BANKING  country of origin,

CHAPTER 4- DEPOSIT FUNCTION  public or high profile position,

 linked accounts,
BANK  business activities or other risk indicators should be
 Basic services and functions considered.
1. Acceptance of deposits from the public, and  Banks should develop graduated customer acceptance policies and
2. Lending the funds obtained from deposit. procedures that require more extensive due diligence for higher risk
 The institution is not a bank if these functions – particularly deposit customers.
function are absent.  For example, the policies may require the most basic account-
 Although other entities or person may extend loans, they will not opening requirements for a working individual with a small account
considered performing banking business if they do not accept deposits balance.
from the public.  It is important that the customer acceptance policy is not so
restrictive that it results in a denial of access by the general public to
VOLUNTARY CREDITOR-DEBTOR RELATIONSHIP banking services, especially for people who are financially or socially
 Contract entered into between the bank and the depositor is disadvantaged.
substantially a contract of loan.  On the other hand, quite extensive due diligence would be essential
 Article 1980 of the CC provides: for an individual with a high net worth whose source of funds is
Fixed, savings, and current deposits of money in banks and unclear. Decisions to enter into business relationships with higher
similar institutions shall be governed by the provisions risk customers, such as politically exposed person, should be taken
concerning simple loan. (n) exclusively at senior management level.
 SC: a depositor, in cases of bank deposits, is one who pays money
into the bank in the usual course of business, to be placed to his IDENTIFICATION OF DEPOSITOR
credit and subject to his check or the beneficiary of the funds held by The bank rule in the MORB is for the depositor to submit the
the bank as trustee. necessary specimen signatures and proper documents for
identification.
VOLUNTARY AGREEMENT  X262.1 Specimen signatures, identification photos.
 Contracts by their nature are voluntary and a bank cannot therefore  All banking institutions are required to set a minimum of three (3)
be compelled to accept deposits. specimen signatures to be simultaneously required from each of
 A bank may be liable only if the non-acceptance is discriminatory or their depositors and to update the specimen signatures of their
is otherwise contrary to law, morals, and good customs. depositors every five (5) years or sooner, at the discretion of the
 A bank is not bound to receive deposits from any one, but may bank. Banks may, at their option, require their depositors to submit
choose those whom it will accept as depositors and the terms and ID photos together with the specimen signatures.
conditions on which it will accept deposits.
 BSP instructed all banks to adopt the KNOW YOUR CUSTOMER  BSP RULES ON ESTABLISHING DEPOSITOR’S IDENTITY
(KYC) standards recommended by the Basel Committee on  Prior to the enactment of the Anti-Money Laundering Act, the BSP
Banking Supervision in its paper on Customer Due Diligence. already issued Circular No. 251, Series of 2000, that provides for rules
 Banks should develop clear customer acceptance policies and on the identification of bank customers.
procedures, including a description of the types of customer that
are likely to pose a higher than average risk to a bank. Pursuant to Monetary Board Resolution No. 1116 dated July 6, 2000, the
 In preparing such policies, factors such as: following rules and regulations for banks and non-bank financial institutions
 customers’ background,
under the supervision and regulation of the Bangko Sentral ng Pilipinas Records on customer identification, account files and business
(BSP) are hereby issued in order to combat money laundering: correspondence should be kept for at least five (5) years after the account is
closed.
1. When establishing business relations or conducting transactions
(particularly opening of deposit accounts, accepting deposit substitutes, 6. Special attention should be given to all complex, unusual large
entering into trust and other fiduciary transactions, renting of safety deposit transactions, and all unusual patterns of transactions, which have no
boxes, performing remittances and other large cash transactions), apparent or visible lawful purpose. The background and purpose of such
banks/Non-Bank Financial Institutions (NBFIs) should take reasonable transactions should, as far as possible, be examined, the findings
measures to establish and record the true identity of their clients. Said client established in writing, and be available to help supervisors, auditors and law
identification may be based on official or other reliable documents and enforcement agencies.
records.
If there is reasonable ground to believe that the funds are proceeds of a
In cases of corporate and other legal entities, the following measures should criminal or other illegal activity, they should be reported to competent
be taken, when necessary: authority, without violating any law. If the fund is held as deposit, the
account should be closed.
a. Verification of the legal existence and structure of the client from the
appropriate agency or from the client itself or both, proof of incorporation, 7. Other suspicious transactions not involving deposits should be reported to
including information concerning the customer’s name, legal form, address, competent authorities.
directors, principal officers and provisions regulating the power behind the
entity. 8. Banks/NBFIs should not, or should at least avoid, transacting business
with criminals. Reasonable measures should be adopted to prevent the use
b. Verification of the authority and identification of the person purporting to of their facilities for laundering of proceeds of crimes and other illegal
act on behalf of the client. activities.

2. In case of doubt as to whether their purported clients or customers are 9. Programs against money laundering should be developed. These
acting for themselves or for another, reasonable measures should be taken programs should include, as a minimum:
to obtain the true identity of the persons on whose behalf an account is
opened or a transaction conducted. a. The development of internal policies, procedures and controls, including
the designation of compliance officers at management level, and adequate
3. Unless otherwise prescribed under existing laws, anonymous accounts screening procedures to ensure high standards when hiring employees;
or accounts under fictitious names should not be kept/allowed. In case
where numbered accounts is allowed (i.e. foreign currency deposits), b. An ongoing employee training program; and
banks/NBFIs should ensure that the client is identified in an official or other
c. An audit function to test the system.
identifying documents.
This Circular shall take effect immediately.
4. The identity of existing clients or beneficial owners of deposits and other
funds held or being managed by the bank should be renewed/updated at  IDENTIFYING AND VERIFYING THE TRUE IDENTITY OF THE
least every other year. CUSTOMER UNDER SECTION X806 OF THE MORB.
 Part 8 of the MORB, provides for the Anti-Money Laundering
5. All necessary records on transactions, both domestic or international,
Regulations.
should be maintained for at least five (5) years. Such records must be
 Sub-part 8 of the Regulations provides for the Customer Identification
sufficient to permit reconstruction of individual transactions so as to provide,
Process, which is in keeping w/ one of the basic principles that banks,
if necessary, evidence for prosecution of criminal behavior.
among other entities subject to the provision of the BSP, are required to
 apply – that is, knowing sufficiently the bank’s customer at all times and Unless otherwise stated in this Part, average due diligence requires that the
ensuring that the financially and socially disadvantaged are not denied covered institution obtain, at the time of account opening, all the following
access to financial services while at the same time preventing minimum information and confirming these information with the valid
suspicious individuals or entities from operating or maintaining an identification documents:
account.
 The conduct of customer due diligence by bank is required, which 1. Name;
includes, 2. Present address;
Identifying the customer and verifying the true identity of the 3. Date and place of birth;
customer based on official documents or other reliable, independent 4. Nature of work, name of employer or nature of self-
source documents, data or information. In case of corporate and employment/business;
juridical entities, verifying their legal existence and organizational 5. Contact details;
structure, as well as the authority and identification of all persons 6. Specimen signature;
purporting to act on their behalf. 7. Source of funds;
8. Permanent address;
 CUSTOMER ACCEPTANCE AND IDENTIFICATION 9. Nationality;
 Customer = depositors 10. Tax identification number (TIN), SSS number or GSIS number, if
any; and
 Covered persons = banks
11. Name, present address, date and place of birth, nature of work and
Subsection X806.1 Customer acceptance and identification policy. source of funds of beneficial owner or beneficiary, whenever
Every covered institution shall develop clear written and graduated applicable
acceptance policies and procedures that will ensure that the financially or
socially disadvantaged are not denied access to financial services while at b. New corporate and juridical entities.
the same time prevent suspicious individuals or entities from opening an
A covered person shall develop a systematic procedure for identifying
account or establishing a relationship.
corporate, partnership and sole proprietorship entities, as well as their
A covered person shall formulate a risk-based and tiered customer stockholders/ partners/owners, directors, officers and authorized signatories.
acceptance, identification and retention policy that involves reduced
It shall open and maintain accounts only in the true and full name of the
customer due diligence (CDD) potentially low risk clients and enhanced CDD
entity and shall have primary responsibility to ensure that the entity has not
for higher risk accounts.
been, or is not in the process of being dissolved, struck-off, wound-up,
Subsection X806.2 Customer Identification. terminated, or otherwise placed under receivership or liquidation.

Covered persons shall establish and verify the true identity of its customers Unless otherwise stated in this Part, average due diligence requires that the
based on official document as defined in this Part or other reliable, covered person obtain the following minimum information and/or documents
independent source documents, data, or information. before establishing business relationships:

a. New individual customers (1) Customer information

Covered institutions shall develop a systematic procedure for establishing a. Name of entity;
the true and full identity of new individual customers and shall open and b. Name, present address, date and place of birth, nationality, nature
maintain the account only in the true and full name of the account owner or of work and source of funds of beneficial owner or beneficiary, if
owners. applicable, and authorized signatories;
c. Official address;
d. Contact numbers or information; g. Amount, number, type, purpose and frequency of the
e. Nature of business; and transaction expected.
f. Specimen signatures or biometrics of the authorized signatory.

(2) Identification documents c. Valid identification documents.

a. Certificates of Registration issued by the Department of Trade and 1. Customers and the authorized signatory/ies of a corporate or
Industry (DTI) for single proprietors, or by the Securities and juridical entity who engage in a financial transaction with
Exchange Commission (SEC) for corporations and partnerships, covered person for the first time shall be required to present
and by the Bangko Sentral for money changers/foreign exchange official identification document which shall include any of the
dealers and remittance agents and transfer companies; official documents as defined in this Part or other
b. Secondary license or certificate of authority issued by the identification information which can be verified from reliable,
supervising authority or other government agency; independent source, documents, data or information, such as
c. Articles of incorporation/partnership; third-party verified customer information database.
d. Latest general information sheet which lists the names of 2. A covered person may classify identification documents
directors/trustees/ partners, principal stockholders owning at least based on its reliability and ability to validate the information
twenty percent (20%) of the outstanding capital stock and primary indicated in the identification document with that provided by
officers such as the president and treasurer; the customer. Whenever it deems necessary, a covered
e. Board or Partners' resolution duly certified by the person may accept other IDs not provided herein:
corporate/partners' secretary, or other equivalent document, Provided, That it shall not be the sole means of identification.
authorizing the signatory to sign on behalf of the entity; and In case the identification document presented does not bear
f. For entities registered outside of the Philippines, similar any photo of the customer or authorized signatory, or the
documents and/or information shall be obtained, duly photo-bearing ID or a copy thereof does not clearly show the
authenticated by a senior officer or the designated officer of the face of the customer or authorized signatory, a covered
covered person assigned in the country of registration; in the person may utilize its own technology to take the photo of the
absence of said officer, the documents should be authenticated by customer or authorized signatory.
the Philippine Consulate, company register or notary public, where
said entities are registered.  Face to face Contact in Customer Verification and Identification
 Consistent with the KYC principle, w/c the banks are required to adhere
For legal arrangement (e.g., Trust), the following must be to, especially prior to account opening or the commencement of banking
obtained: relationship, banking regulations require face to face contact and
a. Name of legal arrangement and proof of existence; personal interview of the customer.
b. Address and country of establishment;
c. Nature, purpose and objects of the legal arrangement;  Subsection X806.2d of the MORB
d. The names of the settlor, the trustee, the trustor, the Face-to-face contact. Covered persons shall conduct face-to-face
protector, if any, the beneficiary and any other natural person contact and personal interview at the commencement of the
exercising ultimate effective control over the legal relationship, or as reasonably practicable so as not to interrupt the
arrangement; normal conduct of business, taking into account the nature of the
e. Description of the purpose/activities of the legal arrangement; product, type of business and the risks involved: Provided, That
f. Expected use of the account; and ML/TF risks are effectively managed.

