BANKING
CHAPTER 4- DEPOSIT FUNCTION
BANK
 Basic services and functions
1. Acceptance of deposits from the public, and
2. Lending the funds obtained from deposit.
 The institution is not a bank if these functions – particularly deposit
function are absent.
 Although other entities or person may extend loans, they will not
considered performing banking business if they do not accept deposits
from the public.
VOLUNTARY CREDITOR-DEBTOR RELATIONSHIP
 Contract entered into between the bank and the depositor is
substantially a contract of loan.
 Article 1980 of the CC provides:
Fixed, savings, and current deposits of money in banks and
similar institutions shall be governed by the provisions
concerning simple loan. (n)
 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
credit and subject to his check or the beneficiary of the funds held by
the bank as trustee.
VOLUNTARY AGREEMENT
 Contracts by their nature are voluntary and a bank cannot therefore
be compelled to accept deposits.
 A bank may be liable only if the non-acceptance is discriminatory or
is otherwise contrary to law, morals, and good customs.
 A bank is not bound to receive deposits from any one, but may
choose those whom it will accept as depositors and the terms and
conditions on which it will accept deposits.
 BSP instructed all banks to adopt the KNOW YOUR CUSTOMER
(KYC) standards recommended by the Basel Committee on
Banking Supervision in its paper on Customer Due Diligence.
 Banks should develop clear customer acceptance policies and
procedures, including a description of the types of customer that
are likely to pose a higher than average risk to a bank.
 In preparing such policies, factors such as:
 customers’ background,
 country of origin,
 public or high profile position,
 linked accounts,
 business activities or other risk indicators should be
considered.
 Banks should develop graduated customer acceptance policies and
procedures that require more extensive due diligence for higher risk
customers.
 For example, the policies may require the most basic account-
opening requirements for a working individual with a small account
balance.
 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
banking services, especially for people who are financially or socially
disadvantaged.
 On the other hand, quite extensive due diligence would be essential
for an individual with a high net worth whose source of funds is
unclear. Decisions to enter into business relationships with higher
risk customers, such as politically exposed person, should be taken
exclusively at senior management level.
IDENTIFICATION OF DEPOSITOR
The bank rule in the MORB is for the depositor to submit the
necessary specimen signatures and proper documents for
identification.
 X262.1 Specimen signatures, identification photos.
 All banking institutions are required to set a minimum of three (3)
specimen signatures to be simultaneously required from each of
their depositors and to update the specimen signatures of their
depositors every five (5) years or sooner, at the discretion of the
bank. Banks may, at their option, require their depositors to submit
ID photos together with the specimen signatures.
 BSP RULES ON ESTABLISHING DEPOSITOR’S IDENTITY
 Prior to the enactment of the Anti-Money Laundering Act, the BSP
already issued Circular No. 251, Series of 2000, that provides for rules
on the identification of bank customers.
Pursuant to Monetary Board Resolution No. 1116 dated July 6, 2000, the
following rules and regulations for banks and non-bank financial institutions
under the supervision and regulation of the Bangko Sentral ng Pilipinas
(BSP) are hereby issued in order to combat money laundering:
1. When establishing business relations or conducting transactions
(particularly opening of deposit accounts, accepting deposit substitutes,
entering into trust and other fiduciary transactions, renting of safety deposit
boxes, performing remittances and other large cash transactions),
banks/Non-Bank Financial Institutions (NBFIs) should take reasonable
measures to establish and record the true identity of their clients. Said client
identification may be based on official or other reliable documents and
records.
In cases of corporate and other legal entities, the following measures should
be taken, when necessary:
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,
including information concerning the customer’s name, legal form, address,
directors, principal officers and provisions regulating the power behind the
entity.
b. Verification of the authority and identification of the person purporting to
act on behalf of the client.
2. In case of doubt as to whether their purported clients or customers are
acting for themselves or for another, reasonable measures should be taken
to obtain the true identity of the persons on whose behalf an account is
opened or a transaction conducted.
3. Unless otherwise prescribed under existing laws, anonymous accounts
or accounts under fictitious names should not be kept/allowed. In case
where numbered accounts is allowed (i.e. foreign currency deposits),
banks/NBFIs should ensure that the client is identified in an official or other
identifying documents.
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
least every other year.
