity of suits.
E. ADMINISTRATION OF DEPOSIT ACCOUNTS
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DEPOSIT OF FUNDS - Delivery is required. Acceptability of Withdrawal Slips as Deposits
Firestone Tire & Rubber Co. of the Phil. v CA
DOCTRINE: A bank is under the obligation to treat the accounts of its
depositors with meticulous care, whether such account consists only of a
few hundred pesos or millions of pesos. The fact that the other withdrawal
slips were honored and paid by the other bank was no license for the bank
to presume that subsequent slips would be honored and paid immediately.
By doing so, it failed in its fiduciary duty to treat the accounts of its clients
with the highest degree of care.
In the ordinary and usual course of banking operations, current accountdeposits are accepted by the bank on the basis of deposit slips
prepared and signed by the depositor, or the latter's agent or
representative, who indicates therein the current account number to
which the deposit is to be credited, the name of the depositor or
current account holder, the date of the deposit, and the amount of
the deposit either in cash or in check.
The withdrawal slips deposited with petitioner's current account withCitibank were not checks, as petitioner admits. Citibank was not
bound to accept the withdrawal slips as a valid mode of deposit. But
having erroneously accepted them as such, Citibank andpetitioner as account- holder must bear the risks attendant to the
acceptance of these instruments. Petitioner and Citibank could not
now shift the risk and hold private respondent liable for their
admitted mistake.
Acceptability of Checks Without Indorsement of Payee
PNB v Rodriguez
DOCTRINE: A bank that regularly processes checks that are neither
payable to the customer nor duly indorsed by the payee is apparently
grossly negligent in its operations.
In a checking transaction, the drawee bank has the duty to verify the
genuineness of the signature of the drawer and to pay the check
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strictly in accordance with the drawers instructions, i.e., to the named
payee in the check.
As a rule, when the payee is fictitious or not intended to be the truerecipient of the proceeds, the check is considered as a bearer
instrument based on Sections 8 and 9 of the NIL. The draweebank is then absolved from liability and the drawer bears the
loss. However, there is a commercial bad faith exception to the
fictitious-payee rule. A showing of commercial bad faith on the
part of the drawee bank, or any transferee of the check for thatmatter, will work to strip it of this defense.
For the fictitious-payee rule to be available as a defense, PNB mustshow that the makers did not intend for the named payees to be
part of the transaction involving the checks. At most, the banks
thesis shows that the payees did not have knowledge of the
existence of the checks. This lack of knowledge on the part ofthe payees, however, was not tantamount to a lack of intention
on the part of respondents-spouses that the payees would not
receive the checks proceeds. Considering that the respondents
were transacting with PEMSLA and not the individual payees, it isunderstandable that they relied on the information given by the
officers of PEMSLA that the payees would be receiving the
checks.
WITHDRAWAL OF FUNDS1 FROM CURRENT ACCOUNTS
When Funds Insufficient
Moran v CA
DOCTRINE: A bank is under no obligation to make part payment on a
check, up to only the amount of the drawer's funds, where the check is
drawn for an amount larger than what the drawer has on deposit. Such a
practice of paying checks in part has never existed. Upon partial payment,
the check holder could not be called upon to surrender the check, and the
bank would be without a voucher affording a certain means of showing the
payment. The rule is based on commercial convenience, and any rule thatwould work such manifest inconvenience should not be recognized. A
check is intended not only to transfer a right to the amount named in it, but
to serve the further purpose of affording evidence for the bank of the
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payment of such amount when the check is taken up.
Villanueva v Nite
DOCTRINE: If a bank refuses to pay a check (notwithstanding the
sufficiency of funds), the payee-holder cannot sue the bankthe payeeshould instead sue the drawer who might in turn sue the bank. Sec. 189 is
sound law based on logic and established legal principlesno privity of
contract exists between the drawee-bank and the payee.
Prior to Clearing
Associated Bank v Tan
DOCTRINE: Although a collecting bank has the right to debit a clients
account for the value of a dishonored check that has previously been
credited, it should nevertheless exercise such right with the highest degree
of diligence, as it is a business impressed with public interest.
A bank generally has the right to setoff over the deposits therein for thepayment of any withdrawals on the part of the depositor. The
right of a collecting bank to debit a clients account for the value of a
dishonored check that has previously been credited has fairly been
established by jurisprudence.
The degree of diligence required of banks is more than that of a goodfather of a family where the fiduciary nature of their relationshipwith their depositors is concerned. By the nature of its functions,
a bank is under obligation to treat the accounts of its depositors
with meticulous care. It is undisputed that purportedly as an act of accommodation to a
valued client, the bank allowed the withdrawal of the face valueof the deposited check prior to its clearing. That act certainlydisregarded the clearance requirement of the banking system.
Such a practice is unusual, because a check is not legal tender or
money, and its value can properly be transferred to a depositorsaccount only after the check has been cleared by the drawee bank.
When the bank came to know of the checks dishonour, it should haveimmediately and duly informed Tan of the debiting of his account.
Notice was proper and ought to be expected. As a valued client, Tan
deserved nothing less than an official notice of the precarious
condition of his account.
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When Check Crossed
Traders Royal Bank v Radio Philippine Network Inc.
DOCTRINE: The crossing of a check should put a bank on guard. It was
duty bound to ascertain the indorsers title to the check or the nature of hispossession. Its effects are that (a) the check may not be encashed but only
deposited in the bank; (b) the check may be negotiated only once to one
who has an account with a bank; and (c) the act of crossing the check
serves as a warning to the holder that the check has been issued for a
definite purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a holder in due course.
By encashing in favor of unknown persons checks which were ontheir face payable to the BIR. A government agency which canonly act through its agents, TRB did so in at its peril and mustsuffer the consequences of the unauthorized endorsement. TRB
cannot exculpate itself from liability by claiming that RPN was
itself negligent.
In contrast with managers check
Equitable PCI Bank v Ong
DOCTRINE: A managers check is an order of the bank to pay, drawn
upon itself, committing in effect its total resources, integrity and honor
behind its issuance, and by its peculiar character and general use in
commerce, a managers check is regarded substantially to be as good as
the money it represents.
Said check stands on the same footing as a certified check. As statedin Sec 187 of the NIL, when the managers check is certified bythe bank on which it was drawn, the certification is equivalent to
an acceptance. Jurisprudence adds that a manager's check is one drawn by the
bank's manager upon the bank itself. It is similar to a cashier's
check both as to effect and use. A cashier's check is a check ofthe bank's cashier on his own or another check. In effect, it is abill of exchange drawn by the cashier of a bank upon the bank
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itself, and accepted in advance by the act of its issuance. It is
really the bank's own check and may be treated as a promissorynote with the bank as a maker. The check becomes the primaryobligation of the bank which issues it and constitutes its writtenpromise to pay upon demand. The mere issuance of it is
considered an acceptance thereof.