The use of information and communication technology (ICT) in the

conduct of face-to-face contact and interview may be allowed:
 Provided, that the covered person is in possession of and has  Section 22 of Thrift Banks Act of 1995
verified the identification documents submitted by the prospective
client prior to the interview and that the entire procedure is Sec. 22. Minors as Depositors. — Minors in their own rights and in their
documented. own names may make deposits and withdraw the same, and may receive
dividends and interest:
The covered person shall clearly define the instances when the
Provided, however, That, if any guardian shall give notice in writing to any
conduct of face-to-face is reasonably practicable, depending on the
thrift bank not to make payments of deposits, dividends, or interest to the
product, type of business and risk involved, or when the use of ICT
minor of whom he is the guardian, then such payment shall be made only to
shall apply.
the guardian.
Also, the covered person should adopt policies and procedures to
address any specific risks associated with deferred or technology-
aided face-to-face verification and personal interview.  MARRIED WOMAN
 Married women are allowed to open bank accounts without the
 CAPACITY OF DEPOSITOR assistance of their husbands.
 A party who enters into a contract must have the capacity to act.  RA 7192, recognizes the capacity of women to enter into contracts
 Consistently, incapacitated persons are generally not allowed to open regardless of status.
an account with the bank.  Section 5
 Ex: an insane person does not have any capacity to act in that state and Sec. 5. Equality in Capacity to Act. — Women of legal age,
cannot therefore validly enter into a contract with a bank. regardless of civil status, shall have the capacity to act and enter into
contracts which shall in every respect be equal to that of men under
 MINOR DEPOSITOR. similar circumstances.
 Allowed under special laws to open, in their own right, savings and time
deposits. In all contractual situations where married men have the capacity to
 PD 734, Sec 1. act, married women shall have equal rights.xxx
Section 1. Minors who are at least seven years of age, are able to read and  CORPORATIONS AND OTHER JURDICAL ENTITY
write, have sufficient discretion, and are not otherwise disqualified by any
 Juridical persons are likewise capacitated to open bank accounts.
other incapacity, are hereby vested with special capacity and power, in their
 With respect to corporations, the power to open bank accounts are or to
own right and in their own names, to make savings or time deposits with and
deposit money in bank is part of the general powers of the corporation.
withdraw the same as well as receive interests thereon from banking
 Banks are mandated to shall develop a systematic procedure for
institutions, without the assistance of their parents or guardians, the
identifying, corporate, partnership and sole proprietorship entities, as
provisions of existing laws and regulations to the contrary notwithstanding.
well as their stockholders/ partners/owners, directors, officers and
Parents may nevertheless deposit for their minor children and guardians for
authorized signatories. It shall open and maintain accounts only in the
their wards.
true and full name of the entity and shall have primary responsibility to
 Demand deposits cannot be opened by minors without the assistance ensure that the entity has not been, or is not in the process of being
of their parents or guardians. dissolved, struck-off, wound-up, terminated, or otherwise placed under
receivership or liquidation.
 The opening of a bank account in behalf of a corporation normally
precedes the commencement of the life of a corporation because the
payments of subscribers that will constitute the initial paid-up capital are
deposited in a bank.
 The life of a corporation starts from the issuance of the Certificate of controlled corporations shall be deposited with the Bangko Sentral, with
Incorporation by the SEC. only minimum working balances to be held by government-owned banks
 This certificate can only be issued upon filing and approval of the AOI. and such other banks incorporated in the Philippines as the Monetary
 Incorporated in the 9th clause of the Articles to be filed w/ the SEC is a Board may designate: Provided, That such banks may be authorized by
certification of the Treasurer of the corporation stating that the initial the Monetary Board to hold deposits of the political subdivisions and
paid-up capital has been received. instrumentalities of the Government beyond their minimum working
 Usually, a bank account is opened by the treasurer-in-trust in behalf of balances whenever such subdivisions and instrumentalities have
the proposed corporation. outstanding loans with said banks.
 With respect to the opening of corporate accounts after incorporation,
the power to do so rests with the BOD or Trustees of the  Private banks incorporated in the Philippines may act as depository of
corporation. government funds only with the prior approval of the Bangko Sentral.
 Hence, it is a requirement that a Corporate Secretary’s Certificate on
the Board resolution approving the opening of the corporate account Local government units may maintain depository accounts
and designating the account signatories must be submitted before an preferably in government banks and, in exceptional cases and with
account is opened. the prior approval of the Monetary Board, in the name of their
 SC: BOD is the governing body of a corporation with whom the respective government units, in private banks located in or nearest
management of the corporate affair is vested. to their respective areas of jurisdiction but the depository bank(s)
Since the authority to designate bank depositaries and account must also seek the prior approval of the BSP.
signatories partakes of a management function, such power belongs
to the BOD. Hence, it calls for a board resolution.  BANK AS DEBTOR
 Although the Board may delegate its power, such right to delegate is  As a debtor, the bank has no duty to preserve the same money
subject to limitations. Power to manage the corporate funds in the deposited.
bank account cannot be delegated to a non-officer of the corporation  Since the contract is governed by the rules on simple loan and not the
who is not even a resident alien. contract of deposit, the money received by the bank is not being held for
safekeeping for the depositor.
 For partnership, the authority of the person opening the account and  Money so deposited belongs to the bank and may be used for any
the authorized signatory for the partnership must be established by a lawful purpose as it may deem fit.
Certificate of the Partners or other equivalent document, authorizing the  The relationship between the depositor and the bank is one of creditor-
account opening and designating the signatory to sign on behalf of the debtor and the obligation of the bank is to pay the depositor and not to
entity. return exactly the same thing that was given.
 The bank can may use as its own the money deposited. Said money is
 A sole proprietorship does not have a juridical personality that is not being held in trust for the depositor nor is it being held for
separate from the proprietor, Subsection X806.2 of the MORB also safekeeping.
recognizes the authority to open a deposit account for a sole  Officers of the bank cannot be held liable for estafa if they authorized
proprietorship. the use of the money deposited by the depositor.
 Submission of the sole proprietorship’s Certificate of Registration  There would be no liability for estafa under Article 315(1) (b) of the RPC
issued by DTI is required. even if the bank failed to return the amount deposited. The money that
is deposited is not held in trust by the bank.
 GOVERNMENT AS DEPOSITOR  If an employee who is entrusted with possession of the money
 As a general policy, cash balances of the Government, its political deposited takes the same money, the crime committed by the employee
subdivisions and instrumentalities as well as of government owned or is Qualified Theft.
 The bank has the right to legal compensation.  Even if what was taken was the money deposited by the client, the
 It can set off deposits with the indebtedness of the depositor that is crime is no longer against the client-depositor but against the bank that
due and demandable. already owns the same money/amounts.
 It can likewise set-off the value of dishonored check that were  Employees of the bank, who are entrusted with the possession of
previously credited. money deposited in a bank, occupy positions of confidence.
 3rd persons who may have a right to the money deposited cannot hold  Tellers, cashiers, bookkeepers and other employees of a bank who
the bank responsible unless there is a court order or garnishment. come into possession of the monies deposited therein enjoy the
 The duty of the bank is to its creditor-depositor and not to third persons. confidence reposed in them by their employer.
 If a 3rd person has a valid right over the money deposited, he must  When a teller with grave abuse of confidence, removed the money and
prove the same before a court of competent jurisdiction. appropriated it to his own use w/o the consent of the bank, there was
 Bank deposits in excess of the amount not covered by deposit taking as contemplated in the crime of Qualified Theft.
insurance are not special preferred credits under the CC but they are  There are cases when a bank President can be held liable for Estafa
common preferred credits. instead of Qualified Theft.
 The President of a bank is a fiduciary with respect to the bank’s fund,
 BANKS AS OWNER OF FUNDS and he holds the same in trust or for administration for the bank’s
 Amount deposited by the customer belongs to the bank. benefit.
 It is not misappropriation of funds if the bank will use the amount
deposited for its own purpose.  LEGAL COMPENSATION
 Ownership of the amount deposited was transmitted to the bank upon  A bank has the right to set off the deposits in its hands for the payment
the perfection of the contract and it can make use of the amt deposited of the indebtedness of the depositor provided that all the requisites for a
for its banking operations such as to pay interests on deposits and to valid legal compensation are present.
pay withdrawals.  Legal compensation under Article 1278 of the CC may take [lace when
 While the bank has the obligation to return the amt deposited it has all the requisites in Article 1279 are present:
however, no obligation to return or deliver the same money that was 1. That each one of the obligors be bound principally, and that he be
deposited. at the same time a principal creditor of the other;
2. That both debts consists in a sum of money, or if the things due
 NO ESTAFA are consumable, they be of the same kind, and also of the same
 The failure of the bank to return the money deposited will not constitute quality if the latter has been stated;
estafa thru misappropriation punishable under Article 315, par. 1(b) of 3. That the two debts be due;
the RPC, but it will only give rise to civil liability. 4. That they be liquidated and demandable; and
 In order for a person to be convicted under the said Article, it must be 5. That over neither of them there be any retention or controversy,
proven that he has the obligation to deliver or return the same money, commenced by 3rd persons and communicated in due time to the
goods, or personal property that he received. debtor.