5. All necessary records on transactions, both domestic or international,
should be maintained for at least five (5) years. Such records must be
sufficient to permit reconstruction of individual transactions so as to provide,
if necessary, evidence for prosecution of criminal behavior.
Records on customer identification, account files and business
correspondence should be kept for at least five (5) years after the account is
closed.
6. Special attention should be given to all complex, unusual large
transactions, and all unusual patterns of transactions, which have no
apparent or visible lawful purpose. The background and purpose of such
transactions should, as far as possible, be examined, the findings
established in writing, and be available to help supervisors, auditors and law
enforcement agencies.
If there is reasonable ground to believe that the funds are proceeds of a
criminal or other illegal activity, they should be reported to competent
authority, without violating any law. If the fund is held as deposit, the
account should be closed.
7. Other suspicious transactions not involving deposits should be reported to
competent authorities.
8. Banks/NBFIs should not, or should at least avoid, transacting business
with criminals. Reasonable measures should be adopted to prevent the use
of their facilities for laundering of proceeds of crimes and other illegal
activities.
9. Programs against money laundering should be developed. These
programs should include, as a minimum:
a. The development of internal policies, procedures and controls, including
the designation of compliance officers at management level, and adequate
screening procedures to ensure high standards when hiring employees;
b. An ongoing employee training program; and
c. An audit function to test the system.
This Circular shall take effect immediately.
 IDENTIFYING AND VERIFYING THE TRUE IDENTITY OF THE
CUSTOMER UNDER SECTION X806 OF THE MORB.
 Part 8 of the MORB, provides for the Anti-Money Laundering
Regulations.
 Sub-part 8 of the Regulations provides for the Customer Identification
Process, which is in keeping w/ one of the basic principles that banks,
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
ensuring that the financially and socially disadvantaged are not denied
access to financial services while at the same time preventing
suspicious individuals or entities from operating or maintaining an
account.
 The conduct of customer due diligence by bank is required, which
includes,
Identifying the customer and verifying the true identity of the
customer based on official documents or other reliable, independent
source documents, data or information. In case of corporate and
juridical entities, verifying their legal existence and organizational
structure, as well as the authority and identification of all persons
purporting to act on their behalf.
 CUSTOMER ACCEPTANCE AND IDENTIFICATION
 Customer = depositors
 Covered persons = banks
Subsection X806.1 Customer acceptance and identification policy.
Every covered institution shall develop clear written and graduated
acceptance policies and procedures that will ensure that the financially or
socially disadvantaged are not denied access to financial services while at
the same time prevent suspicious individuals or entities from opening an
account or establishing a relationship.
A covered person shall formulate a risk-based and tiered customer
acceptance, identification and retention policy that involves reduced
customer due diligence (CDD) potentially low risk clients and enhanced CDD
for higher risk accounts.
Subsection X806.2 Customer Identification.
Unless otherwise stated in this Part, average due diligence requires that the
covered institution obtain, at the time of account opening, all the following
minimum information and confirming these information with the valid
identification documents:
1. Name;
2. Present address;
3. Date and place of birth;
4. Nature of work, name of employer or nature of self-
employment/business;
5. Contact details;
6. Specimen signature;
7. Source of funds;
8. Permanent address;
9. Nationality;
10. Tax identification number (TIN), SSS number or GSIS number, if
any; and
11. Name, present address, date and place of birth, nature of work and
source of funds of beneficial owner or beneficiary, whenever
applicable
b. New corporate and juridical entities.
A covered person shall develop a systematic procedure for identifying
corporate, partnership and sole proprietorship entities, as well as their
stockholders/ partners/owners, directors, officers and authorized signatories.
It shall open and maintain accounts only in the true and full name of the
entity and shall have primary responsibility to ensure that the entity has not
been, or is not in the process of being dissolved, struck-off, wound-up,
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;
e. Nature of business; and
f. Specimen signatures or biometrics of the authorized signatory.