2 FROM SAVINGS ACCOUNT
BPI v CA (2000)
DOCTRINE: The requirement of presentation of the passbook when
withdrawing an amount cannot be given mere lip service even though theperson making the withdrawal is authorized by the depositor to do so.
A bank is under obligation to treat the accounts of its depositors "withmeticulous care, always having in mind the fiduciary nature of their
relationship."27As such, in dealing with its depositors, a bank should
exercise its functions not only with the diligence of a good father of a
family but it should do so with the highest degree of care.
From Time Deposits
Far East Bank and Trust Company v Querimit
DOCTRINE: A bank acts at its peril when it pays deposits evidenced by a
certificate of deposit, without its production and surrender after
proper endorsement.
A certificate of deposit is defined as a written acknowledgment by a bankor banker of the receipt of a sum of money on deposit which the
bank or banker promises to pay to the depositor, to the order of the
depositor, or to some other person or his order, whereby the relation
of debtor and creditor between the bank and the depositor is
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created.
The principles governing other types of bank deposits are applicableto certificates of deposit, as are the rules governing promissory
notes when they contain an unconditional promise to pay a sum
certain of money absolutely.
The principle that payment, in order to discharge a debt, must bemade to someone authorized to receive it is applicable to the
payment of certificates of deposit. Thus, a bank will be protected
in making payment to the holder of a certificate indorsed by the
payee, unless it has notice of the invalidity of the indorsement or
the holder's want of title.
A bank acts at its peril when it pays deposits evidenced by acertificate of deposit, without its production and surrender after
proper indorsement. As a rule, one who pleads payment has the
burden of proving it. Even where the plaintiff must allege non-
payment, the general rule is that the burden rests on thedefendant to prove payment, rather than on the plaintiff to
prove payment. The debtor has the burden of showing with legal
certainty that the obligation has been discharged by payment.
From Foreign Currency Deposits
SEC. 5, FCDA: Withdrawability and transferability of deposits. There
shall be no restriction on the withdrawal by the depositor of his deposit or
on the transferability of the same abroad except those arising from the
contract between the depositor and the bank.
If Deceased Depositor: Tax Clearance Required
If a bank has knowledge of the death of a person, who maintained abank deposit account alone, or jointly with another, it shall notallow any withdrawal from the said deposit account, unless the
Commissioner has certified that the taxes imposed thereon by
this Title have been paid. Provided, however, That the administrator of the estate or any one
(1) of the heirs of the decedent may, upon authorization by the
Commissioner, withdraw an amount not exceeding Twentythousand pesos (P20,000) without the said certification.
For this purpose, all withdrawal slips shall contain a statement to theeffect that all of the joint depositors are still living at the time of
withdrawal by any one of the joint depositors and such
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statement shall be under oath by the said depositors.
Survivorship Agreements
Vitug v CA
DOCTRINE: Survivorship agreements are permitted by the Civil Code. The
validity of the contract seems debatable by reason of its survivor-take-all
feature. But in reality, the contract imposed a mere obligation with a term
being death. However, if it be shown that such an agreement is a mere
cloak to hide an inofficious donation, it may be assailed and annulled on
such ground.
The agreement didnt modify the conjugal funds of the spouse. Spousesare not prohibited by law to invest conjugal property, say by way of a
joint and several bank account, or an and/or account.
When the spouses Vitug opened the savings account, they merely putwhat rightfully belonged to them in a money-making venture. They
did not dispose of it in favor of the other, which would have arguably
been sanctionable as a prohibited donation. And since the funds
were conjugal, it cannot be said that one spouse could have
pressured the other in placing his or her deposits in the money pool. The agreement was in the nature of an aleatory contract. In reality what
is involved here is a contract with a term the fulfillment of which
depends on either the happening of an event which is (1)
uncertain, (2) which is to occur at an indeterminate time.
BOOKING OF DEPOSITS
INTEREST ON DEPOSITSSEC. X242, MRB: Interest onDeposits/Deposit Substitutes. Demand, savings, NOW accounts,
time deposits and deposit substitutes shall not be subject to interest
ceilings.
X242.1 Time of payment of interest on time deposits/deposit substitutes.
Interest or yield on time deposit/deposit substitute may be paid at maturity
or upon withdrawal or in advance: Provided, however, That interest or yield
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paid in advance shall not exceed the interest for one (1) year.
X242.2 Treatment of matured time deposits/deposit substitutes a. A timedeposit not withdrawn or renewed on its due date shall be treated as a
savings deposit and shall earn interest from maturity to the date of actual
withdrawal or renewal at a rate applicable to savings deposits.
b. A deposit substitute instrument not withdrawn or renewed on its maturity
date shall from said date become payable on demand and shall earn an
interest or yield from maturity to actual withdrawal or renewal at a rate
applicable to a deposit substitute with a maturity of fifteen (15) days.
Banks performing quasi-banking functions shall continue to consider
matured and unwithdrawn deposit substitutes as such and subject to
reserves.
Citibank, NA v Cabamongan
DOCTRINE: In a loan or forbearance of money, the interest due should be
that stipulated in writing and in the absence thereof, the rate shall be 12%
per annum counted from the time of demand.
CLOSING OF ACCOUNTSFar East Bank and Trust Company v Pacilan, Jr.DOCTRINE: No malice or bad faith could be imputed on a bank for closing
the account of a depositor for frequently drawing checks against
insufficient funds. Neither is there malice or bad faith, but only negligence,
when the bank accepted a deposit made by the depositor the day following
the closure of his account.
Petitioner bank has the right to close the account. The Bank Rules alsostate that: "...the depositor is NOT ENTITLED, AS A MATTER OF
RIGHT, TO OVERDRAW on this deposit and the bank reserves the
right at any time to return checks of the depositor which are drawn
against insufficient funds or for any other reason."
There was no right of the petitioner that was violated. The fact thatpetitioner constantly overdrew his account and used signatures not
on file was sufficient ground to close the account; therefore, there
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was no bad faith. He had improperly handled his account hundreds
of time. The depositor is bound by the terms and conditions of the
agreement with the bank.
Neither the fact that petitioner bank accepted the deposit made by therespondent the day following the closure of his account constitutes
bad faith or malice on the part of petitioner bank. The same could be
characterized as simple negligence by its personnel. Said act, by
itself, is not constitutive of bad faith. No legal right was established
nor bad faith proved by Pacilan. Damnum Absque Injuria.
F. SECRECY OF BANK DEPOSITS
REPUBLIC v. EUGENIO, 545 SCRA 384 (2008)
DOCTRINE: There is a right to privacy governing bank accounts in the
Philippines, as expressed in Sec. 2, RA 1405 (Bank Secrecy Act of 1995).
Exceptions provided for in Sec. 2 (may be examined by any person,
government official, bureau or office), are as follows:
Upon written permission of the depositor; In cases of impeachment; Examination of bank accounts is upon order of a competent court
in cases of bribery or dereliction of duty of public officials;
Money deposited or invested is the subject matter of litigation.