 QUALIFIED THEDT AND ESTAFA OF EMPLOYEES AND  If the indebtedness was the result of payment against uncollected
OFFICERS deposit of checks or check that were accepted and paid by the
 The bank acquires ownership of the money deposited by its clients depositary-collecting bank but were later dishonored by the drawee-
 Taking of the amount deposited by the employees of the bank may amt bank-in one account, the bank may debit another account of the
to Qualified Theft or Estafa. depositor in the same bank if the account where the check was
originally deposited is already closed.
 Although legal compensation is allowed, the same presupposes the  The amount that is not paid by the PDIC shall be claimed in the
existence of a valid and demandable obligation. These include liquidation proceedings following the rules on Concurrence and
obligations arising from trust receipts Preference of Credit under CC.
 Bank deposits of a depositor cannot be offset with an alleged obligation  Section 20 of PDIC Law
covered by a fictitious or non-existent promissory note. A depositor shall retain his or her claim for any uninsured portion of
his or her deposit, which legal preference shall be the same as that
 UNILATERAL FREEZING OF AN ACCOUNT NOT ALLOWED. of the subrogated claim of the Corporation for its payment of insured
 Person whose name appears as depositor in the passbook and other deposits in closed bank partake the nature of public funds, and as
bank documents is presumed to be the owner of the money in the bank such, must be considered a preferred credit in the order of
account. preference under Article 2244(9) of the NCC.
 A bank cannot unilaterally freeze the account of its depositor and  While bank deposits enjoy preference, the preference is subject to
preclude him from withdrawing his deposits despite the allegation that limitation that may prevent recovery of any portion thereof in some
the amount deposited was obtained by the depositor thru fraud. cases where the liabilities are far greater than the remaining assets.
 The depositary bank does not have a unilateral right to freeze the  Ex: bank deposits are just part of the common preferred credits under
accounts of its depositor based on its mere suspicion that the funds Art. 2244. Hence, there are credits that enjoy higher preference
therein were proceeds of fraudulent acts. particularly those that are considered Special Preferred Credits under
 To allow the bank would open the floodgates of public distrust in the Arts 2241 and 2242.
banking industry.  Art 2244 provides for a rule of preference, meaning, the credits
enumerated therein shall be satisfied in the order that they are
 Article 559 Does Not Apply enumerated in Article 2244.
 Although the business of banks is invested with public interest, it cannot  There are credits that must be satisfied before the payment of bank
likewise be disregarded that the bank’s primary concern is the interest of deposits considering that bank deposits fall under no. 9 in the list.
its customers.
 Banks, as a rule, do not owe any obligation to 3rd person.  ASSIGNMENT
 This is one reason why banks cannot just freeze the account of its  The right to collect the deposit from the bank is an intangible right.
depositor to honor the claim of 3rd persons.  As such it can be assigned to another person.
 Banks cannot freeze an account on the basis of Article 559, CC, w/c  An assignment of credit is an agreement by virtue of which the owner of
provides that while possession of movable property acquired in good a credit, known as the assignor, by a legal cause, such as sale, dation
faith is equivalent to a title, nevertheless, one who has lost any movable of payment, exchange or donation, and without the consent of the
or has been unlawfully deprived thereof may recover it from the person debtor, transfer of his credit and accessory rights to another, known as
in possession of the same. the assignee, who acquired the power to enforce it to the same extent
 The movable property pertains to specific or determinate thing, in case as the assignor could enforce it against the debtor.
of bank deposits, the account consists of money that, albeit  Entitle the assignee not only to the credit itself but also gives him the
characterized as a movable is generic and fungible. power to enforce it as against the debtor of the assignor.
 Hence, in case of a valid assignment in favor of 3rd person, the 3rd
 COMMON PREFERRED CREDIT person can recover the amount deposited from the bank.
 Bank deposits are insured under RA 3591, as amended (PDIC)  Assignment can also be in favor of a bank.
 In the event of closure of an insured bank, payment of the insured  The depositor may assign his deposit in favor of a bank by way of
deposits on such closed bank shall be made by the PDIC. dacion en pago to extinguish an existing obligation.
 However, in some cases, the assignment can be construed as a mere
security.
 The assignment of deposit by way of security is in the nature of pledge.  Any knowledge on an officer of a bank, who has acquired it within the
scope of his employment, is to be imputed to the bank.
 DEPOSIT NOT TRUST UNDER THE CIVIL CODE.  The bank’s concern is to ensure that the trustees act within the scope of
 A bank is considered a fiduciary. their apparent powers.
 As a trustee of the money of its customer, the bank is in a fiduciary  Thus the bank has to ensure that a cheque drawn on the trust acct
relationship with the customers. carries all the required signatures.
 A bank’s relationship with the depositor is not a trustor-trustee  In the absence of express knowledge by the bank of improper or a
relationship under the NCC. fraudulent design perpetrated by the trustees, the banks is not usually
 A trust is one whereby one called the trustor reposes upon another liable for their misconduct.
called a trustee, confidence as regards property for the benefit of  The bank is not required to assume the role of an amateur detective.
another.
 In ordinary trust agreement, the trustee does not become the owner of  Cause of Action Against Banks in case of Breach of Trust
the property.  A bank may be made liable if it took part in committing the fraudulent
 Although the trustee acquires legal title, beneficial ownership remains act.
with the trustor.  Ex: if it will assist the fiduciary in accomplishing misappropriate.
 In a deposit, the bank becomes the owner of the cash that is deposited
subject to the obligation to pay the depositor.  Dishonest Assistance
 Unlike an ordinary trustee who cannot use the money held in trust for its  In common law, liability is imposed for “dishonest assistance” in anyone
own benefit, the bank is free to use the money deposited for its own who has dishonestly been an accessory to, or assisted in, a disposition
profit. in breach of trust.
 The “accessory” or “assister” is even considered a constructive trustee.
 BASIC OBLIGATIONS TO DEPOSITOR  The requisites that must occur before “dishonest assistance” can
 The depositary bank owns the deposited monies in the account of the be considered as an exception are as follows:
depositor because the CC provisions on simple loan or mutuum govern 1. There must be a trust or other fiduciary relationship;
the deposit of money in banks. 2. There must be breach of trust;
3. The person upon whom liability is to be imposed must as a matter
 As there is creditor-debtor relationship between a bank and its of fact have been an accessory or assisted in the misfeasance or
depositors, the depositary bank ultimately acquires ownership of money breach of trust; and
deposited, but ownership is coupled with a corresponding obligation to 4. The accessory must be dishonest.
pay him an equal amount on demand.
 Knowing Receipt
 Liability for Trust Account  Another exception involving disposition in breach of trust that is
 While deposits are not trust agreements with the bank, an account may recognized in common law is when there is “knowing receipt.” Under
be opened in trust for another person. this exception, the claimant must show the ff:
 The deposit may be made whereby the depositor is the trustee the 1. A disposal of the claimant’s assets in breach of fiduciary duty;
depositor holds the deposit in his name in trust for a beneficiary. 2. The beneficial receipt by the defendant bank of assets which
 The relationship is still mutuum while the trust agreement is between the are traceable as representing assets of the claimant; and
depositor and the 3rd person beneficiary. 3. Knowledge on the part of the defendant bank that the assets he
 No liability will be incurred by it to the beneficiaries unless it knows that received are traceable to a breach of fiduciary duty.
the account involved is a trust account.
 2. A TB, RB, Coop Bank may accept or create demand deposits
upon prior authority of the BSP.
3. When a TB, RB, Coop Bank applies for authority to accept or
 Court Order or Garnishment create deman deposits it shall also comply with:
 The bank may also be made liable if there is already a court order that a. Minimum capitalization requirement under Subsection
recognized the right of a third person or that effectively prohibits the X111.1 of the MORB.
bank from releasing funds from the account. b. It must be a member of the PDIDC in good standing;
 A bank must not release the funds in the account if the same has c. If it is not a member of the PH Clearing House Corporation
already been garnished at the instance of 3rd persons. (PCHC)m it shall have designated a KB/TB thru which its
shall participate in the check clearing system; and
 ADVERSE CLAIM d. That it has complied with all other conditions that the BSP
 Existing laws do not impose a duty on a banks to freeze the deposit may impose.
upon a mere notice of adverse claim; banks first require either a court 4. Temporary overdrawing against current accounts shall be
order or an indemnity bond. allowed unless caused by normal bank charges and other fees
 A bank is under obligation to treat the accounts of its depositors with incidental to handling such accounts;
meticulous care and always to have in monad the fiduciary nature of its 5. Drawing against uncollected deposits (DAUD) are generally
relationship with them. prohibited.
6. Certain bank officers and employees of banks are prohibited
 KINDS OF DEPOSITS from maintaining demand deposits or current accounts with
 MORB recognizes different types of deposits which include a Demand banking office in which they are assigned.
Deposit, Savings Account, Time Deposit, and NOW Account. Includes:
 officers and employees of banks,
DEMAND DEPOSITS  their spouses and relatives within the second degree of
 All those liabilities of banks that are denominated in PH currency and consanguinity and affinity,
subject to payment in legal tender upon demand by presentation of  including partnerships, associations or corporations in
checks. which such officers and employees, their spouses and
 BSP Circular No. 992, Series of 2018 defines a demand deposit as relatives within the second degree of consanguinity and
deposits, subject to withdrawal by check thru available bank channels affinity, individually or as a group, own or control at least a
and/or thru the automated tellering machine (ATM) w/c are otherwise majority of the capital are prohibited from maintaining
known as current or checking accounts. demand deposits or current accounts with the banking
 The bank may or may not pay interest on these accounts. office in which they are assigned
 No Separate Authority Required 7. Demand deposits may also earn interest.
 Only UB and KB can accept or create demand deposits without a  UNCOLLECTED DEPOSITS
separate authority from BSP. These banks by their nature, are allowed  The payment of the amount of the checks without previously clearing
or empowered by law to accept or create demand deposit. the checks with the drawee bank especially where the drawee bank is a
 Other banks need a prior approval of the MB of the BSP. foreign bank and that the checks involve huge amounts is not normal or
 MORB Rules ordinary bank practice
1. Commercial banks and Universal banks may accept or create  The regulations promulgated by the BSP disallow drawee banks from
demand deposits subject to withdrawal by check w/o prior honoring checks on uncollected deposits.
authority from the BSP.  Sec X202. Temporary Overdrawings;
Drawings Against Uncollected Deposits The following regulations b. Temporary overdrawings are covered within fifteen (15) banking
shall govern temporary overdrawings and drawings against days from the date overdrawings are incurred; and
uncollected deposits (DAUDs). c. Such accounts are credited only through foreign exchange
inward remittance.
a. Temporary overdrawings. Temporary overdrawings against
demand deposit account (DDA) shall not be allowed, unless caused b. Drawings against uncollected deposits. DAUDs shall be
by normal bank charges and other fees incidental to handling such prohibited except when the drawings are made against uncollected
accounts. Banks which violate these regulations shall be subject to a deposits representing manager’s/cashier’s/treasurer’s checks,
fine of one-tenth of one percent (1/10 of 1%) per day of violation, treasury warrants, postal money orders and duly funded “on us”
computed on the basis of the amount of overdrawing or fines in checks which may be permitted at the discretion of each bank.
amounts as may be determined by the Monetary Board, but not to
exceed P30,000 a day for each violation, whichever is lower.  Stopping Payment of Checks
 A check is a mere order on a bank to pay money from the drawer’s
Technical overdrawings arising from “force posting” in-clearing account.
checks shall be debited by banks under “Returned Checks and  As such it is subject to revocation by the drawer anytime before it is
Other Cash Items Not in Process for Collection” which is part of accepted.
“Other Assets” in the Statement of Condition. Items to be lodged  Issuance of a check by itself is not an assignment of funds by the
under this account shall consist only of in-clearing checks which may drawee.
result in “technical overdrawn” accounts and shall be immediately  If a bank pays a check after it has been notified to stop payment, it pays
reversed the following day. on its own responsibility and will not be permitted to charge the account.