(2) Identification documents
a. Certificates of Registration issued by the Department of Trade and
Industry (DTI) for single proprietors, or by the Securities and
Exchange Commission (SEC) for corporations and partnerships,
and by the Bangko Sentral for money changers/foreign exchange
dealers and remittance agents and transfer companies;
b. Secondary license or certificate of authority issued by the
supervising authority or other government agency;
c. Articles of incorporation/partnership;
d. Latest general information sheet which lists the names of
directors/trustees/ partners, principal stockholders owning at least
twenty percent (20%) of the outstanding capital stock and primary
officers such as the president and treasurer;
e. Board or Partners' resolution duly certified by the
corporate/partners' secretary, or other equivalent document,
authorizing the signatory to sign on behalf of the entity; and
f. For entities registered outside of the Philippines, similar
documents and/or information shall be obtained, duly
authenticated by a senior officer or the designated officer of the
covered person assigned in the country of registration; in the
absence of said officer, the documents should be authenticated by
the Philippine Consulate, company register or notary public, where
said entities are registered.
For legal arrangement (e.g., Trust), the following must be
obtained:
a. Name of legal arrangement and proof of existence;
b. Address and country of establishment;
c. Nature, purpose and objects of the legal arrangement;
d. The names of the settlor, the trustee, the trustor, the
protector, if any, the beneficiary and any other natural person
exercising ultimate effective control over the legal
arrangement;
e. Description of the purpose/activities of the legal arrangement;
f. Expected use of the account; and
g. Amount, number, type, purpose and frequency of the
transaction expected.
c. Valid identification documents.
1. Customers and the authorized signatory/ies of a corporate or
juridical entity who engage in a financial transaction with
covered person for the first time shall be required to present
official identification document which shall include any of the
official documents as defined in this Part or other
identification information which can be verified from reliable,
independent source, documents, data or information, such as
third-party verified customer information database.
2. A covered person may classify identification documents
based on its reliability and ability to validate the information
indicated in the identification document with that provided by
the customer. Whenever it deems necessary, a covered
person may accept other IDs not provided herein:
Provided, That it shall not be the sole means of identification.
In case the identification document presented does not bear
any photo of the customer or authorized signatory, or the
photo-bearing ID or a copy thereof does not clearly show the
face of the customer or authorized signatory, a covered
person may utilize its own technology to take the photo of the
customer or authorized signatory.
 Face to face Contact in Customer Verification and Identification
 Consistent with the KYC principle, w/c the banks are required to adhere
to, especially prior to account opening or the commencement of banking
relationship, banking regulations require face to face contact and
personal interview of the customer.
 Subsection X806.2d of the MORB
Face-to-face contact. Covered persons shall conduct face-to-face
contact and personal interview at the commencement of the
relationship, or as reasonably practicable so as not to interrupt the
normal conduct of business, taking into account the nature of the
product, type of business and the risks involved: Provided, That
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
verified the identification documents submitted by the prospective
client prior to the interview and that the entire procedure is
documented.
The covered person shall clearly define the instances when the
conduct of face-to-face is reasonably practicable, depending on the
product, type of business and risk involved, or when the use of ICT
shall apply.
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.
 CAPACITY OF DEPOSITOR
 A party who enters into a contract must have the capacity to act.
 Consistently, incapacitated persons are generally not allowed to open
an account with the bank.
 Ex: an insane person does not have any capacity to act in that state and
cannot therefore validly enter into a contract with a bank.
 MINOR DEPOSITOR.
 Allowed under special laws to open, in their own right, savings and time
deposits.
 PD 734, Sec 1.
Section 1. Minors who are at least seven years of age, are able to read and
write, have sufficient discretion, and are not otherwise disqualified by any
other incapacity, are hereby vested with special capacity and power, in their
own right and in their own names, to make savings or time deposits with and
withdraw the same as well as receive interests thereon from banking
institutions, without the assistance of their parents or guardians, the
provisions of existing laws and regulations to the contrary notwithstanding.
Parents may nevertheless deposit for their minor children and guardians for
their wards.
 Demand deposits cannot be opened by minors without the assistance
of their parents or guardians.
 Section 22 of Thrift Banks Act of 1995
Sec. 22. Minors as Depositors. — Minors in their own rights and in their
own names may make deposits and withdraw the same, and may receive
dividends and interest:
Provided, however, That, if any guardian shall give notice in writing to any
thrift bank not to make payments of deposits, dividends, or interest to the
minor of whom he is the guardian, then such payment shall be made only to
the guardian.
 MARRIED WOMAN
 Married women are allowed to open bank accounts without the
assistance of their husbands.
 RA 7192, recognizes the capacity of women to enter into contracts
regardless of status.
 Section 5
Sec. 5. Equality in Capacity to Act. — Women of legal age,
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
similar circumstances.
