Philippine Deposit Insurance Corporation

Philippine Deposit Insurance banking system, and PROTECT it

Corporation (PDIC – RA from illegal schemes and
machinations.
10846)
“Towards this end, the government
“SECTION 1. — There is hereby
must extend all means and
created a Philippine Deposit
mechanisms necessary for the
Insurance Corporation hereinafter
Corporation to effectively fulfill
referred to as the [Government]
its vital task of promoting and
‘Corporation’ which shall insure as
safeguarding the interests of the
herein provided, the deposits of all
depositing public by way of
banks which are entitled to the
providing insurance coverage on
benefits of insurance under this Act,
bank deposits and in helping
and which shall have the powers
develop a SOUND AND STABLE
hereinafter granted.
banking system.
“The Corporation shall, as a basic
“In view of the crucial role and the
policy, promote and safeguard the
nature of its functions and
interests of the depositing public by
responsibilities, the Corporation,
providing insurance coverage on all
while being a government
insured deposits and helping
instrumentality with corporate
maintain a sound and stable
powers, shall enjoy FISCAL AND
banking system.”
ADMINISTRATIVE AUTONOMY.
[The Philippine Deposit Insurance
MAIN FUNCTIONS OF PDIC
Corporation Act created the
Philippine Deposit Insurance 1. Insurance of banks
Corporation which is a government
corporation promoting and 2. Examination of banks
safeguarding the interests of the 3. Rehabilitation of banks
depositing public by providing
permanent and continuing 4. Receivership of closed banks
insurance coverage on all insured
5. Liquidation of closed banks
deposits. (Atty. Rondez Notes)]

STATE POLICY (S2) Section 3 – Composition of

Board of PDIC
To STRENGTHEN the mandatory
deposit insurance coverage Board of Directors (7 members)
system to GENERATE, PRESERVE,
1. Sec. of Finance – Ex Officio
MAINTAIN FAITH AND
Chairman
CONFIDENCE in the country’s

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Philippine Deposit Insurance Corporation

2. Governor of BSP – Ex Officio distribution of all the assets of the

Member closed bank.
3. Pres. of the Corp. (appointed)-
Vice Chairman (Chief 4 kinds of Deposits which
Executive Officer of the cannot be insured by the
Corporation) PDIC (Sec. 5) (IF-U2)
4. 4 members from the private
sector The Corporation shall not pay
- “The presence of four (4) deposit insurance for the following
members shall constitute a accounts or transactions:
quorum. All decisions of the (1) Investment products such as
Board of Directors shall bonds and securities, trust accounts,
require the concurrence of at and other similar instruments;
least four (4) members.
(2) Deposit accounts or transactions
Asset (Sec.5) which are fictitious or fraudulent
as determined by the Corporation;
refers to movable, immovable,
tangible, or intangible resources or “(3) Deposit accounts or
properties over which a bank has an transactions constituting, and/or
established or equitable interest, emanating from, unsafe and
including the proceeds of the sale of unsound banking practice/s, as
its bank and branch licenses determined by the Corporation, in
subject to the approval of the consultation with the Bangko
Bangko Sentral ng Pilipinas. Sentral ng Pilipinas, after due notice
and hearing, and publication of a
Asset Distribution plans
directive to cease and desist issued
(Sec. 5)
by the Corporation against such
refers to the plan of distribution of
deposit accounts, transactions or
the assets of a closed bank to its
practices; and
creditors, based on its estimated
realizable value as of a certain cut- “(4) Deposits that are determined to
off date, prepared in accordance be the proceeds of an unlawful
with the Rules on Concurrence and activity as defined under Republic
Preference of Credits under the Civil Act No. 9160, as amended.
Code or other laws.
“An asset distribution plan may be Liquidation court (Sec. 5 (l))
partial when it pertains to the
refers to the Regional Trial Court
distribution of a portion or some of
(RTC) of general jurisdiction where
the assets of the closed bank, or
the petition for assistance in the
final when it pertains to the
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Philippine Deposit Insurance Corporation