The checks lodged under “returned checks, etc” shall either be  Countermanding
returned or honored the following day before clearing. The  The drawer may countermand payment if he has a valid defense against
items to be used as cover for the honored checks shall only the holder of the check (Ex. Of the payee failed to deliver the goods that
consist of any of the ff: he was supposed to deliver).
1. Cash  If there was no valid reason to countermand payment, the drawee is still
2. Cashier’s, Manager’s or Certified Checks; contractually obligated to dishonor the check on the basis of the stop
3. Bank drafts payment order.
4. Postal money orders  However, if he has no defense, the drawer remains liable and he is not
5. Treasury warrants released from the legal obligation that he contracted.
6. Duly funded “On Us” Checks
7. Fund transfer/credit means within the same bank representing  SAVINGS DEPOSIT
proceeds of loans granted under existing regulation.
 Interest or non-interest bearing deposits, which can be withdrawn upon
demand thru available bank channels.
Peso demand deposit accounts maintained by foreign
 Has an investment feature in the sense that it is normally opened for the
correspondent banks with commercial banks shall not be subject to
purpose of earning interest.
the above-mentioned regulations: Provided, That:
 Islamic banks are expressly authorized to open savings accounts for
a. The maintenance of non-resident correspondent bank’s peso
safekeeping or custody with no participation in profit and losses except
DDAs and overdrawings therefrom are covered by reciprocal
unless authorized by the account holders to be invested.
arrangement;
  Kinds of Savings Deposit c. SOLICITORS
 BSP Circular 992, Series of 2018, amending portions of the Financial  Banks may be authorized by the BSP to solicit and accept
Reporting Package required under Subsection X191.2 of the MORB. deposits outside the bank premises thru deposit solicitors.
1. REGULAR SAVINGS ACCOUNT  The passbook shall be retrieved from the depositor and it is the
 Interest-bearing account which is withdrawable either upon bookkeeper or ledger clerk who shall record the deposit or
presentation of a properly accomplished withdrawal slip withdrawal therein- not the solicitor.
together with the corresponding passbook or thru automated  The passbook shall be returned to the depositor not later than
tellering machine. the ff business day.

2. KIDDIE AND TEEN SAVINGS ACCOUNT 9.03 NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS (NOW)
 Interest-bearing saving account of children and teens upon to  Interest-bearing deposit accounts that combine the payable on
19 years old with an initial deposit of 100 and no minimum demand feature of checks and investment feature of savings
maintaining balance requirement accounts.
 The demand feature of a check is served with the issue of an Order
3. BASIC DEPOSIT ACCOUNT of Withdrawal that is similar to a check.
 Interest or non-interest bearing account designed to promote
financial inclusion a. The MORB provides that UB/KB may offer NOW accounts without
prior authority of the MB. A TB/RB/ Coop Bank may accept Now
4. OTHER SAVINSG ACCOUNT accounts upon prior approval of the MB.
 Interest-bearing special savings account which offers tiered b. NOW is a check for purposes of applying Art 315(b) of RPC
interest rates depending on the size of deposit.  The drawer may be prosecuted for estafa if the instrument involved
 Usually caries higher interest rate compared to the rate for is a NOW.
regular savings account. c. Sample NOW account order of withdrawal
 It is required that the order of withdrawal from shall have a size of 3
a. BASIC DEPOSIT ACCOUNT inched by 7 inches, and shall be on a security/check paper.
 Purpose: to “enable Filipinos, especially the unserved and Page 80.
underserved to receive and make payments, as well as have a
facility for store of value.” e. SERVICING OF NOW ACCOUNTS
 Minimum key features: an opening account or initial deposit of RULES:
not more than P100 and no minimum maintaining balance. 1. Prior to or simultaneous with the opening of a NOW account, the
bank shall inform the depositor of its terms and conditions.
b. WITHDRAWALS 2. The bank shall be responsible for the proper identification of its
 Deposits in savings accounts are generally withdrawn with the depositors; it shall require, among other things, 2 specimen
use of withdrawal slip signatures and such other pertinent information
 The signatures in the deposit slips should be verified using the 3. Deposits shall be covered by deposit slips in duplicate duly
signature cards that are signed by the depositors at the time of validated and initiated by the teller receiving the deposit. A copy of
the opening of the account. the deposit slip shall be furnished the depositor.
4. NOW account shall he kept and maintained separately from the
 Banks are prohibited from accepting a deposit slip if the
regular savings deposits.
passbook is not presented.
5. Blank NOW form shall be pre-numbered and shall be controlled as
 Banks may be authorized by the BSP to adopt a no-passbook
in the case of unissued blank checks.
withdrawal system.
6. A bank statement shall be sent to each depositor at the end of each
 Banks may also be authorized to allow the withdrawal for month for confirmation of balances.
ATMs thru electronic cards.
 7. Banks must use the form prescribed by present rules for NOW
Accounts. b. Term - The minimum maturity of the certificates shall be 731 days.

e. CLEARING OF NOW ACCOUNTS c. Manner of issuance - The certificates shall be issued only upon receipt of
 Any Now, which may be deposited with a bank other than the funds equivalent to their face value. d. Manner of printing - NCTDs shall be
drawee bank, may be cleared thru the PCHC in accordance with printed on security paper by the Security Plant Complex (SPC) of the
the PCHC clearing house rules and regulations. Bangko Sentral.
 The provision of Section X202 of the MORB on temporary
overdrawing of drawings against collected deposist shall also apply Orders for the printing of the desired forms shall not exceed a total value
for withdrawals on NOW Accounts. equivalent to twenty percent (20%) of the issuing bank’s capital accounts
(based on the quarter immediately preceding the request for printing) at any
9.04 TIME DEPOSITS one time. Additional orders for printing which shall result in an excess over
 Defined as: a deposit the payment of which generally cannot legally the prescribed benchmark shall require prior Bangko Sentral approval.
be required within a specified number of days.
 “no time shall be accepted for a term of less than 30 days” D. LONG-TERM NEGOTIABLE CERTS OF TIME DEPOSIT
 Time deposit is covered by a cert of deposit. CIRCULAR 304 SERIES OF 2001
1. Form; denomination - An LTNCD shall be in scripless form with a third
a. Far East Bank vs Queremitt: certificate of deposit: party Registry Bank maintaining the Electronic Registry Books. To have legal
 “a written acknowledgment by a bank or banker of the recipient of a effect, it shall comply with the provisions of R.A. No. 8792 (Electronic
sum of money on deposit which the bank or banker promises to pay Commerce Act) particularly on the existence of an assurance on the
the depositor, to the order of the depositor, or to some other person integrity, reliability and authenticity of the LTNCD in electronic
or his order, whereby the relation of the debtor and creditor form. LTNCDs shall be registered in the name of individuals or corporations,
between the bank and the depositor is created negotiable and prenumbered serially. The minimum denomination shall be
 “a receipt issued by a bank for an interest-bearing time deposit at the discretion of the Issuing Bank.
coming due at a specified future date.
2. Currency - Denomination shall be in Philippine pesos.
b. “a passbook representing an interest-bearing deposit account issued by a
banks qualifies as a certificate of deposit drawing interest. 3. Term - The minimum maturity of the LTNCD shall be five (5) years.
 A document to be deemed a cert of deposit requires no specific form
4. Primary Offering/Secondary Trading – The initial offering shall be
as long as there is some written memorandum that the bank
executed through an Underwriter or an Arranger. Subsequent negotiation in
accepted a deposit of a sum of money from a depositor
secondary trading must be executed through authorized Market Maker(s).
 What is important and controlling: nature or meaning conveyed by
the passbook and not the particular label or nomenclature attached
E. LONG-TERM NEGOTIABLE TAX-EXEMPT CERTF OF TIME
to it, inasmuch as substance, not form is paramount.
DEPOSITS
1. Form; denomination - The certificate
c. NEGOTIABLE CERTIFICATE OF TIME DEPOSIT.
2. Term - The minimum maturity of the certificate shall be five (5) years.
X233.3 Minimum features
3. Manner of issuance - The certificate shall be issued only upon receipt
of funds equivalent to their face value.
a. Form; denomination - NCTDs may be issued in bearer or other form
4. Manner of printing - The certificate shall be printed on security paper.
denoting negotiability and shall have a standard format to be prescribed by
5. Pre-termination - In case of pretermination, the deposit shall be subject
the Bangko Sentral which shall be prenumbered serially and
to income tax as provided under Section 24(B)(1) of the Tax Reform Act
predenominated. The minimum denomination shall be at the discretion of the
of 1997 which states that “xxx a final tax shall be imposed on the entire
issuing bank. No certificate payable to bearer shall contain words prohibiting
income and shall be deducted and withheld by the depository bank from
its negotiation.
 the proceeds of the long-term deposit or investment certificate based on a. CANCELLATION AND REVERSAL
the remaining maturity thereof  The bank teller must retrieve all copies of the deposit slips of the
6. the deposits shall be insured with the PDIC depositor requested for the reversal of the deposit or cancellation of
the deposit.
10. DEPOSITING FUNDS  The cancellation of deposit or payment transactions upon request by
 The Civil code provides that the contract of sample loan itself shall any depositor or payor, requires that all copies of the deposit slips
not be perfected until the delivery of the object of the contract. must be retrieved or surrendered to the bank.
 An accepted promise to deliver something by way of simple loan is  This practice cancel the deposit or payment transaction thus it leaves
binding upon the parties. no evidence for any subsequent claim or misrepresentation made by
 The agreement between the bank and its customer to accept a any innocent 3rd person,
deposit form the latter is binding.  SC: fraudulent transaction were made possible thru the teller’s failure
 The duty of the bank over the amount shall commence only from to retrieve the duplicate original copies of the deposit slips from the
the delivery of the amount by the depositor, that is, upon actual employee of the depositor every time the latter asked for cancellation
deposit of the amount. or reversal of the deposit or payment transaction.