In all contractual situations where married men have the capacity to
act, married women shall have equal rights.xxx
 CORPORATIONS AND OTHER JURDICAL ENTITY
 Juridical persons are likewise capacitated to open bank accounts.
 With respect to corporations, the power to open bank accounts are or to
deposit money in bank is part of the general powers of the corporation.
 Banks are mandated to shall develop a systematic procedure for
identifying, corporate, partnership and sole proprietorship entities, as
well as their stockholders/ partners/owners, directors, officers and
authorized signatories. It shall open and maintain accounts only in the
true and full name of the entity and shall have primary responsibility to
ensure that the entity has not been, or is not in the process of being
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
Incorporation by the SEC.
 This certificate can only be issued upon filing and approval of the AOI.
 Incorporated in the 9th clause of the Articles to be filed w/ the SEC is a
certification of the Treasurer of the corporation stating that the initial
paid-up capital has been received.
 Usually, a bank account is opened by the treasurer-in-trust in behalf of
the proposed corporation.
 With respect to the opening of corporate accounts after incorporation,
the power to do so rests with the BOD or Trustees of the
corporation.
 Hence, it is a requirement that a Corporate Secretary’s Certificate on
the Board resolution approving the opening of the corporate account
and designating the account signatories must be submitted before an
account is opened.
 SC: BOD is the governing body of a corporation with whom the
management of the corporate affair is vested.
Since the authority to designate bank depositaries and account
signatories partakes of a management function, such power belongs
to the BOD. Hence, it calls for a board resolution.
 Although the Board may delegate its power, such right to delegate is
subject to limitations. Power to manage the corporate funds in the
bank account cannot be delegated to a non-officer of the corporation
who is not even a resident alien.
 For partnership, the authority of the person opening the account and
the authorized signatory for the partnership must be established by a
Certificate of the Partners or other equivalent document, authorizing the
account opening and designating the signatory to sign on behalf of the
entity.
 A sole proprietorship does not have a juridical personality that is
separate from the proprietor, Subsection X806.2 of the MORB also
recognizes the authority to open a deposit account for a sole
proprietorship.
 Submission of the sole proprietorship’s Certificate of Registration
issued by DTI is required.
 GOVERNMENT AS DEPOSITOR
 As a general policy, cash balances of the Government, its political
subdivisions and instrumentalities as well as of government owned or
controlled corporations shall be deposited with the Bangko Sentral, with
only minimum working balances to be held by government-owned banks
and such other banks incorporated in the Philippines as the Monetary
Board may designate: Provided, That such banks may be authorized by
the Monetary Board to hold deposits of the political subdivisions and
instrumentalities of the Government beyond their minimum working
balances whenever such subdivisions and instrumentalities have
outstanding loans with said banks.
 Private banks incorporated in the Philippines may act as depository of
government funds only with the prior approval of the Bangko Sentral.
Local government units may maintain depository accounts
preferably in government banks and, in exceptional cases and with
the prior approval of the Monetary Board, in the name of their
respective government units, in private banks located in or nearest
to their respective areas of jurisdiction but the depository bank(s)
must also seek the prior approval of the BSP.
 BANK AS DEBTOR
 As a debtor, the bank has no duty to preserve the same money
deposited.
 Since the contract is governed by the rules on simple loan and not the
contract of deposit, the money received by the bank is not being held for
safekeeping for the depositor.
 Money so deposited belongs to the bank and may be used for any
lawful purpose as it may deem fit.
 The relationship between the depositor and the bank is one of creditor-
debtor and the obligation of the bank is to pay the depositor and not to
return exactly the same thing that was given.
 The bank can may use as its own the money deposited. Said money is
not being held in trust for the depositor nor is it being held for
safekeeping.
 Officers of the bank cannot be held liable for estafa if they authorized
the use of the money deposited by the depositor.
 There would be no liability for estafa under Article 315(1) (b) of the RPC
even if the bank failed to return the amount deposited. The money that
is deposited is not held in trust by the bank.
 If an employee who is entrusted with possession of the money
deposited takes the same money, the crime committed by the employee
is Qualified Theft.
 The bank has the right to legal compensation.
 It can set off deposits with the indebtedness of the depositor that is
due and demandable.
 It can likewise set-off the value of dishonored check that were
previously credited.
 3rd persons who may have a right to the money deposited cannot hold
the bank responsible unless there is a court order or garnishment.