liquidation of a closed bank is filed any insured bank, it shall be

and given due course. disclosed that an insured bank or
its directors or agents have
Deposit Liabilities (Sec. 6) committed, are committing or
about to commit unsafe or
“SEC. 6. The deposit liabilities of
unsound practices in conducting
any bank which is engaged in the
the business of the bank, or have
business of receiving deposits as
violated, are violating or about to
herein defined on the effective date
violate any provisions of any law
of this Act, or which thereafter may
or regulation to which the insured
engage in the business of receiving
bank is subject, the Board of
deposits, shall be insured with the
Directors shall submit the report
Corporation.
of the examination to the
“Whenever a bank is determined by Monetary Board to secure
the Bangko Sentral ng Pilipinas to corrective action thereon. If no such
be capital deficient, the corrective action is taken by the
Corporation may conduct an Monetary Board within 45 days
insurance risk evaluation on the from the submission of the report,
bank to enable it to assess the risks the Board of Directors shall, motu
to the Deposit Insurance Fund proprio, institute corrective action
(DIF). Such evaluation may include which it deems necessary. The
the determination of: Board of Directors may thereafter
issue a cease and desist order, and
(i) the fair market value of the require the bank or its directors or
assets and liabilities of a agents concerned to correct the
bank; or practices or violations within 45
(ii) the risk classification of a days. However, if the practice or
bank; or violation is likely to cause
(iii) possible resolution modes insolvency or substantial dissipation
under Section 11 of this of assets or earnings of the bank, or
Act, subject to such terms is likely to seriously weaken the
and conditions as the PDIC condition of the bank or otherwise
Board may prescribe.” seriously prejudice the interests of
its depositors and the Corporation,
Examination and
the period to take corrective action
Investigation (Sec. 8
shall not be more than fifteen (15)
Unsound Banking Practices) days. The order may also include
the imposition of fines provided in
(a) Whenever upon examination by
Section 26(g) hereof. The Board of
the Corporation into the condition of
Directors shall duly inform the

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Philippine Deposit Insurance Corporation

Monetary Board of the Bangko grave abuse of discretion as to

Sentral ng Pilipinas of action it has amount to a lack or excess of
taken under this subsection with jurisdiction -> File in CA
respect to such practices or
NOTE: The petition for certiorari
violations.
may only be filed within thirty (30)
(b) The actions and proceedings days from notice of denial of claim
provided in the preceding for deposit insurance.
subsections may be undertaken by
EXC to EXC: SC – unique cases
the Corporation if, in its opinion, an
(extreme urgency or involves a
insured bank or its directors or
constitutional issue)]
agents have violated, are violating or
about to violate any provision of this The deposits of each depositor in the
Act or any order, rule or instruction bank on the effective date of the
issued by the Corporation or any termination of insurance coverage,
written condition imposed by the less all subsequent withdrawals,
Corporation in connection with any shall continue to be insured up to
transaction with or grant by the the maximum deposit insurance
Corporation. coverage for a period of one hundred
eighty (180) days. Additions to, or
(c) The Corporation may terminate
renewal of, existing deposits and
the insured status of any bank that
new deposits in such bank after the
fails or refuses to comply, within
effective date of termination of
thirty (30) days from notice, with
insured status of the bank shall not
any cease-and-desist order issued
be insured by the Corporation.
by the Corporation, or with any
corrective action imposed by the The bank shall not advertise or
Monetary Board, under this section represent that additions to, or
pertaining to a deposit-related renewal of, existing deposits and
unsafe and/or unsound banking new deposits made after the effective
practice. date of termination aye covered by
deposit insurance.
Such termination shall be final
and executory, and shall be Two types of Examination
effective upon publication of the
notice of termination in a newspaper (RI No. 2009-05 or the Rules
of general circulation. and Regulations on
[EXC: File Petition for Certiorari Examination of Banks. Sec.
ground that the action was taken in 2)
excess of jurisdiction or with such

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Philippine Deposit Insurance Corporation

a. Regular Examination - An valuation reserves on loans and

examination conducted other risk assets;
independently or jointly with the
c. Review of all aspects of bank
BSP. It requires the prior
operations;
approval of the PDIC Board of
Directors and the Monetary d. Assessment of risk management
Board (MB). It may be conducted system, including the evaluation of
only after an interval of at least the effectiveness of the bank
twelve (12) months from the closing managements oversight functions,
date of the last Regular Examination. policies, procedures, internal control
and audit;
b. Special Examination An
examination conducted at any time e. Appraisal of overall management
in coordination with the BSP, by an of the bank;
affirmative vote of a majority of all
the members of the PDIC Board of f. Review of compliance with
Directors, without need of prior MB applicable banking laws, and rules
approval, if there is a threatened or and regulations, including PDIC
impending bank closure as issuances;
determined by the PDIC Board of
g. Follow-through of specific
Directors.
exceptions/ violations noted during
Examination v. Investigation a previous examination; and

(Source: PDIC v. Philippine h. Any other activity relevant to

Countryside Rural Bank, Inc., Rural the above.
Bank Of Carmen (Cebu), Inc., Bank
Of East Asia (Minglanilla, Cebu), Rule 2, Section 1 of PDIC RI No.
Inc., And Pilipino Rural Bank (Cebu), 2005-02 or the PDIC Rules on Fact-
Inc., G.R. No. 176438, January 24, Finding Investigation of Fraud,
2011) Irregularities and Anomalies
Committed in Banks provides for the
Section 3. Scope of Examination scope of fact-finding investigations
The examination shall include, but as follows:
need not be limited to, the following:
SECTION 1. Scope of the
a. Determination of the banks Investigation.
solvency and liquidity position;
Fact-finding Investigations shall be
b. Evaluation of asset quality as well limited to the particular acts or
as determination of sufficiency of omissions subject of a complaint or
a Final Report of Examination.