10.01 THE PROCESS 10.04 VALIDATION OF DEPOSIT.

PBComm VS CA:  SC: the bank cannot be relieved of liability if it validated blank or
“ In the ordinary and usual course of banking operations, current account incomplete duplicate copies of deposit slips thereby facilitating the
deposits are accepted by the bank on the basis of deposit slips prepared and taking of the funds of the depositor by the latter’s employee.
signed by the depositor, or the latter's agent or representative, who indicates  A bank was made liable when it accepted withdrawals slips for
therein the current account number to which the deposit is to be credited, the deposit that turned out to be unfunded. The fact that withdrawal
name of the depositor or current account holder, the date of the deposit, and slips were honored in the past does not excuse it from liability. The
the amount of the deposit either in cash or checks. The deposit slip has an bank bears the risk attendant to the acceptance of the withdrawal
upper portion or stub, which is detached and given to the depositor or his slips.
agent; the lower portion is retained by the bank. In some instances, however,
the deposit slips are prepared in duplicate by the depositor. The original of 11.WITHDRAWAL OF FUNDS
the deposit slip is retained by the bank, while the duplicate copy is returned  When cash is deposited in the account, the depositor can withdraw
or given to the depositor.” the amount at any time provided that he complies with the
prescribed procedure.
10.02 DIRECT CREDIT  When the depositor deposits a check, he cannot withdraw the
 The bank may directly credit the account of the depositor whenever amount covered by the check from his account until the drawee
the bank is obligated to pay an amount to the same depositor under a bank clears the same.
separate agreement or contract.  Even after the lapse of a number of days or even a month, the
 If the depositor is the beneficiary of a letter of credit issued by the amount of a deposited check cannot be withdrawn in the absence
bank, the bank may credit the account of the depositor up to the extent of a clearance thereon.
of what is due to the latter.  BSP regulations prohibit drawings and withdrawals against
uncollected deposits except when the drawings or withdrawal are
10.03 PROOF OF DEPOSIT made against uncollected treasurer’s check, manager’s check,
 Deposit slips serve as proof of that amount was deposited to an cashier’s check, treasury warrants, postal money orders and duly
account. funded “on us” checks which may be permitted at the discretion of
the bank.

a. Demand deposits are withdrawn thru duly issued checks. Funds

from savings accounts are generally withdrawn by accomplishing
 and presenting withdrawal slips duly signed by the depositor. amount although in truth and in fact it was another person who
Withdrawal slips are not negotins and cannot be treated as checks. made the withdrawal,
b. With respect to savings accounts covered by passbooks, banks d. Cagungun vs Planters Devt Bank: SC: the bank grossly negligent in
are prohibited from issuing/accepting withdrawal slips or any other allowing withdrawal of funds thru falsified withdrawal slips without
similar instruments designated to effect withdrawals of savings the depositor’s authority and knowledge. The fact that the depositor
deposits without requiring the depositors concerned to present left and entrusted to the bank employees his passbook will not
their passbooks and accomplishing the necessary withdrawal slips, excuse the bank from liability. The bank employees went beyond
except for bank authorized by the BSP to adopt the no passbook their authority and were able to withdraw from the depositor’s
withdrawal system. account without the latter’s consent.
a bank is negligent if it allows the withdrawal without requiring the e. BPI vs CA: the depositor allowed a 3rd person to deposit a
presentation of a passbook. manager’s check issued by a foreign bank and gave the 3 rd person
a blank withdrawal slip. Later the manager’s check was dishonored.
11.01 ENCASHMENT SLIP The bank allowed the withdrawal of an amount that is definitely over
 May be used to withdraw funds from an account. and above the aggregate amount of the depositor’s deposit that had
 They are commercial documents – docs or instruments that are not yet been cleared.
used by merchants or businessmen to promote or facilitate trade. f. Citibank vs Cabamongan: the bank is held liable when it allowed
 Necessarily facilitates bank transactions for it allows the person the pre-termination of the deposit despite noticing discrepancies in
whose name and signature appears thereon to encash a check and the signature and photograph of the person claiming to be the
withdraw the amount indicated therein. depositor and the failure to surrender the original certificate of time
deposit.
11.02 WITHDRAWAL THROUGH ELECTRONIC INSTRUCTIONS.
 SC ruled that the electronic messages are not negotiable bills 11.03.01 SOLIDARY OBLIGATION
exchange under Section 1 of Negotin law.  The bank should be solidarily liable with its employees for the
damages caused to its depositors.
11.03 DUE CARE IN HANDLING WITHDRAWAL  Art 2180 of the CC: employers shall be held primarily and solidarily
 Withdrawals from a bank account can be made upon the authority liable for damages caused by their employees acting within the
of the depositor as reflected in the withdrawal slips. scope of their assigned tasks.
 The bank is liable if it allows withdrawal of funds on the basis of
forged signatures in withdrawal slips. a. Oliver vs PSB: the acting branch manager and the bank must be
 The bank is also liable if it allows withdrawal of funds against held liable.
uncollected check/s which have it yet been cleared.
11.04 AUTOMATIC TRANSFER FROM SAVINGS ACCOUNT.
a. “as a standard banking practice intended precisely to prevent  The depositor may maintain a savings account and a checking
unauthorized and fraudulent withdrawals, a bank manager must account with the same bank and agree that funds may be
verify with the client-depositor to authenticate and confirm that he or automatically transferred from the savings account if the balance of
she has validly authorized such withdrawal. the checking account is nor sufficient to cover checks that were
b. If the bank allows unauthorized withdrawal, the bank can be drawn on the same account.
required to return the amount that was illegally withdrawn plus  Called: Combo plan accounts
interest at the rate stipulated upon by the parties and in the
absence thereof at the legal rate of 6% per annum from the time of a. There must be stipulation to that effect. Where a depositor has 2
demand. accounts with a bank, an open or checking account a saving
c. PNB vs Pike : the bank allowed a depositor to pre-sign the account, and draws a check upon the open account for more
withdrawal slip thereby making it appear that he was the one money that the account contains, the bank may rightfully refuse
actually withdrawing from his account and receiving the withdrawn to pay the check and is under no duty to make up the deficiency
 from the savings account unless there is an agreement to that  When the bank honors the check, the bank is allowing the
effect. withdrawal of funds from the demand deposit; the bank as debtor is
complying with its obligation to pay the depositor up to the extent of
11.05 CASH CARD OR ATM CARD the value of the check.
a. Far east bank vs Chante: the bank was held liable because the entries
reflecting withdrawals resulted by reason of the intervention of a system bug a. A banking institution has the direct obligation to supervise very
that facilitated the purported withdrawal. closely the employees handling its depositors’ accounts and should
The bank’s burden of proof requires it to preponderantly demonstrate that always be mindful of the fiduciary nature of its relationship with the
the depositor’s ATM card has been used to make withdrawals, and that the depositors.
depositor used the ATM card and PIN by himself or by another person to b. Failure of the bank employees to credit the amount deposited by the
make the fraudulent withdrawals. drawer-depositor to his account resulting in the dishonor of the
checks that the latter issued constitutes actionable negligence. There
Electronic Commerce Act of 2000: RA 8792 is actionable negligence of the drawee fails to transfer funds from the
Section 16. Formation of Validity of Electronic Contracts. drawer’s savings account to his checking account as previously
(2) Electronic transactions made through networking among banks, or agreed upon thereby leaving the balance in the checking account
linkages thereof with other entities or networks, and vice versa, shall be insufficient to cover checks that were issued by the drawer.
deemed consummated upon the actual dispensing of cash or the debit of
one account and the corresponding credit to another, whether such 13. BOOKING OF DEPOSITS
transaction is initiated by the depositor or by an authorized collecting party: § X261.1 Clearing cut-off time.
Provided, that the obligation of one bank, entity, or person similarly situated As a general rule, all deposits and withdrawals during regular banking hours
to another arising therefrom shall be considered absolute and shall not be shall be credited or debited to deposit liability accounts on the date of receipt
subjected to the process of preference of credits. or payment thereof: Provided, however, That a bank may set a clearing cut-
off time for its head office not earlier than two (2) hours before the start of
CONSUMER PROTECTION clearing at the BSP, and not earlier than three and one-half (3-1/2) hours
 BSP requires banks to establish and maintain comprehensive before the start of clearing for all its branches, agencies and extension
information security program and ensure that they are properly offices doing business in the Philippines, after which time, deposits received
implemented and strictly enforced. shall be booked as hereinafter provided: Provided, further, That banks which
 The information security program shall include, at a minimum the ff: are located in areas where there are no BSP regional/clearing arrangements
1. Identification and assessment of risks associated with e-banking may set a clearing cut-off time not earlier than two (2) hours before the start
products and services of their local clearing after which time, deposits received shall be booked
2. Identification of risk mitigation action including appropriate likewise as hereinafter provided.
authentication technology and internal controls
3. Information disclosure and customer privacy policy § X261.2 Definitions. As used in this Section, the following terms shall have
4. Evaluation of consumer awareness efforts. the following meanings: a. Regular banking hours shall refer to the banking
hours reported to the BSP pursuant to Sec. X156, including the extended
BSP CIRCULAR NO 542 SERIES OF 2006 banking hours reported for servicing deposits and withdrawals; and b.
Clearing cut-off time shall mean the bank’s closing time for the acceptance
12. WRONGFUL DISHONOR OR CHECKS of deposits in the form of checks, bills and other demand items for clearing
 By virtue of contract of deposit between the banker and its on the day of their receipt.
depositor, the banker agrees to pay checks drawn by the depositor
provided that said depositor has money in the hands of the bank. § X261.3 Booking of cash deposits Cash deposits received after the
 Where the bank possesses funds of a depositor, it is bound to selected clearing cut-off time until the close of the regular banking hours
honor his checks to the extent of the amount of his deposits. shall be booked as deposits on the day of receipt.
§ X261.4 Booking of non-cash deposits Deposits of checks including “on to affirm the accuracy of items recorded by the banks. It purpose it
us” checks, manager’s/cashier’s/ treasurer’s checks and demand drafts, to obtain from depositors a direct corroboration of the correctness
which are drawn against the depository bank and all its offices, as well as of their account balances with their respective banks.
treasury warrants and postal money orders, received after the selected
clearing cut-off time until the close of the regular banking hours, may, at the 14.01 EXAMINATION OF STATEMENT
option of the bank, be booked as deposits on the day of receipt. Other non-  Failure of the depositor to examine the SOA will not necessarily
cash deposits received after the selected clearing cut-off time shall be result in the absence of liability on the part of the drawee bank that
treated as contingent accounts on the day of receipt and shall be booked as issued the statement.
deposits the following banking day.  The depositor shall bear the loss only if it its negligence is the
proximate cause of his loss.
§ X261.5 Booking of deposits after regular banking hours. Deposits, a. In some cases, even if the drawee-bank that issued the bank
whether cash or non-cash, received after the close of the regular banking statement is liable, such liability may be mitigated by the
hours shall be treated as contingent accounts on the day of receipt and shall contributory negligence of the depositor-drawer.
be booked as deposits the following banking day. b. SC in one case held that he account holder’s failure to timely
examine the account, cancel the checks, and notify the drawee
§ X261.6 Other records required. For record and control purposes, banks bank of their alleged loss/theft should mitigate petitioner’s liability, in
shall prepare a daily abstract of deposit transactions treated as contingent accordance with Art 2179 of the CC which provides that if the
accounts. plaintiff’s negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of due
§ X261.7 Notice required. Banks shall post at a conspicuous place near care, the plaintiff may recover damages but the courts shall mitigate
each teller’s window a notice to depositors indicating their selected clearing the damages to be awarded.
cut-off time and a statement to the effect that non-cash items deposited after
said cut-off time shall be treated as transactions for the next banking day. 14.02 EFFECT OF MISCREDIT.
 A depositor is entitled to recover from the bank the amount that was
14. STATEMENT OF ACCOUNT AND PASSBOOKS. erroneously deducted from his account.
a. In general, savings accounts are covered by passbooks although  Also when amount was deducted from is account without his
bank statements may also be sent to depositors. Entries in the bank authority.
statements and passbooks are prima facie proof of the entries  This applies in the case of checks that contain the forged signature
therein. Hence, the statement and passbooks may be proof of the of the drawer of the indorsers.
amounts deposited or withdrawn and the respective dates thereof,  The bank can also recover the amount that was erroneously
as well as the balances of the accounts. credited to the account of the depositor
b. However, the parties may establish proof of inaccuracy of the
entries in the passbooks or SOA. For instance, the bank may prove 15. INTEREST IN DEPOSITS
that a bigger amount was erroneously credited.  Demand, savings,NOW accounts, time deposits and deposit
c. On the other hand, the depositor may prove that the bank failed to substitutes shall not be subject to interest ceilings
credit a deposit and his balance is bigger. A depositor-drawer may
 Interest or yield on time deposit/ deposit substitute may be paid at
also prove that the value of a check containing his forged signature
maturity or upon withdrawal or in advance. However, interest or
or forged indorsement was wrongfully debited from his account.
yield paid in advance shall not exceed the interest for 1 year.
The drawer is not estopped or bound by the bank statement that
was sent to it by the drawee bank.
15.01 MATURED TIME DEPOSITS/DEPOSIT SUBSTITUTES
d. In one case, there is a printed provision in the bank statement that
 A time deposit not withdrawn or renewed on its due date shall be
state: “if no error is reported in 10 days, account will be correct.”
treated as a savings deposit and shall earn interest from maturity to
SC: the depositor is estopped from questioning any mistake in the
the date of the actual withdrawal or renewal at a rate applicable to
bank statement after the lapse of the 10-day period. The notice is a
savings deposits.
simple confirmation or circularization that requests client-depositors
  A deposit substitute instrument not withdrawn or renewed on its 16.01 JOINT ACCOUNTS
maturity date shall from said date become payable on demand and  Whenever 2 or more persons open an account, the same may be
shall earn an interest or yield from maturity to actual withdrawal or an “and/or account” or an “and” account.
renewal at a rate applicable to a deposit substitute with a maturity  If the joint account is an “and/or” account, any one of the depositors
of 15 days. may withdraw funds therefrom and the signature of 1 is enough to
 However, the foregoing rules do not prevent the parties from authorize the bank to allow such withdrawal
continuing with the same terms and conditions. Thus, there may be  If it is an “And” account, the depositor are joint creditors of the
a provision in the agreement that automatically renews the contract banks and the signatures of all depositors are necessary to allow
under the same terms and conditions. withdrawal.
a. The concurrence of 2 or more creditors on one and the same
15.02 DISCLOSURE REQUIREMENT obligation does not imply that each one has the right to demand
 Banks are required to disclose to depositors the ff information on compliance with the obligation
interest computation and payments.  The presumption is that the liability is joint, unless a specific law
1. Type/ kind of deposit or the contract itself indicates otherwise.
2. Nominal rate of interest and period covered  If the joint account is an”and/or” account there is an indication in
3. Manner of interest payment (whether credited in advance or the contract that any one of the creditors-depositors has the right
otherwise) to demand full compliance with the obligation.
4. Basis of interest payment ( whether based in average daily  The depositors would then be considered splodary creditors of
balance compounded quarterly or otherwise) the bank.
5. Effective rate of interest expressed as a simple annual rate, on  If the joint account is an “And” account, the tenor of the contract
the basis of the information above given and indicating the is to the effect that all the depositors must demand compliance
formula used to arrive at the effective rate of interest. with the obligation of the debtor-bank, that is, both must
6. Illustration of basis of computing interest on a hypothetical authorize the withdrawal of funds from the account.
deposit account.
b. The presumption is that the depositors own equal shares in the
* Copies of the above-mentioned info shall be made available to each deposit.
and every depositor by attaching these copies to savings deposit  This is consistent with Art 485 of the CC : “portions belonging
passbooks and time deposit certificate. to the co-owner in the co-ownership shall be presumed equal,
unless the contrary is proved.
16. TYPES OF DEPOSIT ACCOUNTS  If there are 2 depositors, the presumption is that they each own
 In addition to the classification of bank deposits by deposit type or ½ in accordance with the rule in co-ownership.
as to their nature, bank deposits may also be classified by currency  In case of death of one of the depositors, the share belonging
– Philippine Peso or Foreign currencies. to the deceased depositor forms part of his/her estate and
 There is also a 3rd classification of bank deposits and that is by withdrawal thereof would be subject to prevailing tax laws.
deposit account or in relation to the name/s in which the accounts  The authority previously given to the co-depositor to withdraw
are held. from the “and/or” account ceases upon the death of the other
 SINGLE ACCOUNT: in the name of a single person – natural or co-depositor.
juridical
 JOINT ACCOUNT: in the name of 2 or more persons. 16.02 BY, ITF, FAO ACCOUNTS
 An account may also be a “by” account, “in trust for (ITF) account”  It is incumbent upon the banks during account opening to ascertain
or for the account of (FAO) another person. the legal relationship of the parties involved and the actual
ownership of the funds deposited.
  In general, a by, itf, and fao account the named beneficiary is b. EXCEPTION
considered the depositor.  Section 3(1) of the Foreign Currency Deposit Act:
 “numbered accounts for recording and servicing of said foreign
ITF ACCOUNT TRUST ACCOUNT currency deposits shall be allowed”.
Creates a debtor-creditor Investment product wherein the  Said act was amended and the MORB now allows only
relationship between the bank and relationship between the banks and numbered non-checking accounts (peso or foreign currency),
the depositor the client is that of trustee-trustor. and absolutely prohibits numbered checking accounts.