INTENGAN v. CA, 377 SCRA 63 (2002)
DOCTRINE: Where the accounts in question are US dollar deposits, the
applicable law is RA 6426 (FCDA), not RA 1405 (Bank Secrecy Law).
Under the applicable law, the only exception to the secrecy of foreigncurrency deposits is upon the written permission of the depositor.
Applicability of Exclusionary Rule
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EJERCITO v. SANDIGANBAYAN, 509 SCRA 190 (2006)
DOCTRINE: RA 1405 nowhere provides that an unlawful examination of
bank accounts shall render the evidence obtained therefrom inadmissible
in evidence. Sec. 5 only states that any violation of this law will subject the
offender upon conviction, to an imprisonment of not more than 5 years orfine of not more than P20,000 or both, in the discretion of the court.
Section 5 of R.A. 1405 only states that [a]ny violation of this lawwill subject the offender upon conviction, to an imprisonment ofnot more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court. Even assuming arguendo, however, that the exclusionary rule
applies in principle to cases involving R.A. 1405, the Court finds
no reason to apply the same in this particular case.
Clearly, the fruit of the poisonous tree doctrine1[13] presupposes aviolation of law. If there was no violation of R.A. 1405 in the instantcase, then there would be no poisonous tree to begin with, and,
thus, no reason to apply the doctrine.
Rules for Peso Deposits
SEC. 2, LAW ON SECRECY OF BANK DEPOSITS: All deposits ofwhatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, are
hereby considered as of an absolutely confidential nature and may
not be examined, inquired or looked into by any person, government
official, bureau or office, except upon written permission of the
depositor, or in cases of impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of public officials, or in
cases where the money deposited or invested is the subject matter
of the litigation.
EJERCITO v. SANDIGANBAYAN, 509 SCRA 190 (2006)
DOCTRINE: The term deposits used therein is to be understood broadly
and not limited only to accounts, which give rise to a creditor-debtor
relationship between the depositor and the bank. If the money deposited
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under an account may be used by banks for authorized loans to third
persons, then such accounts, regardless of whether it creates a creditor-
debtor relationship between the depositor and the bank, falls under the
category of accounts which the law precisely seeks to protect for the
purpose of boosting the economic development of the country.
Under the Anti-Graft and Corrupt Practices Act
SEC. 8, RA 3019: Dismissal due to unexplained wealth. If in accordance
with the provisions of Republic Act Numbered One thousand three hundred
seventy-nine, a public official has been found to have acquired during his
incumbency, whether in his name or in the name of other persons, an
amount of property and/or money manifestly out of proportion to his salary
and to his other lawful income, that fact shall be a ground for dismissal orremoval. Properties in the name of the spouse and unmarried children of
such public official may be taken into consideration, when their acquisition
through legitimate means cannot be satisfactorily shown. Bank deposits
shall be taken into consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary.
Cases
PNB v. GANCAYAO, 15 SCRA 91 (1965)
DOCTRINE: Sec. 8 of RA 3019 directs in mandatory terms that bank
deposits shall be taken into consideration in the enforcement of this
section, notwithstanding any provision of law to the contrary.
Anti Graft and Corrupt Practices Act prevails over the Bank SecrecyLaw. The anti graft law directs in mandatory terms that bank
deposits shall be taken into consideration in the enforcement ofthis section, notwithstanding any provision of law to the
contrary. The only conclusion possible is that Section 8 of the
Anti Graft Law is intended to amend Section 2 of the BankSecrecy Law by providing an additional exception to the rule against
the disclosure of bank deposits.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. PURISIMA, 161
SCRA 576 (1988)
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DOCTRINE: By enacting Sec. 8 of RA 3019, Congress intended to provide
an additional ground for the examination of bank deposits for without such
provision, the prosecutors would be hampered if not altogether frustrated in
the prosecution of those charged with having acquired unexplained wealth
while in public office.
The inquiry into illegally acquired property or property NOT"legitimately acquired" extends to cases where such property is
concealed by being held by or recorded in the name of other
persons. This proposition is made clear by R.A. No. 3019 which
quite categorically states that the term, "legitimately acquired
property of a public officer or employee shall not include .. property
unlawfully acquired by the respondent, but its ownership is
concealed by its being recorded in the name of, or held by,
respondent's spouse, ascendants, descendants, relatives or any
other persons.
To sustain the petitioner's theory, and restrict the inquiry only toproperty held by or in the name of the government official or
employee, or his spouse and unmarried children is unwarrantedin the light of the provisions of the statutes in question, and
would make available to persons in government who illegally
acquire property an easy and fool-proof means of evadinginvestigation and prosecution; all they would have to do wouldbe to simply place the property in the possession or name ofpersons other than their spouse and unmarried children. This is
an absurdity that we will not ascribe to the lawmakers.
Under the Ombudsman Act
SEC. 15 (8), RA 6770: Powers, Functions and Duties. The Office ofthe Ombudsman shall have the following powers, functions and
duties: Administer oaths, issue subpoena and subpoena duces
tecum, and take testimony in any investigation or inquiry, includingthe power to examine and have access to bank accounts and
records.
MARQUEZ v. DESIERTO, 359 SCRA 772 (1991)
DOCTRINE: Before an in camera inspection by the Ombudsman may be
allowed, there must be a pending case before a court of competent
jurisdiction. Further, the account must be clearly identified, the inspection
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limited to the subject matter of the pending case before the court of
competent jurisdiction. The bank personnel and the account holder must
be notified to be present during the inspection, and such inspection may
cover only the account identified in the pending case.
ISSUE
(Ombudsman act) whether petitioner may be cited for indirect contempt for
her failure to produce the documents requested by the Ombudsman. And
whether the order of the Ombudsman to have an in camera inspection of
the questioned account is allowed as an exception to the law on secrecy of
bank deposits (R. A. No. 1405).
RULING
NO, she may not be held in contempt or may the Ombudsman have an incamera inspection.
Examination of the secrecy of bank deposits law (R. A. No. 1405) would
reveal the following exceptions:
1.Where the depositor consents in writing;2.Impeachment case;3.By court order in bribery or dereliction of duty cases against public
officials;
4.Deposit is subject of litigation;5.Sec. 8, R. A. No. 3019, n cases of unexplained wealth as held in thecase of PNB vs. Gancayco. - The order of the Ombudsman to
produce for in camera inspection the subject accounts with the
Union Bank of the Philippines, Julia Vargas Branch, is based on a
pending investigation at the Office of the Ombudsman against
Amado Lagdameo, et. al. for violation of R. A. No. 3019, Sec. 3 (e)
and (g) relative to the Joint Venture Agreement between the Public
Estates Authority and AMARI.
We rule that before an in camera inspection may be allowed, there mustbe a pending case before a court of competent jurisdiction. Further,
the account must be clearly identified, the inspection limited to the
subject matter of the pending case before the court of competent
jurisdiction.