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Philippine Deposit Insurance Corporation

From the above-cited provisions, it of omissions and, thus, requires a

is clear that the process of less invasive assessment.
examination covers a wider scope
An examination of banks requires
than that of investigation.
the prior consent of the Monetary
Examination involves an evaluation Board, whereas an investigation
of the current status of a bank and based on an examination report,
determines its compliance with the does not.
set standards regarding solvency,
liquidity, asset valuation, operations, Sec. 9
systems, management, and
The provisions of Presidential
compliance with banking laws, rules
Decree No. 1445, as amended,
and regulations.
Executive Order No. 292, and other
Investigation, on the other hand, is similar laws notwithstanding, to
conducted based on specific findings compromise, condone or release,
of certain acts or omissions which in whole or in part, any claim or
are subject of a complaint or a Final settled liability to the Corporation,
Report of Examination. regardless of the amount involved,
under such terms and conditions as
Clearly, investigation does not may be imposed by the Board of
involve a general evaluation of the Directors to protect the interest of
status of a bank. An investigation the Corporation, and to write off the
zeroes in on specific acts and Corporation’s receivables and assets
omissions uncovered via an which are no longer recoverable or
examination, or which are cited in realizable.
a complaint.
To determine qualified interested
An examination entails a review of acquirers or investors for any of the
essentially all the functions and modes of resolution or liquidation of
facets of a bank and its operation. It banks
necessitates poring through
voluminous documents, and To determine the appropriate
requires a detailed evaluation resolution method and to implement
thereof. Such a process then the same for a bank subject of
involves an intrusion into a banks resolution
records.
To determine the appropriate mode
In contrast, although it also involves of liquidation of a closed bank and
a detailed evaluation, an to implement the same.
investigation centers on specific acts
Powers of the receiver (Sec. 13(b))

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Philippine Deposit Insurance Corporation

(a) The receiver is authorized to deputies, assistants or agents, to

adopt and implement, without need perform such powers and functions
of consent of the stockholders, of the Corporation as receiver of the
board of directors, creditors or closed bank, or assist in the
depositors of the closed bank, any performance thereof;
or a combination of the following
“(6) Appoint or hire persons or
modes of liquidation:
entities of recognized competence in
(1) Conventional liquidation; and forensic and fraud investigations;

(2) Purchase of assets and/or “(7) Pay accrued utilities, rentals

assumption of liabilities. and salaries of personnel of the
closed bank for a period not
(b) In addition to the powers of a
exceeding three (3) months, from
receiver provided under existing
available funds of the closed bank;
laws, the Corporation, as receiver
of a closed bank, is empowered to: “(8) Collect loans and other claims of
the closed bank and for this purpose,
“(1) Represent and act for and on
modify, compromise or restructure
behalf of the closed bank;
the terms and conditions of such
“(2) Gather and take charge of all loans or claims as may be deemed
the assets, records and affairs of the advantageous to the interests of the
closed bank, and administer the creditors of the closed bank;
same for the benefit of its creditors;
“(9) Hire or retain private counsel as
“(3) Convert the assets of the closed may be necessary;
bank to cash or other forms of liquid
“(10) Borrow or obtain a loan, or
assets, as far as practicable; mortgage, pledge or encumber any
“(4) Bring suits to enforce liabilities asset of the closed bank, when
of the directors, officers, employees, necessary to preserve or prevent
agents of the closed bank and other dissipation of the assets, or to
entities related or connected to the redeem foreclosed assets of the
closed bank or to collect, recover, closed bank, or to minimize losses
and preserve all assets, including to its depositors and creditors;
assets over which the bank has
“(11) If the stipulated interest rate
equitable interest;
on deposits is unusually high
“(5) Appoint or hire persons or compared with prevailing applicable
entities of recognized competence in interest rates, the Corporation as
banking, finance, asset management receiver, may exercise such powers
or remedial management, as its which may include a reduction of