Subsection X806.2.g of the MORB, where 16.04 NUMBERED ACCOUNTS

1) An account is opened by;  Section 9(a) of RA 9160 provides for absolute prohibition of
2) Relationship established through anonymous accounts, accounts under fictitious names, and all other
3) Any transaction is conducted by, a trustee, nominee, agent or similar accounts.
intermediary, either as an individual or thru a fiduciary relationship  The same provision provides that “peso and foreign non-checking
or similar arrangements numbered accounts shall be allowed.
- the covered person (the bank) shall establish and record the true
and full identity and existence of both the (1) trustee, nominee, 160.5 DORMANT ACCOUNTS
agent or intermediary and (2) trustor, principal, beneficial owner Section 2 of BSP CIRCULAR 928 :
or person on whose behalf the account/relationship/transaction is Definition of dormant accounts
being opened/established/conducted 1) Current or checking accounts showing no deposit or withdrawal for
a period of one (1) Year.
16.03 ANONYMOUS ACCOUNT 2) Savings account showing no deposit or withdrawal for a period of
 Circular NO 251, to combat money laundering and Section 9(a0 of two (2) Years.
AMLA of 2001 (RA 9160) prohibit anonymous accounts or accounts
under fictitious names.  Banks are required to exert all efforts to prevent deposit accounts
 In fact, when accounts are opened, banks must employ a system to from becoming dormant.
establish the identity of the depositor  Banks are required to give 60-day notice to a depositor of the
 In addition, at least 3 specimen signatures of the depositor are required. potential dormancy of his/her/its account.
 The notice to be given to the depositor shall contain information on
It should be noted that use of pseudonyms or alias may amount to criminal the
offenses. o effect of dormancy to transfer the account from active to
a. It is a felony under Art 178 of the RPC: dormant status
i. To publicly use a fictitious name for the purpose of concealing a o Advice on how to reactivate the account
crime, evading the execution of a judgment or causing damage o And a reminder that the dormant account will be included in the
b. Commonwealth Act No. 142 ( as amended by Ra 6085) makes it list of unclaimed balances to be submitted to the Treasurer of
unlawful for any person to use an alias unless the same is The Philippines for escheat pursuant to unclaimed balances
registered in the proper civil registry except only as a pseudonym act, in case the account has no activity for 10 years.
for litereary and athletic events
 A dormancy fee may be imposed by a bank on a dormant deposit
a. Under the Family Code, the use of name and surname not account 5 years after the last activity therein, subject to the ff
appearing in the cert of live birth of a person is also disallowed conditions:
except as pen name or stage name so long as it is done in good o The balance fall below the minimum monthly average daily
faith and no injury to 3rd person results. balance, if any
o The monthly dormancy fee shall not exceed P30.00
o The bank complied with the 2-notice requirement.
 1. Notice of potential dormancy of the account 60 days prior to
the commencement of the dormancy period RR requires the submission of BIR from No 1904 of the deceased
2. Notice when an account is about to be subject to dormancy depositor’s estate duly stamped received by the BIR, to the bank where the
fee at least 60 days prior to the imposition of the fee to be withdrawal is made.
sent to the depositor.
B. REVENUE MEMORANDUM CIRCULAR (RMC) NO 62-2018.
17. DECEASED DEPOSITOR  RMC provides that “for joint account, the final withholding tax shall
 Prior to the enactment of RA 10963(TRAIN LAW), if a depositor be based in the share of the decedent in the joint bank deposits”.
dies, the heirs cannot withdraw the bank deposits of the deceased  Since the estate of the deceased co-depositors covers only his/her
without the settlement of the latter’s estate and submission of a share in the joint deposit account, them it is but right that only said
clearance or cert of payment of estate tax. amount/share would be subject to the 6% withholding tax and not
 Before the amendment of the NIRC by the TRAIN law, a bank that the entire amount remaining in the joint deposit account.
is aware of the death of the depositor must not allow withdrawal of
the balance of the account unless a certificate of payment of the 1) By virtue of the surviving agreement between among the co-
estate tax is submitted and the only exception to the rule was when depositors, the remaining balance in the joint account at the time of
the CIR allows withdrawal of an amount not exceeding P20,000.00 death of the co-depositor would pertain to the surviving co-
depositor and no part thereof would accrue to the estate of the
17.01 TRAIN LAW deceased co-depositor.
 A bank may now allow any withdrawal from the back deposit 2) In the case of a deposit account maintained in the name of one
account of a deceased depositor without the need for a clearance person, where the depositor at the time of the account opening is
of cert of payment of estate tax issued by the BIR. marries, the presumption under the law is that the account is
 The bank that allows such withdrawal is required to deduct a 6% community or conjugal property of the spouses, unless it is shown
final withholding tax from the deposit account. that the spouses opted for another property regime in a marriage
settlement.
Section 27. Section 97 of the NIRC, as amended, is hereby further The presumptive share of the surviving spouse should not be
amended to read as follows: subject to the 6% final withholding tax.
"Sec. 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds 3) Banks are not prevented from requiring pertinent documents in
or Rights - x x x. accordance with its existing policy or in pursuance of a requirement
"If a bank has knowledge of the death of a person, who maintained a bank under applicable laws rules and regulation for the purpose of
deposit account alone, or jointly with another, it shall allow any withdrawal ascertaining the identity and the right to claim of the heirs, or its
from the said deposit account, subject to a final withholding tax of six percent authorized reps before allowing any withdrawal from the bank
(6%). For this purpose, all withdrawal slips shall contain a statement to the deposit accounts.
effect that all of the joint depositors are still living at the time of withdrawal by
any one of the joint depositors and such statement shall be under oath by 18. DEPOSITOR IN FINANCIAL DISTRESS.
the said depositors."  Under the Financial Rehabilitation and Insolvency Act 2010 (FRIA),
a petition for voluntary or involuntary rehabilitation may be filed
A. REVENUE REGULATION NO 12-2018 (Consolidate RR on Estate tax against an insolvent debtor.
and donor’s tax incorporating the amendments introduced by RA  Within 5 days from the filing of the proper petition with all the
10963) required attachments, the Court will issue a Commencement Order
Page 107 which includes a Stay order and the appointment of Rehabilitation
Receiver.
RR imposes a 1-year limit from the date of the death of the deceased  The rehabilitation receiver has the power to take possession,
depositor on the withdrawals from the bank accounts of a deceased custody and control, and to preserve the value of all the properties of
depositor without need to submit to the bank an eCAR. the debtor.
  Section 48: no funds or property of the debtor shall be used or consideration of what the other shall give or do upon the happening
disposed of except in the ordinary course of business of the debtor of an event which is uncertain, or which is to occur at an
or unless necessary to finance the administrative expenses of the indeterminate time
rehabilitation proceedings.
20. CLOSURE OF ACCOUNT
a. Under Section 47: the management of the juridical debtor shall  The bank can expressly reserve the right to choose an account
remain with the existing management subject to the applicable (even without prior notice) whenever certain identified events occur.
laws/and agreements if any on the election or appointment of  Far east bank vs Pacilan Jr.
directors, managers or managing partner. However, all
disbursements, payments or sale, disposal or sale. Disposal, 21. HOLD-OUT OF DEPOSIT
assignment, transfer or encumbrance of property, or any other act  The bank is authorized to withhold the amount deposited as
affecting title or interest in property, shall be subject to the security for any and all obligations of the depositor to the bank.
approval of the rehabilitation receiver and/or the court.  It may also provide that the bank may assert a lien on any balance
b. The rehabilitation receiver shall also have the right to sue and of the account and may apply the same balance to the
recover amounts owed to and all properties pertaining to the indebtedness of the depositor.
debtor. Hence, upon approval of the court, the rehab receiver can  An authority to compensate the deposit with the obligations of the
file an action tor recover the deposits if they are duly withheld by depositor with the same bank.
the depositary banks.  Hold-out provision applies only if there is a valid and existing
c. Section 17: commencement order shall best the rehab receiver obligation arising from any sources of obligation under Art 1157of
with all the powers and functions provided for in FRIA, such as the the CC,
right to review and obtain record to which the debtor; management
and directors have access, including bank accounts or whatever 22.DUTY OF CARE
nature of the debtor subject to the approval by the court of the  The law acknowledges the fiduciary nature of banking that requires
performance bond filed by the rehab receiver. high standards of integrity and performance.
d. In case of liquidation, the remaining balances in the bank accounts  They are therefore required to exercise the highest degree of are in
of the insolvent shall be included in the properties that will be taken the handling of the amounts deposited by their clients.
over by the court appointed liquidator that will eventually be made a. Simex vs CA
to answer for claims in accordance with the rule on concurrence b. BPI vs CA
and preferences of credits under new civil code. c. Go vs IAC
19. SURVIVORSHIP AGREEMENTS.
 In case of death of one of the depositors in a joint account, it is 23. GARNISHMENT OF DEPOSITS.
presumed that the depositors own the account share and share- Rule 39 of Section 9 of Rules of Court
alike, hence, if there are 2 depositors, half of the deposit shall
pertain to the estate of the deceased depositor and the other half Section 9.Execution of judgments for money, how enforced. —
shall pertain to the surviving co-depositor. (c) Garnishment of debts and credits. — The officer may levy on debts
due the judgment obligor and other credits, including bank deposits, financial
a. Survivorship agreement: aleatory contract supported by interests, royalties, commissions and other personal property not capable of
consideration where the joint depositors agree to permit either to manual delivery in the possession or control of third parties. Levy shall be
them to withdraw the whole deposit during their lifetime and made by serving notice upon the person owing such debts or having in his