In Union Bank of the Philippines v. Court of Appeals, we held that
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Section 2 of the Law on Secrecy of Bank Deposits, as amended,
declares bank deposits to be absolutely confidential except:
(1) In an examination made in the course of a special or general
examination of a bank that is specifically authorized by the Monetary Boardafter being satisfied that there is reasonable ground to believe that a bankfraud or serious irregularity has been or is being committed and that it is
necessary to look into the deposit to establish such fraud or irregularity,
(2) In an examination made by an independent auditor hired by the bank to
conduct its regular audit provided that the examination is for audit
purposes only and the results thereof shall be for the exclusive use of the
bank,
(3) Upon written permission of the depositor, (4) In cases of impeachment,
(5) Upon order of a competent court in cases of bribery or dereliction ofduty of public officials, or
(6) In cases where the money deposited or invested is the subject matter
of the litigation
In the case at bar, there is yet no pending litigation before any court of
competent authority. What is existing is an investigation by the office of the
Ombudsman. In short, what the Office of the Ombudsman would wish todo is to fish for additional evidence to formally charge Amado Lagdameo,
et. al., with the Sandiganbayan. Clearly, there was no pending case in
court, which would warrant the opening of the bank account for inspection.
Under the Plunder Law
SEC. 1 (D), RA 7080: Ill-gotten wealth means any asset, property,
business enterprise or material possession of any person within the
purview of Section Two (2) hereof, acquired by him directly or indirectly
through dummies, nominees, agents, subordinates and/or business
associates by any combination or series of the following means or similar
schemes:
1) Through misappropriation, conversion, misuse, or malversation of public
funds or raids on the public treasury;
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2) By receiving, directly or indirectly, any commission, gift,
share, percentage, kickbacks or any other form of pecuniary benefit from
any person and/or entity in connection with any government contract or
project or by reason of the office or position of the public officer concerned;
3) By the illegal or fraudulent conveyance or disposition of assetsbelonging to the National Government or any of its subdivisions, agencies
or instrumentalities or government-owned or -controlled corporations and
their subsidiaries;
4) By obtaining, receiving or accepting directly or indirectly any shares of
stock, equity or any other form of interest or participation including promise
of future employment in any business enterprise or undertaking;
5) By establishing agricultural, industrial or commercial monopolies or
other combinations and/or implementation of decrees and orders intendedto benefit particular persons or special interests; or
6) By taking undue advantage of official position, authority, relationship,
connection or influence to unjustly enrich himself or themselves at the
expense and to the damage and prejudice of the Filipino people and the
Republic of the Philippines.
EJERCITO v SANDIGANBAYAN, 509 SCRA 190 (2006)
DOCTRINE: The plunder case under the Sandiganbayan necessarily
involves an inquiry into the whereabouts of the amount purportedly
acquired illegally by Erap, and the subject matter of the litigation cannot belimited to bank accounts under his name alone, but must include those
accounts to which the money purportedly acquired illegally or a portion
thereof was alleged to have been transferred. A public office is a public
trust.
Under the AMLA
REPUBLIC v. EUGENIO, 545 SCRA 384 (2008)
DOCTRINE: Even if bank inquiry order may be availed of without need of a
pre-exisitng case under the AMLA, it does not follow that such order may
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be availed of ex parte.
Under section 10, the AMLC is authorized to inquire into a bank accountupon establishing probable cause where the deposits are related tokidnapping for ransom, violation of the Dangerous Drugs Act,
hijacking, destructive arson and murder. The exception does not
dispense the Bank Secrecy Act to all deposits, except for cases
related to the enumerations above.
Section 10 contains the application for ex parte, but it is connected to
freezing of accounts. This must be done ex parte, since notifying the
accused my cause him to disburse the account before the order freezing
the account is issued. Section 11 does not contain the application for exparte, for the fact that there is nothing wrong with the accused knowing that
his accounts are being checked. It is immaterial for the accused to know
that his accounts are being checked, since he cannot hide the bank
records to prove that the accounts are linked to the crime imputed against
him. Hence, using the ex parte application found in section 10 in inquiring
into bank accounts (section 11) may be stayed with injunction.
Independent Auditor
MARQUEZ v. DESIERTO, 359 SCRA 772 (2001)
DOCTRINE: Sec. 2 of Bank Secrecy Law provides for exceptions to the
confidentiality rule of bank deposits, one of which is in an examination
made by an independent auditor hired by the bank to conduct its regular
audit provided that the examination is for audit purposes only and the
results thereof shall be for the exclusive use of the bank.
RATIO
We rule that before an in camera inspection may be allowed,there must be a pending case before a court of competent
jurisdiction. Further, the account must be clearly identified, the
inspection limited to the subject matter of the pending case before the
court of competent jurisdiction. The bank personnel and the account holder
must be notified to be present during the inspection, and such inspection
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may cover only the account identified in the pending case.
In Union Bank of the Philippines v. Court of Appeals, we held that Section
2 of the Law on Secrecy of Bank Deposits, as amended, declares bankdeposits to be absolutely confidential except:
(2) In an examination made by an independent auditor hired by the bank to
conduct its regular audit provided that the examination is for audit
purposes only and the results thereof shall be for the exclusive use of the
bank
In the case at bar, there is yet no pending litigation before any court of
competent authority. What exists is an investigation by the office of theOmbudsman. In short, what the Office of the Ombudsman would wish to
do is to fish for additional evidence to formally charge Amado Lagdameo,et. al., with the Sandiganbayan. Clearly, there was no pending case in
court, which would warrant the opening of the bank account for inspection.
Under the Rules of Court
1 Garnishment
SEC. 9 (C), RULE 39: Garnishment of debts and credits. - The officer may
levy on debts due the judgment obligor and other credits, including bank
deposits, financial interests, royalties, commissions and other personal
property not capable of manual delivery in the posssession or control of
third parties. Levy shall be made by serving notice upon the person owing
such debts or having in his possession or control such credits to which the
judgment obligor is entitled. The garnishment shall cover only such amount
as will satisfy the judgment and all lawful fees. The garnishee shall make a
written report to the court within five (5) days from service of the notice ofgarnishment stating whether or not the judgment obligor has sufficient
funds or credits to satisfy the amount of the judgment. If not, the reportshall state how much funds or credits the garnishee holds for the judgment
obligor. The garnished amount in cash, or certified bank check issued in
the name of the judgment obligee, shall be delivered directly to the
judgment obligee within ten (10) working days from service of notice on
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said garnishing requiring such delivery, except the lawful fees which shall
be paid directly to the court. In the event there are two or more garnishees
holding deposits or credits sufficient to satisfy the judgment, the judgment
obligor, if available, shall have the right to indicate the garnishee or
garnishees who shall be required to deliver the amount due; otherwise, the
choice shall be made by the judgment obligee. The executing sheriff shall
observe the same procedure under paragraph (a) with respect to
delivery of payment to the judgment obligee.