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Philippine Deposit Insurance Corporation

the interest rate to a reasonable Directors, notwithstanding the laws

rate: Provided, That any on archival period and disposal of
modifications or reductions shall records; and
apply only to earned and unpaid
“(16) Exercise such other powers as
interest;
are inherent and necessary for the
“(12) Utilize available funds of the effective discharge of the duties of
bank, including funds generated by the Corporation as receiver.
the receiver from the conversion of
assets to pay for reasonable costs Petition for a closed bank
and expenses incurred for the
A petition for assistance in the
preservation of the assets, and
liquidation is a special proceeding
liquidation of, the closed bank,
for the liquidation of a closed bank,
without need for approval of the
and includes the declaration of the
liquidation court;
concomitant right of its creditors
“For banks with insufficient funds, and the order of payment of their
the Corporation is authorized to valid claims in the disposition of its
advance the foregoing costs and assets.
expenses, and collect payment, as
“Any proceeding initiated under this
and when funds become available.
section shall be considered in rem.
“(13) Charge reasonable fees for the Jurisdiction over all persons affected
liquidation of the bank from the by the proceeding shall be
assets of the bank: Provided, That considered as acquired upon
payment of these fees, including any publication of the order setting the
unpaid advances under the case for initial hearing in any
immediately preceding paragraph, newspaper of general circulation in
shall be subject to approval by the the Philippines.
liquidation court;
Periods to file
“(14) Distribute the available assets
Insured depositors may claim for
of the closed bank, in cash or in
insured deposit 60 days from the
kind, to its creditors in accordance
date of the publication of notice.
with the Rules on Concurrence and
Preference of Credits under the Civil Q: Can you transact business
Code or other laws; when you have a receiver?
A: NO.
“(15) Dispose records of the closed
bank that are no longer needed in Note: 2-year period – The depositor
the liquidation in accordance with of a closed bank has 24 months
guidelines set by the PDIC Board of
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Philippine Deposit Insurance Corporation

from the date of bank takeover to other evidence of deposit issued in

file his deposit insurance claim. accordance with Bangko Sentral ng
Pilipinas rules and regulations and
Permanent Insurance Fund other applicable laws.
(Sec. 17)
Determination of the amount due
3 billion pesos the depositor

NOTE: The risk insured against is (Atty. Rondez Notes)

the closure of a bank.
1. Insured deposits under the law
Enhanced Receivership and means the net amount due the
Liquidation Power depositor for any deposits in the
insured bank after deducting any
allows the receiver, among others, to offsets but should not exceed PHP
suspend the powers and allowances 500,000.00.
of bank directors upon closure;
place bank assets in custogia legis 2. Hence, if a depositor has two or
and prohibit garnishment of such more accounts maintained in the
assets; and to terminate the same right and capacity, the
employment of bank officers and coverage of PHP 500,000.00 shall be
employees of a closed bank, among held to apply to the sum of all such
others. accounts.

(preferred credit likened to a tax due 3. A joint account (whether “and/or,

to a government) “or”, “and” shall be insured
separately from any individual-
7 reasons for appointment of owned account.
a receiver NOTE: If held by a juridical person
--- or entity with a natural person,
the account shall be presumed to
“Deposit” (Sec. 5(g)) belong to the juridical person.

means the unpaid balance of 3.1 Accounts under joint ownership

money or its equivalent received by is considered equally shared among
a bank in the usual course of co-depositors unless otherwise
business and for which it has given indicated in the deposit document.
or is obliged to give credit to a
commercial, checking, savings, time Proof of Claims
or thrift account, evidenced by a
ORIGINAL EVIDENCE OF
passbook, certificate of deposit, or
DEPOSITS such as savings

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Philippine Deposit Insurance Corporation

passbook, certificate of time deposit, Basis of PDIC liability

bank statement, used or unused
checks, or ATM card. Existence of deposits

NOTE: Claim filed -> PDIC must Coverage of Deposit

comply within 6 months (beyond:
Q: Cash, Time Deposit, Manager’s
Arresto mayor)
check. Which is not considered a
Waiver deposit?

Implication of upgrading insured A: Manager’s check???

deposit for a period of 2 years
NOTE: Trust funds as it was was
constitutes a waiver.
expressly excluded from the term
Splitting of Deposits “deposit” under R.A. 7400 and
(Sec. 26) money market placement as it is not
included in the term “deposit.”
Splitting of deposits or creation of Exclusions from deposit insurance
fictitious or fraudulent loans or coverage as stipulated in R.A. No.
deposit accounts.
9576:
“Splitting of deposits occurs
whenever a deposit account with an 1. Investment products such as
outstanding balance of more than bonds, securities and trust
the statutory maximum amount of accounts;
insured deposit maintained under
2. Deposit accounts which are
the name of natural or juridical
unfunded, fictitious or
persons is broken down and
fraudulent;
transferred into two (2) or more
accounts in the name/s of natural 3. Deposit products constituting
or juridical persons or entities who or emanating from unsafe and
have no beneficial ownership on unsound banking practices;
transferred deposits in their names
within 120 days immediately 4. Deposits that are determined
preceding or during a bank- to be proceeds of an unlawful
declared bank holiday, or activity as defined under the
immediately preceding a closure Anti-Money Laundering Law.
order issued by the Monetary Board
of the Bangko Sentral ng Pilipinas
Predetermination of Time
for the purpose of availing of the Deposit
maximum deposit insurance
If time deposit is terminated prior to
coverage.
the time of renewal of the time
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Philippine Deposit Insurance Corporation