transferring the balance to the survivor upon the death of one of possession or control such credits to which the judgment obligor is entitled.
them. The garnishment shall cover only such amount as will satisfy the judgment
and all lawful fees.
Article 2010. By an aleatory contract, one of the parties or both
reciprocally bind themselves to give or to do something in
The garnishee shall make a written report to the court within five (5) days c. EXEMPT UNDER THE RULES OF COURT.
from service of the notice of garnishment stating whether or not the judgment Section 13. Property exempt from execution. — Except as otherwise
obligor has sufficient funds or credits to satisfy the amount of the judgment. If expressly provided by law, the following property, and no other, shall be
not, the report shall state how much funds or credits the garnishee holds for exempt from execution:
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 a. The judgment obligor's family home as provided by law, or the
judgment obligee within ten (10) working days from service of notice on said homestead in which he resides, and land necessarily used in
garnishee requiring such delivery, except the lawful fees which shall be paid connection therewith;
directly to the court.
In the event there are two or more garnishees holding deposits or credits b. Ordinary tools and implements personally used by him in his trade,
sufficient to satisfy the judgment, the judgment obligor, if available, shall employment, or livelihood;
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 c. Three horses, or three cows, or three carabaos, or other beasts of
judgment obligee. burden, such as the judgment obligor may select necessarily used by
The executing sheriff shall observe the same procedure under paragraph (a) him in his ordinary occupation;
with respect to delivery of payment to the judgment obligee. (8a, 15a)
d. His necessary clothing and articles for ordinary personal use,
23.01 NOT COVERED BY SECRECY excluding jewelry;
 Garnishment of deposits does not violate the law on Secrecy of
Bank Deposits e. Household furniture and utensils necessary for housekeeping, and
 The bank account is not inquired into when the funds are used for that purpose by the judgment obligor and his family, such as
garnished. the judgment obligor may select, of a value not exceeding one
hundred thousand pesos;
23.02 DEPOSITS EXEMPT FROM GARNISHMENT.
 Foreign currency deposits f. Provisions for individual or family use sufficient for four months;
 Deposits of government funds.
g. The professional libraries and equipment of judges, lawyers,
A. FOREIGN CURRENCY DEPOSITS. physicians, pharmacists, dentists, engineers, surveyors, clergymen,
 Exempt from attachment or garnishment under Section 8 of FCDA. teachers, and other professionals, not exceeding three hundred
 The wording or the law does not admit any exception: thousand pesos in value;
“provided, however, that said foreign currency deposit shall be
exempt from attachment, garnishment and other order or process of h. One fishing boat and accessories not exceeding the total value of one
any court, legislative body, govt agency or any administrative body hundred thousand pesos owned by a fisherman and by the lawful use
whatsoever. of which he earns his livelihood;
1) EXCEPTIONAL CASE: Salvacion vs Centran Bank of the PH.
2) China Banking Corp v Hon. Court of appeals i. So much of the salaries, wages, or earnings of the judgment obligor
for his personal services within the four months preceding the levy as
b. GOVERNMENT FUNDS are necessary for the support of his family;
 Govt funds and properties may not be seized under writs of execution
or garnishment to satisfy judgment. 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 withdrawals during the preceding ten years or more. Such unclaimed
such support, or any pension or gratuity from the Government; balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the
m. Properties specially exempted by law. Government of the Republic of the Philippines to be used as the National
Assembly may direct.
But no article or species of property mentioned in this section shall be "Banks", "building and loan associations" and "trust corporations", within the
exempt from execution issued upon a judgment recovered for its price or meaning of this Act, shall refer to institutions defined under Section two,
upon a judgment of foreclosure of a mortgage thereon. (12a) thirty-nine and fifty-six, respectively, of Republic Act Numbered Three
Hundred Thirty Seven, otherwise known as the General Banking Act, as
 The depositor may prove that the amounts deposited constitute the amended, whether organized under special charters or not.
provision for individual or family use sufficient for 4 months.
"Sec. 2. Immediately after the taking effect of this Act and within the month
23.03 NO LIABILITY FOR RELEASE of January of every odd year, all banks, building and loan associations, and
 The bank is not liable whenever it releases the amount garnished as trust corporations shall forward to the Treasurer of the Philippines a
ordered by a court of competent jurisdiction statement, under oath, of their respective managing officers, of all credits
 It is not even required to look into the validity or legality of the and deposits held by them in favor of persons known to be dead, or who
garnishment as it is in fact in no position to do so. have not made further deposits or withdrawals during the preceding ten
 Case: by virtue of the order of garnishment, the account was placed in years or more, arranged in alphabetical order according to the names of
custodia legis and therefore, from that time one, the bank holds the creditors and depositors, and showing:
funds subject to the ordered of the court a quo. "(a) The names and last known place of residence or post office
 No breach of trust or dereliction of duty can be attributed to the bank in addresses of the persons in whose favor such unclaimed balances
delivering its depositor’s funds pursuant to a court order that was stand;
merely in the exercise of its power of control over such funds. "(b) The amount and the date of the outstanding unclaimed balance
and whether the same is in money or in security, and if the latter,
24. UNCLAIMED BALANCE. the nature of the same;
 Deposits that have become dormant for a period of 10years may be "(c) The date when the person in whose favor the unclaimed
escheated in favor of the govt. balance stands died, if known, or the date when he made his last
 The bank concerned is required to report to the Treasurer of the PH deposit or withdrawal; and
the existence of such deposits. "(d) The interest due on such unclaimed balance, if any, and the
amount thereof.
 The treasurer will turn inform the SolGEn who will then initiate the
proper escheat proceedings in Court.
"A copy of the above sworn statement shall be posted in a conspicuous
 Publication of a list of unclaimed balances is also required in order
place in the premises of the bank, building and loan association, or trust
to safeguard the right of the depositors, their heirs, and successors
corporation concerned for at least sixty days from the date of filing thereof:
in interest to due process.
Provided, That immediately before filing the above sworn statement, the
bank, building and loan association, and trust corporation shall communicate
Act No 3936: Unclaimed balances law
with the person in whose favor the unclaimed balance stands at his last
Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended
known place of residence or post office address.
to read as follows:
"It shall be the duty of the Treasurer of the Philippines to inform the Solicitor
General from time to time the existence of unclaimed balances held by
"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall
banks, building and loan associations, and trust corporations.
include credits or deposits of money, bullion, security or other evidence of
indebtedness of any kind, and interest thereon with banks, buildings and
"Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed
loan associations, and trust corporations, as hereinafter defined, in favor of
balances, he shall commence an action or actions in the name of the People
any person known to be dead or who has not made further deposits or
of the Republic of the Philippines in the Court of First Instance of the
province or city where the bank, building and loan association or trust
corporation is located, in which shall be joined as parties the bank, building Upon the publication or the completion of the publication, if there are several,
and loan association or trust corporation and all such creditors or depositors. of the summons and notice, and the service of the summons on the
defendant banks, building and loan associations or trust corporations, the
All or any of such creditors or depositors or banks, building and loan court shall have full and complete jurisdiction in the Republic of the
association or trust corporations may be included in one action. Service of Philippines over the said unclaimed balances and over the persons having or
process in such action or actions shall be made by delivery of a copy of the claiming any interest in the said unclaimed balances, or any of them, and
complaint and summons to the president, cashier, or managing officer of shall have full and complete jurisdiction to hear and determine the issues
each defendant bank, building and loan association or trust corporation and herein, and render the appropriate judgment thereon.
by publication of a copy of such summons in a newspaper of general
circulation, either in English, in Filipino, or in a local dialect, published in the "Sec. 4. If the president, cashier or managing officer of the bank, building
locality where the bank, building and loan association or trust corporation is and loan association, or trust corporation neglects or refuses to make and
situated, if there be any, and in case there is none, in the City of Manila, at file the sworn statement required by this action, such bank, building and loan
such time as the court may order. 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
Upon the trial, the court must hear all parties who have appeared therein, default shall continue.
and if it be determined that such unclaimed balances in any defendant bank,
building and loan association or trust corporation are unclaimed as "Sec. 5. Any bank, building and loan association or trust corporation which
hereinbefore stated, then the court shall render judgment in favor of the shall make any deposit with the Treasurer of the Philippines in conformity
Government of the Republic of the Philippines, declaring that said unclaimed with the provisions of this Act shall not thereafter be liable to any person for
balances have escheated to the Government of the Republic of the the same and any action which may be brought by any person against in any
Philippines and commanding said bank, building and loan association or bank, building and loan association, or trust corporation for unclaimed
trust corporation to forthwith deposit the same with the Treasurer of the balances so deposited with the Treasurer of the Philippines shall be
Philippines to credit of the Government of the Republic of the Philippines to defended by the Solicitor General without cost to such bank, building and
be used as the National Assembly may direct. loan association or trust corporation."