CHINA BANKING CORPORATION v. ORTEGA, 49 SCRA 356 (1973)
DOCTRINE: Garnishment of bank deposit judgment debtor is not violative
of RA 1405. The Court merely required the cashier of the bank to inform
the court whether or not the defendant had a deposit in said bank only forpurposes of the garnishment issued by it, so that the bank would hold the
same intact and not allow any withdrawal until further order.
2 Preliminary Attachment
Examination of party whose property is attached and persons indebted to
him or controlling his property; delivery of property to sheriff.
3 Rules for Foreign Currency Deposits
SEC. 8, FCDA: Secrecy of foreign currency deposits. All foreign currency
deposits authorized under this Act, as amended by PD No. 1035, as well
as foreign currency deposits authorized under PD No. 1034, are hereby
declared as and considered of an absolutely confidential nature and,
except upon the written permission of the depositor, in no instance shall
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. (As amended by PD No. 1035, and further amended by PD
No. 1246, prom. Nov. 21, 1977.)
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Cases
SALVACION v. CENTRAL BANK, 278 SCRA 27 (1997)
DOCTRINE: Sec. 113 of CB Circular No. 960, which exempts from
garnishment, attachment or any other order or process of any court,legislative body, government agency or any administrative body
whatsoever foreign currency deposits, is NOT applicable to a foreign
transient, but only to foreign lenders and investors to the development of
the Foreign Currency Deposit System and Offshore Banking System in the
Philippines.
CHINA BANKING CORP. v. CA, 511 SCRA 110 (2006)
DOCTRINE: The only exception to the secrecy of foreign currency deposits
is in the case of a written permission of the depositor.
Rules for Deposits in Specific Banks and Financial Institutions
Under the GBL SEC. 55.1 (B), GBL: No director, officer, employee, or
agent of any bank shall, without order of a court of competent
jurisdiction, disclose to any unauthorized person any information
relative to the funds or properties in the custody of the bank belongingto private individuals, corporations, or any other entity: Provided, That
with respect to bank deposits, the provisions of existing laws shallprevail;
G. GARNISHMENT
SEC. 13, RULE 39 OF RULES OF COURT: Property exempt from
execution.
Except as otherwise expressly provided by law, the following property, and
no other, shall be exempt from execution:
(a) The judgment obligor's family home as provided by law, or the
homestead in which he resides, and land necessarily used in connection
therewith;
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(b) Ordinary tools and implements personally used by him in hs trade,
employment, or livelihood;
(c) Three horses, or three cows, or three carabaos, or other beasts of
burden such as the judgment obligor may select necessarily used by him in
his ordinary occupation;
(d) His necessary clothing and articles for ordinary personal use, excluding
jewelry;
(e) Household furniture and utensils necessary for housekeeping, and
used for that purpose by the judgment obligor and his family, such as the
judgment obligor may select, of a value not exceeding one hundred
thousand pesos;
(f) Provisions for individual or family use sufficient for four months;
(g) The professional libraries and equipment of judges, lawyers,
physicians, pharmacists, dentists, engineers, surveyors, clergymen,
teachers, and other professionals, not exceeding three hundred thousand
pesos in value;
(h) One fishing boat and accessories not exceeding the total value of one
hundred thousand pesos owned by a fisherman and by the lawful use of
which he earns his livelihood;
(i) So much of the salaries, wages, or earnings of the judgment obligor of
his personal services within the four months preceding the levy as are
necessary for the support of his family;
(j) Lettered gravestones;
(k) Monies benefits, privileges, or annuities accruing or in any manner
growing out of any life insurance;
(l) The right to receive legal support, or money or property obtained as
such support, or any pension or gratuity from the Government;
(m) Properties specially exempt by law.
But no article or species of property mentioned in his section shall be
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exempt from executio issued upon a judgment recovered for its price or
upon a judgment of foreclosure of a mortgage thereon.
No violation of Law on Secrecy of Bank Deposits CasesCHINA BANKING v. ORTEGA, 49 SCRA 356 (1973) The prohibition against examination of or inquiry into a bank deposit under
Republic Act 1405 does not preclude its being garnished to insure
satisfaction of a judgment. Indeed there is no real inquiry in such a case,
and if the existence of the deposit is disclosed the disclosure is purely
incidental to the execution process. It is hard to conceive that it was everwithin the intention of Congress to enable debtors to evade payment of
their just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank.
PCI BANK v. CA, 193 SCRA 452 (1991)
It is clear from the discussion of the conference committee report on
Senate Bill No. 351 and House Bill No. 3977, which later became Republic
Act 1405, that the prohibition against examination of or inquiry into a bank
deposit under Republic Act 1405 does not preclude its being garnished toinsure satisfaction of a judgment. Indeed there is no real inquiry in such a
case, and if existence of the deposit is disclosed the disclosure is purelyincidental to the execution process. It is hard to conceive that it was ever
within the intention of Congress to enable debtors to evade payment of
their just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank.
Liability for Release Cases
RCBC v. DE CASTRO. 168 SCRA 49 (1988)
Moreover, by virtue of the order of garnishment, the same was placed in
custodia legis and therefore, from that time on, RCBC was holding the
funds subject to the orders of the court a quo. That the sheriff, upon
delivery of the check to him by RCBC encashed it and turned over the
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proceeds thereof to the plaintiff was no longer the concern of RCBC as the
responsibility over the garnished funds passed to the court. Thus, no
breach of trust or dereliction of duty can be attributed to RCBC in delivering
its depositor's funds pursuant to a court order, which was merely in the
exercise of its power of control over such funds.
The bank had no choice but to comply with the order demanding deliveryof the garnished amount in check. The very tenor of the order called for
immediate compliance therewith. On the other hand, the bank cannot be
held liable for the subsequent encashment of the check as this was upon
order of the court in the exercise of its power of control over the funds
placed in custodia legis by virtue of the garnishment.
H. DEPOSIT INSURANCE
SEC. 5, PDIC CHARTER: The deposit liabilities of any bank or banking
institution, which is engaged in the business of receiving deposits as herein
defined on the effective date of this Act, or which thereafter may engage in
the business of receiving deposits, shall be insured with the Corporation.
(As amended by R.A. 6037, 04 August 1969; renumbered from Sec. 4 by
R.A. 9302, 12 August 2004)
SEC. 9, FCDA: Deposit insurance coverage. The deposits under this Act
shall be insured under the provisions of Republic Act No. 3591, asamended (Philippine Deposit Insurance Corporation), as well as its
implementing rules and regulations: Provided, That insurance payment
shall be in the same currency in which the insured deposits are
denominated.