deposit, divide time deposit in 28. On December 28, 1988, a

(No transaction out??) complaint for escheatwas filed
Note: Insider information must not by petitioner, Republic of the
be a mere conjecture. Philippines, with the Regional
Trial Court of Davao City
Insured Deposit (Sec. 5(j))
against several banks which
means the amount due to any had branches within the
bonafide depositor for legitimate jurisdiction of the said court.
deposits in an insured bank as of
the date of closure but not to exceed The complaint alleged that
Five hundred thousand pesos pursuant to Act No. 3936 as
(P500,000.00). Such amount shall
amended by P.D. 679, the
be determined according to such
respective managers of the
regulations as the Board of
Directors may prescribe. defendant banks submitted to
the Treasurer of the Republic
Per Bank basis not per of the Philippines separate
branch statements prepared under
CASES: oath which listed all deposits
and credits held by them in
CASE 1: REPUBLIC OF THE favor of depositors or creditors
PHILIPPINES, petitioner, vs. either known to be dead, have
COURT OF APPEALS and not been heard from, or have
PHILIPPINE COMMERCIAL not made depositors or
AND INTERNATIONAL BANK withdrawals for ten years or
(Santa Ana Branch Davao more since December 31, 1970.
City),* respondents.
The complaint prayed that
after due notice to the
DOCTRINE: Prescription of defendant banks, and after
action does not run against the hearing, judgment be rendered
government. declaring that the deposits,
credits and unpaid balances in
question be escheated to
petitioner, commanding
FACTS:
defendant banks to forthwith

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Philippine Deposit Insurance Corporation

deposit the same with the or withdrawals during the

Treasurer of the Philippines. preceding ten years or more be
escheated in favor of the
On April 12, 1989, the lower
Republic of the Philippines in
court issued an order directing
accordance with Section 1, Act
petitioner to show cause why
3936 as amended by P.D. 679.
the complaint should not be
dismissed for failure to state a The trial court found the
cause of action. According to amendment sufficient and
the order, the complaint issued an order dated June 7,
contained no allegation that 1989 requiring petitioner to
defendant banks have publish a notice in the
complied with two of the Mindanao Forum Standard
conditions in Section 2 of Act once a week for two
No. 3936, compliance with the consecutive weeks, containing
requirements being necessary the summons, notice to the
for the complaint to prosper. public, the amended petition
incorporated in the summons
On April 27, 1989, petitioner
and the list of unclaimed
submitted its manifestation
balances. The notice was
and motion to allow
estimated to occupy 27 pages
amendment of the petition to
of the said newspaper at an
allege compliance with the
estimated cost of P50,000.00.
conditions set forth in Section
2 of Act. No. 3936 as amended On July 11, 1989, petitioner
by P.D. 679 (Unclaimed submitted a manifestation to
Balances Law). the lower court praying that
the publication of the list of the
The amended complaint prayed
unclaimed balances be
that judgment be rendered
dispensed with. Petitioner
ordering that the amount of
posited that under Section 3,
P97,263.38, deposited with the
Act No. 3936, only the
defendant banks by depositors
following are required to be
who are known to be dead or
published: (1) summons to
have not made further deposits
respondent banks; and (2)

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notice to all persons other than respondent judge in ordering

those named defendants the publication of the list of
therein. Petitioner submitted unclaimed balances. The
that to require it to publish the petition for certiorari and
names and list of unclaimed mandamus was dismissed by
balances would only result in the Court of Appeals, on the
additional and unnecessary ground that the proper remedy
expense to the government. was ordinary appeal. Thus:

On August 1, 1989, the trial It is axiomatic that the

court DISMISSED the case extraordinary remedy of
WITHOUT PREJUDICE. certiorari is available only in
the absence of a plain, speedy
Petitioner filed a motion for
and adequate remedy like
reconsideration of the above
appeal. The order of the
Order, which was denied by
respondent court dated
the lower court for lack of
October 31, 1989 dismissing
merit.
the case is final and appealable
Subsequently, the trial court (Monares vs. CWA Enterpises,
issued an Order dated October 105 Phil. 1333; Vol. I,
31, 1989 dismissing Civil Case Francisco, Rules of Court, at
No. 19488-89 without pp. 967-968). No timely appeal
prejudice for plaintiffs failure having been taken therefrom,
to agree to the required the same became final and
publication and shoulder the executory and this petition for
costs thereof. certiorari filed on January 10,
1989 to review the
Petitioner received a copy of
interlocutory orders issued by
the aforesaid Order on
the court before the case was
November 15, 1989. On
dismissed can no longer be
January 10, 1990, petitioner
entertained.
filed with the Court of Appeals
a petition for mandamus and ISSUES:
certiorari, alleging grave abuse
of discretion on the part of