"At the time of issuing summons in the action above provided for, the clerk of 24.01 REQUIREMENTS
court shall also issue a notice signed by him, giving the title and number of 1) There is credit or deposit of money, or other evidence of indebtedness
said action, and referring to the complaint therein, and directed to all of any kind with banks
persons, other than those named as defendants therein, claiming any 2) Such credit, deposit or evidence of indebtedness has a balance
interest in any unclaimed balance mentioned in said complaint, and requiring 3) The balance has been unclaimed for a period of 10 years or more
them to appear within sixty days after the publication or first publication, if 4) Notice should be given to the depositor
there are several, of such summons, and show cause, if they have any, why 5) After due notice to the depositor, a sworn statement with the Treasurer
the unclaimed balances involved in said action should not be deposited with should be filed stating the list of depositors with unclaimed balances
the Treasurer of the Philippines as in this Act provided and notifying them 6) There must be publication of a list of unclaimed balances
that if they do not appear and show cause, the Government of the Republic 7) The escheat proceedings is commenced
of the Philippines will apply to the court for the relief demanded in the 8) Escheat proceedings should be filed by the State thru the SolGen.
complaint.
24.02 ACCOUNTS COVERED.
A copy of said notice shall be attached to, and published with the copy of,  The term “unclaimed balances” include credits or deposits of money
said summons required to be published as above, and at the end of the copy or other evidence of indebtedness of any kind with banks.
of such notice so published, there shall be a statement of the date of  Credit: “ a sum credited in the books of a company to a person who
publication, or first publication, if there are several, of said summons and appears to be entitled to it. It presupposes a creditor-debtor
notice. Any person interested may appear in said action and become a party relationship, and may be said to imply ability, by reason of property or
thereto. esttaes, to make a promised payment.
 o In case the bank complies with the provisions of the law and the
A. DEMAND DRAFT. unclaimed balances are eventually escheated to the Republic,
 Is a bill of exchange payable on demand the bank "shall not thereafter be liable to any person for the
 If demand drafts payable to the depositor have not been presented same and any action which may be brought by any person
either for acceptance or for payment, the inevitable consequence ins against in any bank xxx for unclaimed balances so deposited xxx
that the appellee bank never had any chance of accepting or rejecting shall be defended by the Solicitor General without cost to such
them bank."21 Otherwise, should it fail to comply with the legally
 Verily, the bank never became a debtor of the payee concerned and outlined procedure to the prejudice of the depositor, the bank
as such the aforesaid drafts cannot be considered as credit subject to may not raise the defense provided under Section 5 of Act No.
escheat within the meaning of the law. 3936, as amended.

B. CASHIER’S OR MANAGER’S CHECK 24.04 PUBLICATION OF LIST

 Primary obligation of the bank which issues it and constitutes its  Intended to safeguard the right of the depositor, their heirs and
written promise to pay upon demand. successors to due process.
 The bank is both the drawer and the drawee.  Publication is necessary so that other persons who may have an
interest in any of the unclaimed balance know what this case is all
C. TELEGRAPHIC TRANSFERS about and whether they have an interest in this case if the amended
 Do not come within the meaning of term credit or deposits. complaint and list of unclaimed balances are not published.
 They cannot be considered as a sum credited on the books of the
bank to a person who appears to be entitled to it. 24.05 ESCHEAT PROCEEDINGS.
 The purchaser of a telegraphic transfer upon making payment  Must be initiated before the unclaimed balances will be turned over the
completes the transaction insofar as he is concerned, though Govt
insofar as the remitting bank is concerned, the contract is executory
until the credit is established. 24.05.01 REAL PARTY-INTEREST
 The depositors or creditors of the respondent Republic bank, who can
24.03 NOTICE REQUIREMENT BEFORE FILING A CASE. move for the dismissal of the complaint for escheat inasmuch as what
 It is an indispensable requirement under the Unclaimed Balances are being escheated in favor of the govt are their own unclaimed or
Law that prior notice is given to the depositor dormant deposits and not money of the respondent Republic bank.
 Rizal Commercial Banking vs Hi-tri devt corp:
o the law sets a detailed system for notifying depositors of a. the depositary bank fall under the definition real party in interest for the
unclaimed balances. This notification is meant to inform them escheat of the dormant deposits in favor of the government would
that their deposit could be escheated if left unclaimed. necessarily deprive said bank of the use of such deposits.
Accordingly, before filing a sworn statement, banks and other
similar institutions are under obligation to communicate with Real party in interest: party who would be benefitted or injured by the
owners of dormant accounts. The purpose of this initial notice is judgment of the suit or the party entitled to avail of the suit
for a bank to determine whether an inactive account has indeed Section 3 of RA 3936: the bank shall be joined as a party in the action for
been unclaimed, abandoned, forgotten, or left without an owner. escheat.
If the depositor simply does not wish to touch the funds in the
meantime, but still asserts ownership and dominion over the 24.05.02 JOINDER OF ACTIONS.
dormant account, then the bank is no longer obligated to include SECTION 3 of RA 3936 direct the SolGEn to commence the action in the
the account in its sworn statement.20 It is not the intent of the name of the people of the Philippines in the RTC of the province where the
law to force depositors into unnecessary litigation and defense of bank is located.
their rights, as the state is only interested in escheating balances
that have been abandoned and left without an owner.
24.05.03 SUMMONS AND PUBLICATION
 Insofar as banks are concerned, service of processes is made by
delivery of a copy of the complaint and summons upon the
 President
 Cashier or
 Managing officer of the defendant bank.
 As to depositors or other claimants of the unclaimed balances, service is
made by publication of a copy of the summon is a newspaper of a
general circulation in the locality where the institution is situated.
 Escheat proceedings are actions in rem, whereby an action is brought
against the thing itself instead of a person.

Escheat proceedings
 Judicial process in which the state, by virtue of its sovereignty, steps in
and claims abandoned, left vacant or unclaimed property, without
there being an interested person having a legal claim thereto.
 In the case of dormant accounts, the state requires into the status,
custody, and ownership of the unclaimed balance to determine
whether the inactivity was brought about by the fact of death or
absence of or abandonment by the depositor.
 It is a proceeding whereby the state compels the surrender to it of
unclaimed deposit balances when there is substantial ground for a
belief that they have been abandoned, forgotten or without an owner.