Amount Insured
SEC. 4 (G), PDIC CHARTER: The term insured deposit means the
amount due to any bona fide depositor for legitimate deposits in an insured
bank net of any obligation of the depositor to the insured bank as of the
date of closure, but not to exceed Five Hundred Thousand Pesos
(P500,000.00).2 Such net amount shall be determined according to such
regulations as the Board of Directors may prescribe. In determining such
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amount due to any depositor, there shall be added together all deposits in
the bank maintained in the same right and capacity for his benefit either in
his own name or in the name of others. A joint account regardless of
whether the conjunction "and," "or," "and/or" is used, shall be insured
separately from any individually- owned deposit account: Provided, That
(1) If the account is held jointly by two or more natural persons, or by two
or more juridical persons or entities, the maximum insured deposit shall be
divided into as many equal shares as there are individuals, juridical
persons or entities, unless a different sharing is stipulated in the document
of deposit, and (2) if the account is held by a juridical person or entity
jointly with one or more natural persons, the maximum insured deposit
shall be presumed to belong entirely to such juridical person or entity:
Provided, further, That the aggregate of the interest of each co-owner over
several joint accounts, whether owned by the same or different
combinations of individuals, juridical persons or entities, shall likewise besubject to the maximum insured deposit of Five Hundred Thousand Pesos
(P500,000.00): Provided, furthermore, That the provisions of any law to the
contrary notwithstanding, no owner/holder of any negotiable certificate of
deposit shall be recognized as a depositor entitled to the rights provided in
this Act unless his name is registered as owner/holder thereof in the books
of the issuing bank: Provided, finally, That, in case of a condition that
threatens the monetary and financial stability of the banking system that
may have systemic consequences, as defined in section 17 hereof, as
determined by the Monetary Board, the maximum deposit insurance cover
may be adjusted in such amount, for such a period, and/or for such depositproducts, as may be determined by a unanimous vote of the Board of
Directors in a meeting called for the purpose and chaired by the Secretary
of Finance, subject to the approval of the President of the Philippines. (As
amended by R.A. 9302, 12 August 2004; R.A. 9576, 2009)
Rules on Payment
SEC. 10 (B), PDIC CHARTER: REPEALED ALREADY. For purposes ofthis Act an insured bank shall be deemed to have been closed on account
of insolvency when ordered closed by the Monetary Board of the Central
Bank of the Philippines pursuant to Section 29 of R.A. 265, as amended.
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Liability of PDIC Cases
PDIC v. CA
It doesn't matter. Whether the CTDs in question are negotiable ornot is immaterial in the present case. The Philippine DepositInsurance Corporation was created by law and, as such, isgoverned primarily by the provisions of the special law creating
it. The liability of the PDIC for insured deposits therefore is
statutory and such liability rests upon the existence of deposits
with the insured bank, not on the negotiability or non-negotiability of the certificates evidencing these deposits.
the deposit liability of PDIC is determined by the provisions of thelaw that created it, RA 3519, and statements in the certificates
that the same are insured by PDIC are not binding upon the
latter. PDIC not liable. In order that a claim for deposit insurance with the
PDIC may prosper, the law requires that a corresponding deposit
be placed in the insured bank. The problem is that Regent didnot receive anything in consideration for the CTDs it issued,
since the check representing the vale of the CTDs (issued by
Premiere) bounced; therefore no deposit ever came into
existence. Accordingly, there is nothing here for PDIC to insure.
I. UNCLAIMED BALANCES
SEC. 1, UNCLAIMED BALANCES LAW: "Unclaimed balances", within the
meaning of this Act, shall include credits or deposits of money, bullion,
security or other evidence of indebtedness of any kind, and interest
thereon with banks, buildings and loan associations, and trust
corporations, as hereinafter defined, in favor of any person known to be
dead or who has not made further deposits or withdrawals during the
preceding ten years or more. Such unclaimed balances, together with theincrease and proceeds thereof, shall be deposited with the Treasurer of the
Philippines to the credit of the Government of the Republic of
the Philippines to be used as the National Assembly may direct.
"Banks", "building and loan associations" and "trust corporations", within
the meaning of this Act, shall refer to institutions defined under Section
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two, thirty-nine and fifty-six, respectively, of Republic Act Numbered Three
Hundred Thirty Seven, otherwise known as the General Banking Act, as
amended, whether organized under special charters or not.
Cases
Republic v. CA, 345 SCRA 63 (2000)
The publication of the list of unclaimed balances is intended to safeguard
the right of the depositors, their heirs and successors to due process. This
was made clear by the lower court in its assailed Order, to wit:
Moreover, how would other persons who may have an interest in any of
the unclaimed balances know what this case is all about and whether they
have an interest in this case if the amended complaint and list of unclaimed
balances are not published? Such other persons may be heirs of the bankdepositors named in the list of unclaimed balances.
xxx
The fact that the government is in a tight financial situation is not a
justification for this Court to dispense with the elementary rule of due
process.
As declared by the trial court in its Order dated August 1, 1989, the
dismissal of the petition for escheat is without prejudice. In other words, the
State can refile the said petition, notwithstanding the lapse of time.
Prescription of action does not run against the government.
Escheat Proceedings
SEC. 3, UNCLAIMED BALANCES LAW: Whenever the Solicitor General
shall be informed of such unclaimed balances, he shall commence
an action or actions in the name of the People of the Republic of the
Philippines in the Court of First Instance of the province or city where thebank, building and loan association or trust corporation is located, in whichshall be joined as parties the bank, building and loan association or trust
corporation and all such creditors or depositors. All or any of such creditors
or depositors or banks, building and loan association or trust corporations
may be included in one action.
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Effects of Compliance/Non-Compliance SEC. 4, UNCLAIMED BALANCES LAW: If the president, cashier or
managing officer of the bank, building and loan association, or trustcorporation neglects or refuses to make and file the sworn statement
required by this action, such bank, building and loan association, or trust
corporation shall pay to the Government the sum of five hundred pesos a
month for each month or fraction thereof during which such default shall
continue.
J. ANTI-MONEY LAUNDERING ACT
Declared PolicySEC. 2, AMLA: Declaration of Policy. - It is hereby declaredthe policy of the State to protect and preserve the integrity and
confidentiality of bank accounts and to ensure that the Philippines shall not
be used as a money laundering site for the proceeds of any unlawful
activity. Consistent with its foreign policy, the State shall extend
cooperation in transnational investigations and prosecutions of personsinvolved in money laundering activities wherever committed.
Covered TransactionsSEC. 3 (B), AMLA: "Covered transaction" is a single, series, or
combination of transactions involving a total amount in excess of Four
million Philippine pesos (Php4,000,000.00) or an equivalent amount in
foreign currency based on the prevailing exchange rate within five (5)
consecutive banking days except those between a covered institution and
a person who, at the time of the transaction was a properly identified clientand the amount is commensurate with the business or financial capacity of
the client; or those with an underlying legal or trade obligation, purpose,
origin or economic justification.
It likewise refers to a single, series or combination or pattern of
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unusually large and complex transactions in excess of Four million
Philippine pesos (Php4,000,000.00) especially cash deposits andinvestments having no credible purpose or origin, underlying tradeobligation or contract.