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(1) Whether or not respondent HELD: The petition is without

RTC judge committed grave merit.
abuse of discretion tantamount
The Order of the trial court
to lack of jurisdiction in
dismissing the complaint,
ordering the publication of the
albeit without prejudice, was a
list of unclaimed balances
final order in the sense that it
listed under annexes A to P of
finally disposed of the case. As
the complaint.
such, petitioners remedy was
(2) Whether or not the remedy to file an ordinary appeal to the
of appeal, though available, Court of Appeals within fifteen
was the speedy and adequate (15) days from receipt hereof.
remedy.
This Court has previously held
(3) Whether or not respondent that an order dismissing a case
RTC judge in issuing the without prejudice is a final
interlocutory orders dated order if no motion for
June 7, 1989 and August 1, reconsideration or appeal
1990 which are contrary to Sec. therefrom is timely filed.
1, Act 3936, as amended by PD
In Olympia International vs.
679, otherwise known as the
Court of Appeals, we stated
Unclaimed Balances Law acted
thus:
in excess of and without
jurisdiction; consequently thus The dismissal without
making the Orders of Sept. 1, prejudice of a complaint does
1989 (denying the motion for not however mean that said
reconsideration) and the Order dismissal order was any less
dated October 31, 1989 final. Such order of dismissal
dismissing the case, patently is complete in all details, and
null and void. though without prejudice,
nonetheless finally disposed of
(4) Whether or not the decision
the matter. It was not merely
of the Honorable Court of
an interlocutory order but a
Appeals is in accord with law.
final disposition of the
complaint.

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Philippine Deposit Insurance Corporation

The law grants an aggrieved ordinary course of

party a period of fifteen (15) law. Certiorari is a remedy of
days from his receipt of the last recourse and is a limited
courts decision or order form of review. Its principal
disposing of the action or function is to keep inferior
proceeding to appeal or move tribunals within their
to reconsider the same. jurisdiction. It cannot be used
as a substitute for a lost
After the lapse of the fifteen-
appeal. It is not intended to
day period, an order becomes
correct errors of procedure or
final and executory and is
mistakes in the judges findings
beyond the power or
or conclusions.
jurisdiction of the court which
rendered it to further amend or In a more recent case,this
revoke. A final judgment or Court held:
order cannot be modified in
xxx xxx xxx. Apparently,
any respect, even if the
petitioner resorted to this
modification sought is for the
special civil action because it
purpose of correcting an
had failed to take an appeal
erroneous conclusion by the
within the 15-day reglementary
court which rendered the same.
period which expired on June
Hence, the Court of Appeals 20, 1997.This, of course,
did not err when it dismissed cannot be done. The special
the petition for certiorari and civil action of certiorari cannot
mandamus, on the ground that be used as a substitute for an
the proper remedy was to appeal which petitioner has
appeal within fifteen (15) lost. Nor can it be contended
days. The lapse of the that the only question raised in
reglementary period was of no this case is a jurisdictional
moment. A basic requisite for question. Certiorari lies only
the special civil action of where there is no appeal nor
certiorari to lie is that there be any plain, speedy, and
no appeal nor plain, speedy adequate remedy in the
and adequate remedy in the ordinary course of law. There

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is no reason why the question is correctible in an ordinary

being raised by petitioner, i.e., appeal filed in due time.
whether the appellate court
The publication of the list of
committed a grave abuse of
unclaimed balances is
discretion in dismissing
intended to safeguard the right
petitions, could not have been
of the depositors, their heirs
raised by it on appeal.
and successors to due
Admittedly, this Court, in process. This was made clear
accordance with the liberal by the lower court in its
spirit pervading the Rules of assailed Order, to wit:
Court and in the interest of
Moreover, how would other
justice, has the discretion to
persons who may have an
treat a petition for certiorari as
interest in any of the
having been filed under Rule
unclaimed balances know what
45, especially if filed within the
this case is all about and
reglementary period for filing a
whether they have an interest
petition for review. In the case
in this case if the amended
at bar, there is no compelling
complaint and list of
reason for the Court of Appeals
unclaimed balances are not
to have treated the petition for
published? Such other persons
certiorari and mandamus as
may be heirs of the bank
an ordinary appeal. Aside from
depositors named in the list of
being filed beyond the fifteen
unclaimed balances.
(15) day period, the petition
failed to show that the trial x xx xxx xxx
court committed grave abuse of
The fact that the government is
discretion or want or excess of
in a tight financial situation is
jurisdiction in issuing the
not a justification for this
assailed Order dismissing the
Court to dispense with the
complaint. If at all, any
elementary rule of due process.
mistake therein was an error of
judgment or procedure, which As declared by the trial court
in its Order dated August 1,

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Philippine Deposit Insurance Corporation

1989, the dismissal of the pursuant to Section 2 of said

petition for escheat is without Act defendant banks forwarded
prejudice. In other words, the to the Treasurer of the
State can refile the said Philippines a statement under
petition, notwithstanding the oath of their respective
lapse of time. Prescription of managing officials of all the
action does not run against the credits and deposits held by
government. them in favor of persons
known to be dead or who have
not made further deposits or
withdrawals during the period
of 10 years or more. Wherefore,
it is prayed that said credits
CASE 2: and deposits be escheated to
the Republic of the Philippines
REPUBLIC OF THE by ordering defendant banks to
PHILIPPINES vs. PHILIPPINE deposit them to its credit with
NATIONAL BANK, ET AL the Treasurer of the
G.R. No. L- Philippines.
16106 December 30,
1961 In its answer the First National
City Bank of New York claims
FACTS: that, while it admits that
The Republic of the Philippines various savings deposits, pre-
filed on September 25, 1957 war inactive accounts, and
before the Court of First sundry accounts contained in
Instance of Manila a complaint its report submitted to the
for escheat of certain Treasurer of the Philippines
unclaimed bank deposits pursuant to Act No. 3936,
balances under the provisions totalling more than
of Act No. 3936 against several P100,000.00, which remained
banks, among them the First dormant for 10 years or more,
National City Bank of New are subject to escheat however,
York. It is alleged that it has inadvertently included in

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Philippine Deposit Insurance Corporation

said report certain items Section 1. "Unclaimed

amounting to P18,589.89 balances" within the meaning
which, properly speaking, are of this Act shall include credits
not credits or deposits within or deposits of money, bullion,
the contemplation of Act No. security or other evidence of
3936. Hence, it prayed that indebtedness of any kind, and
said items be not included in interest thereon with banks, as
the claim of plaintiff. hereinafter defined, in favor of
any person unheard from for a
After hearing the court a
period of ten years or more.
quo rendered judgment holding
Such unclaimed balances,
that cashier's is or manager's
together with the increase and
checks and demand drafts as
proceeds thereof, shall be
those which defendant wants
deposited with the Insular
excluded from the complaint
Treasure to the credit of the
come within the purview of Act
Government of the Philippine
No. 3936, but not the
Islands to be as the Philippine
telegraphic transfer payment
Legislature may direct.
which orders are of different
category. Consequently, the It would appear that the term
complaint was dismissed with "unclaimed balances" that are
regard to the latter. But, after a subject to escheat include
motion to reconsider was filed credits or deposits money, or
by defendant, the court a other evidence of indebtedness
quo changed its view and held of any kind with banks, in
that even said demand drafts favor of any person unheard
do not come within the purview from for a period of 10 years or
of said Act and so amended its more. And as correctly stated
decision accordingly. Plaintiff by the trial court, the term
has appealed.lawphil.net "credit" in its usual meaning is
a sum credited on the books of
Section 1, Act No. 3936,
a company to a person who
provides:
appears to be entitled to it. It
presupposes a creditor-debtor

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Philippine Deposit Insurance Corporation

relationship, and may be said "deposits" employed in

to imply ability, by reason of the law?
property or estates, to make a
2. Can their import be
promised payment ( In re Ford,
considered as a sum
14 F. 2d 848, 849). It is the
credited on the books of
correlative to debt or
the bank to a person who
indebtedness, and that which
appears to be entitled to
is due to any person, a
it?
distinguished from that which
he owes (Mountain Motor Co. 3. Do they create a creditor-
vs. Solof, 124 S.E., 824, 825; debtor relationship
Eric vs. Walsh, 61 Atl. 2d 1, between drawee and the
4; See also Libby vs. Hopkins, payee?
104 U.S. 303, 309; Prudential
HELD:
Insurance Co. of America vs.
Nelson, 101 F. 2d, 441, 443; To begin with, we may say that
Barnes vs. Treat, 7 Mass. 271, a demand draft is a bill of
274). The same is true with the exchange payable on demand
term "deposits" in banks where Considered as a bill of
the relationship created exchange, a draft is said to be,
between the depositor and the like the former, an open letter
bank is that of creditor and of request from, and an order
debtor (Article 1980, Civil by, one person on another to
Code; Gullas vs. National Bank, pay a sum of money therein
62 Phil. 915; Gopoco Grocery, mentioned to a third person,
et al. vs. Pacific Coast Biscuit on demand or at a future time
Co., et al., 65 Phil. 443). therein. As a matter of fact, the
term "draft" is often used, and
ISSUES:
is the common term, for all
1. Do demand draft and bills of exchange. And the
telegraphic orders come words "draft" and "bill of
within the meaning of the exchange" are used
term "credits" or indiscriminately.