Suspicious Transactions SEC. 3 (B-1), AMLA: SEC. 3 (B), AMLA:
"Covered transaction" is a single, series, or combination of
transactions involving a total amount in excess of Four million
Philippine pesos (Php4,000,000.00) or an equivalent amount in foreigncurrency based on the prevailing exchange rate within five (5)consecutive banking days except those between a covered institutionand a person who, at the time of the transaction was a properly
identified client and the amount is commensurate with the business or
financial capacity of the client; or those with an underlying legal ortrade obligation, purpose, origin or economic justification.
Covered Institutions SEC. 3 (A), AMLA: "Covered Institution"
refers to:
1. banks, non-banks, quasi-banks, trust entities, and allother institutions and their subsidiaries and affiliates
supervised or regulated by the Bangko Sentral ng
Pilipinas (BSP);
2. insurance companies and all other institutions supervisedor regulated by the Insurance Commission; and
3. securities dealers, brokers, salesmen, investment housesand other similar entities managing securities or
rendering services as investment agent, advisor, orconsultant, (ii) mutual funds, close and investment
companies, common trust funds, pre-needcompanies and other similar entities, (iii) foreign
exchange corporations, money changers, moneypayment, remittance, and transfer companies and
other similar entities, and (iv) other entities
administering or otherwise dealing in currency,
commodities or financial derivatives based thereon,valuable objects, cash substitutes and other similar
monetary instruments or property supervised or
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regulated by Securities and Exchange
Commission.
Obligations of Covered Institutions SEC. 9, AMLA: Prevention ofMoney Laundering; Customer Identification Requirements and
Record Keeping.
Money-Laundering Crime
SEC. 4, AMLA: Money Laundering Offense. - Money laundering is a crime
whereby the proceeds of an unlawful activity are transacted, thereby
making them appear to have originated from legitimate sources. It is
committed by the following:
1.Any person knowing that any monetary instrument or propertyrepresents. involves, or relates to the proceeds of any unlawful
activity, transacts or attempts to transact said monetary instrument
or property.
2.Any person-knowing that any monetary instrument or property involvesthe proceeds of any unlawful activity, performs or fails to perform
any act as a result of which he facilitates the offense of moneylaundering referred to in paragraph (a) above.
3.Any person knowing that any monetary instrument or property is requiredunder this Act to be disclosed and filed with the Anti-Money
Laundering Council (AMLC), fails to do so.
(a) Transacting or attempting to transact, with monetary instrument or
property, knowing it represents, involves, or related to proceeds of any
Unlawful Activity(b) Facilitating money-laundering referred to in Item (a) above, by failing to
perform an act
(c) Failing to disclose and file report with AMLC of any monetary
instrument or property as required under AMLA
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Unlawful Activities
SEC. 3 (i), AMLA: "Unlawful activity" refers to any act or omission or series
or combination thereof involving or having relation to the following:
1.Kidnapping for ransom under Article 267 of Act No.3815, otherwiseknown as the Revised Penal Code, as amended;
2.Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No.6425, asamended, otherwise known as the Dangerous Drugs Act of 1972;
3.Section 3 paragraphs B,C,E,G,H and I of Republic Act No.3019, asamended; otherwise known as the Anti-Graft and Corrupt Practices
Act;
4.Plunder under Republic Act No.7080, as amended;5.Robbery and extortion under Articles 294,295,296,299,300,301 and302 of the Revised Penal Code, as amended;
f. Jueteng and Masiao punished as illegal gambling under Presidential
Decree No.1602;
g. Piracy on the high seas under the Revised Renal Code, as amendedand Presidential Decree No.532;
h. Qualified theft under Article 310 of the Revised Penal Code, as
amended; (9) Swindling under Article 315 of the Revised Penal Code, as
amended;
i. Smuggling under Republic Act Nos. 455 and 1937; j. Violations underRepublic Act No.8792, otherwise known as the
Electronic Commerce Act of 2000; k. Hijacking and other violations underRepublic Act No.6235; destructive arson and murder, as defined under theRevised Penal Code, as amended, including those perpetrated by
terrorists against non- combatant persons and similar targets;
l. Fraudulent practices and other violations under Republic Act No.8799.
otherwise known as the Securities Regulation Code of 2000;
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m. Felonies or offenses of a similar nature that are punishable under the
penal laws of other countries.
Prohibition against Political HarassmentSEC. 16, AMLA: Prohibitions Against Political Harassment. - This Act shall
not be used for political prosecution or harassment or as an instrument to
hamper competition in trade and commerce.
No case for money laundering may be filed against and no assets shall be
frozen, attached or forfeited to the prejudice of a candidate for an electoral
office during an election period.
Civil Forfeiture
SEC. 12, AMLA: Forfeiture Provisions.
1.Civil Forfeiture. - When there is a covered transaction report made, andthe court has, in a petition filed for the purpose ordered seizure of
any monetary instrument or property, in whole or in part, directly or
indirectly, related to said report, the Revised Rules of Court on civil
forfeiture shall apply.
2.Claim on Forfeited Assets. - Where the court has issued an order offorfeiture of the monetary instrument or property in a criminal
prosecution for any money laundering offense defined under Section4 of this Act, the offender or any other person claiming an interest
therein may apply, by verified petition, for a declaration that the
same legitimately belongs to him and for segregation or exclusion of
the monetary instrument or property corresponding thereto. The
verified petition shall be filed with the court which rendered the
judgement of conviction and order of forfeiture, within fifteen (15)
days from the date of the order or forfeiture, in default of which the
said order shall become final and executory. This provision shall
apply in both civil and criminal forfeiture.
Payment in Lieu of Forfeiture. - Where the court has issued an order of
forfeiture of the monetary instrument or property subject of a money
laundering offense defined under Section 4, and said order cannot be
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enforced because any particular monetary instrument or property cannot,
with due diligence, be located, or it has been substantially altered,
destroyed, diminished in value or otherwise rendered worthless by any act
or omission, directly or indirectly, attributable to the offender, or it has been
concealed, removed, converted or otherwise transferred to prevent the
same from being found or to avoid forfeiture thereof, or it is located outside
the Philippines or has been placed or brought outside the jurisdiction of the
court, or it has been commingled with other monetary instruments or
property belonging to either the offender himself or a third person or entity,
thereby rendering the same difficult to identify or be segregated for
purposes of forfeiture, the court may, instead of enforcing the order of
forfeiture of the monetary instrument or property or part thereof or interest
therein, accordingly order the convicted offender to pay an amount equal to
the value of said monetary instrument or property. This provision shall
apply in both civil and criminal forfeiture.