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Philippine Deposit Insurance Corporation

On the other hand, a bill of drawer from liability or to the

exchange within the meaning extent of the loss caused by
of our Negotiable Instruments the delay (Section 186, Ibid.)
Law (Act No. 2031) does not
Since it is admitted that the
operate as an assignment of
demand drafts herein involved
funds in the hands of the
have not been presented either
drawee who is not liable on the
for acceptance or for payment,
instrument until he accepts it.
the inevitable consequence is
This is the clear import of
that the appellee bank never
Section 127. It says: "A bill of
had any chance of accepting or
exchange of itself does not
rejecting them. Verily, appellee
operate as an assignment of
bank never became a debtor of
the funds in the hands of the
the payee concerned and as
drawee available for the
such the aforesaid drafts
payment thereon and the
cannot be considered as
drawee is not liable on the bill
credits subject to escheat
unless and until he accepts the
within the meaning of the law.
same." In other words, in order
that a drawee may be liable on But a demand draft is very
the draft and then become different from a cashier's or
obligated to the payee it is manager's cheek, contrary to
necessary that he first accepts appellant's pretense, for it has
the same. In fact, our law been held that the latter is a
requires that with regard to primary obligation of the bank
drafts or bills of exchange which issues it and constitutes
there is need that they be its written promise to pay upon
presented either for acceptance demand. Thus, a cashier's
or for payment within a check has been clearly
reasonable time after their characterized in In Re Bank of
issuance or after their last the United States, 277 N.Y.S.
negotiation thereof as the case 96. 100, as follows:
may be (Section 71, Act 2031).
A cashier's check issued by a
Failure to make such
bank, however, is not an
presentment will discharge the

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Philippine Deposit Insurance Corporation

ordinary draft. The latter is a A cashier's check issued on

bill of exchange payable request of a depositor is the
demand. It is an order upon a substantial equivalent of a
third party purporting to certified check and the deposit
drawn upon a deposit of represented by the check
funds. Drinkall v. Movious State passes to the credit of the
Bank, 11 N.D. 10, 88 N.W. 724, checkholder, who is thereafter
57 L.R.A. 341, 95 Am. St. Rep. a depositor to that amount
693; State v. Tyler County (Lummus Cotton Gin Co. v.
State Bank (Tex. Com. App.) Walker, 70 So. 754, 756, 195
277 S.W. 625, 42 A.L.R. 1347. Ala. 552).
A cashier's check is of a very
A cashier's check, being merely
different character. It is the
a bill of exchange drawn by a
primary obligation of the bank
bank on itself, and accepted in
which issues it (Nissenbaum v.
advance by the act of issuance,
State, 38 Ga. App. 253, S.E.
is not subject to countermand
776) and constitutes its written
by the payee after indorsement,
promise to pay upon demand
and has the same legal effects
(Steinmetz v. Schultz, 59 S.D.
as a certificate deposit or a
603, 241 N.W.
certified check (Walker v.
734)....lawphil.net
Sellers, 77 So. 715, 201 Ala.
The following definitions cited 189).
by appellant also confirm this
A demand draft is not therefore
view:
of the same category as a
A cashier's check is a check of cashier's check which should
the bank's cashier on his or come within the purview of the
another bank. It is in effect a law.
bill of exchange drawn by a
The case, however, is different
bank on itself and accepted in
with regard to telegraphic
advance by the act of issuance
payment order. It is said that
(10 C.J.S. 409).
as the transaction is for the
establishment of a telegraphic

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Philippine Deposit Insurance Corporation

or cable transfer the agreement remain for sometime in the

to remit creates a contractual defendant bank, can the latter
obligation a has been termed a maintain that the ownership of
purchase and sale transaction said telegraphic payment
(9 C.J.S. 368). The purchaser orders is now with the drawer
of a telegraphic transfer upon bank? The latter was already
making payment completes the paid the value of the
transaction insofar as he is telegraphic payment orders
concerned, though insofar as otherwise it would not have
the remitting bank is transmitted the same to the
concerned the contract is defendant bank. Hence, it is
executory until the credit is absurd to say that the drawer
established (Ibid.) We agree banks are still the owners of
with the following comment the said telegraphic payment
Solicitor General: "This is so orders."
because the drawer bank was
already paid the value of the
telegraphic transfer payment
order. In the particular cases
under consideration it appears
in the books of the defendant
bank that the amounts
represented by the telegraphic
payment orders appear in the
names of the respective payees.
If the latter choose to demand
payment of their telegraphic
transfers at the time the same
was (were) received by the
defendant bank, there could be
no question that this bank
would have to pay them. Now,
the question is, if the payees
decide to have their money

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