Cases
Republic v. Glasgow Credit and Collection Services, 542 SCRA 384
(2008) RULE 12 Forfeiture Provisions xxx xxx xxx Rule 12.2. When Civil Forfeiture May be Applied. When there is a
SUSPICIOUS TRANSACTION REPORT OR A COVERED
TRANSACTION REPORT DEEMED SUSPICIOUS AFTERINVESTIGATION BY THE AMLC, and the court has, in a petition filed for
the purpose, ordered the seizure of any monetary instrument or property,
in whole or in part, directly or indirectly, related to said report, the Revised
Rules of Court on civil forfeiture shall apply. RA 9160, as amended, and its
implementing rules and regulations lay down two conditions when applying
for civil forfeiture: (1) when there is a suspicious transaction report or acovered transaction report deemed suspicious after investigation by the
AMLC (Anti-Money Laundering Council)(2) the court has, in a petition filedfor the purpose, ordered the seizure of any monetary instrument or
property, in whole or in part, directly or indirectly, related to said report. Since account of Glasgow in CSB was (1) covered by several suspicious
transaction reports and (2) placed under the control of the trial court upon
the issuance of the writ of preliminary injunction, the conditions provided in
RA 9160 were satisfied. Hence, the Republic, represented by the AMCL,
properly instituted the complaint for civil forfeiture. Whether or not there is
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truth in the allegation that account of Glasgow contains the proceeds of
unlawful activities is an evidentiary matter that may be proven during trial.
The complaint, however, did not even have to show or allege that Glasgow
had been implicated in a conviction for, or the commission of, the unlawful
activities of estafa and violation of the Securities Regulation Code. Acriminal conviction for an unlawful activity is not a prerequisite for the
institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt
for an unlawful activity is not an essential element of civil
forfeiture.Thus, regardless of the absence, pendency or outcome of acriminal prosecution for the unlawful activity or for money laundering, an
action for civil forfeiture may be separately and independently prosecuted
and resolved. - There was no failure to prosecute on the part of the Republic.
Immediately after the complaint was filed, the trial court ordered the
process server to serve summons to Glasgow. The subpoena to Glasgow
was, however, returned unserved as Glasgow "could no longer be found at
its given address" and had moved out of the building. Republic then filed a
motion for issuance of alias summons and leave of court to serve
summons by publication. The court archived the case for failure to cause
service of alias summons, still, the Republic motioned the case to be
reinstated. Meanwhile, the Republic continued to exert efforts to obtain
information from other government agencies on the whereabouts or current
status of respondent Glasgow. Its efforts, however, proved futile. The alias
summons was again unserved. It was then that Glasgow filed the motion todismiss. Given these circumstances, how could the Republic be faulted forfailure to prosecute the complaint for civil forfeiture? While there wasadmittedly a delay in the proceeding, it could not be entirely or primarily
ascribed to the Republic. That Glasgows whereabouts could not be
ascertained was not only beyond the Republics control, it was also
attributable to Glasgow which left its principal office address without
informing the Securities and Exchange Commission or any official
regulatory body of its new address. Moreover, as early as October 8, 2003,
the Republic was already seeking leave of court to serve summons by
publication. ADDINTIONAL RULING: the service of summons may be made by
publication in cases of civil forfeiture as they are proceedings in rem. The
Rules of Procedure in Cases of Civil Forfeiture also allows summons by
publication in cases where the whereabouts of the owner are unknown and
cannot be ascertained by diligent inquiry.
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Freezing of Accounts SEC. 10, AMLA: Authority to Freeze. - Upon determination that probable
cause .exists that any deposit or similar account is in any way related to anunlawful activity, the AMLC may issue a freeze order, which shall be
effective immediately, on the account for a period not exceeding fifteen
(15) days. Notice to the depositor that his account has been frozen shall be
issued simultaneously with the issuance of the freeze order. The depositor
shall have seventy-two (72) hours upon receipt of the notice to explain why
the freeze order should be lifted. The AMLC has seventy-two (72) hours to
dispose of the depositor's explanation. If it fails to act within seventy-two
(72) hours from receipt of the depositors explanation, the freeze order
shall automatically be dissolved. The fifteen (15)-day freeze order of the
AMLC may be extended upon order of the court, provided that the fifteen(15)-day period shall be tolled pending the court's decision to extend the
period. No court shall issue a temporary restraining order or writ of injunction
against any freeze order issued by the AMLC except the Court of
Appeals or the Supreme Court.
CasesRepublic v. Eugenio
ISSUE
Whether a bank inquiry order issued in accordance with section 10 AMLA
may be stayed with injunction.RULING
YES . Under this section, the AMLC may file an application ex parte, with
the CA, and upon determination of probable cause, they may issue a
freeze order effective immediately. This is to prevent funds that is relatedto any money-laundering from being misused while the case is being tried.
It is ex parte because the fact of freezing the account must be kept secret
from the owner, else the funds may just be moved elsewhere before the
freeze order may be issued. Since the application of AMLC has nothing todo with any of the provided enumerations under Section 11, it must prove
that there is probable cause with the case, in order to inquire into the bank
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accounts. Probable cause may only be decided by the courts (Art III, Sec 2
of Constitution). Section 10 contains the application for ex parte, but it is
connected to freezing of accounts. This must be done ex parte, since
notifying the accused my cause him to disburse the account before the
order freezing the account is issued. Section 11 does not contain the
application for ex parte, for the fact that there is nothing wrong with the
accused knowing that his accounts are being checked. It is immaterial for
the accused to know that his accounts are being checked, since he cannot
hide the bank records to prove that the accounts are linked to the crime
imputed against him. Hence, using the ex parte application found in section
10 in inquiring into bank accounts (section 11) may be stayed with
injunction.
Examination of Accounts
SEC. 11, AMLA: Authority to Inquire into Bank Deposits.
- Notwithstanding the provisions of Republic Act No.1405, as amended; Republic Act No. 6426, as amended;
Republic Act No. 8791, and other laws, the AMLC may
inquire into or examine any particular deposit or
investment with any banking institution or non- bankfinancial institution upon order of any competent court
in cases of violation of this Act when it has been
established that there is probable cause that thedeposits or investments involved are in any way relatedto a money laundering offense: Provided, That this
provision shall not apply to deposits and investments
made prior to the effectivity of this Act. AMLA: Mutual
Assistance among States. 1. Request for assistancefrom a Foreign State. - Where a foreign State makes a
request for assistance in the investigation orprosecution of a money laundering offense, the AMLC
may execute the request or refuse to execute the same
and inform the foreign State of any valid reason for not
executing the request or for delaying the executionthereof. The principles of mutuality and reciprocity
shall, for this purpose, be at all times recognized.
Requirements for Requests for Mutual Assistance from ForeignStates.
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- A request for mutual assistance from a foreign State must (1)
confirm that an investigation or prosecution is being conducted inrespect of a money launderer named therein or that he has beenconvicted of any money laundering offense; (2) state the groundson which any person is being investigated or prosecuted for money
laundering or the details of his conviction; (3) gives sufficientparticulars as to the identity of said person; (4) give particularssufficient to identify any covered institution believed to have any
information, document, material or object which may be of
assistance to the investigation or prosecution; (5) ask from the
covered institution concerned any information, document, materialor object which may be of assistance to the investigation or
prosecution; (6) specify the manner in which and to whom said
information, document, material or object detained pursuant to said
request, is to be produced; (7) give all the particulars necessary forthe issuance by the court in the requested State of the writs, orders
or processes needed by the requesting State; and (8) contain such
other information as may assist in the execution of the request.