 The duty of the bank is to its creditor-depositor and not to third persons.
 If a 3rd person has a valid right over the money deposited, he must
prove the same before a court of competent jurisdiction.
 Bank deposits in excess of the amount not covered by deposit
insurance are not special preferred credits under the CC but they are
common preferred credits.
 BANKS AS OWNER OF FUNDS
 Amount deposited by the customer belongs to the bank.
 It is not misappropriation of funds if the bank will use the amount
deposited for its own purpose.
 Ownership of the amount deposited was transmitted to the bank upon
the perfection of the contract and it can make use of the amt deposited
for its banking operations such as to pay interests on deposits and to
pay withdrawals.
 While the bank has the obligation to return the amt deposited it has
however, no obligation to return or deliver the same money that was
deposited.
 NO ESTAFA
 The failure of the bank to return the money deposited will not constitute
estafa thru misappropriation punishable under Article 315, par. 1(b) of
the RPC, but it will only give rise to civil liability.
 In order for a person to be convicted under the said Article, it must be
proven that he has the obligation to deliver or return the same money,
goods, or personal property that he received.
 QUALIFIED THEDT AND ESTAFA OF EMPLOYEES AND
OFFICERS
 The bank acquires ownership of the money deposited by its clients
 Taking of the amount deposited by the employees of the bank may amt
to Qualified Theft or Estafa.
 Even if what was taken was the money deposited by the client, the
crime is no longer against the client-depositor but against the bank that
already owns the same money/amounts.
 Employees of the bank, who are entrusted with the possession of
money deposited in a bank, occupy positions of confidence.
 Tellers, cashiers, bookkeepers and other employees of a bank who
come into possession of the monies deposited therein enjoy the
confidence reposed in them by their employer.
 When a teller with grave abuse of confidence, removed the money and
appropriated it to his own use w/o the consent of the bank, there was
taking as contemplated in the crime of Qualified Theft.
 There are cases when a bank President can be held liable for Estafa
instead of Qualified Theft.
 The President of a bank is a fiduciary with respect to the bank’s fund,
and he holds the same in trust or for administration for the bank’s
benefit.
 LEGAL COMPENSATION
 A bank has the right to set off the deposits in its hands for the payment
of the indebtedness of the depositor provided that all the requisites for a
valid legal compensation are present.
 Legal compensation under Article 1278 of the CC may take [lace when
all the requisites in Article 1279 are present:
1. That each one of the obligors be bound principally, and that he be
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
are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;
3. That the two debts be due;
4. That they be liquidated and demandable; and
5. That over neither of them there be any retention or controversy,
commenced by 3rd persons and communicated in due time to the
debtor.
 If the indebtedness was the result of payment against uncollected
deposit of checks or check that were accepted and paid by the
depositary-collecting bank but were later dishonored by the drawee-
bank-in one account, the bank may debit another account of the
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
existence of a valid and demandable obligation. These include
obligations arising from trust receipts
 Bank deposits of a depositor cannot be offset with an alleged obligation
covered by a fictitious or non-existent promissory note.
 UNILATERAL FREEZING OF AN ACCOUNT NOT ALLOWED.
 Person whose name appears as depositor in the passbook and other
bank documents is presumed to be the owner of the money in the bank
account.
 A bank cannot unilaterally freeze the account of its depositor and
preclude him from withdrawing his deposits despite the allegation that
the amount deposited was obtained by the depositor thru fraud.
 The depositary bank does not have a unilateral right to freeze the
accounts of its depositor based on its mere suspicion that the funds
therein were proceeds of fraudulent acts.
 To allow the bank would open the floodgates of public distrust in the
banking industry.
 Article 559 Does Not Apply
 Although the business of banks is invested with public interest, it cannot
likewise be disregarded that the bank’s primary concern is the interest of
its customers.
 Banks, as a rule, do not owe any obligation to 3rd person.
 This is one reason why banks cannot just freeze the account of its
depositor to honor the claim of 3rd persons.
 Banks cannot freeze an account on the basis of Article 559, CC, w/c
provides that while possession of movable property acquired in good
faith is equivalent to a title, nevertheless, one who has lost any movable
or has been unlawfully deprived thereof may recover it from the person
in possession of the same.
 The movable property pertains to specific or determinate thing, in case
of bank deposits, the account consists of money that, albeit
characterized as a movable is generic and fungible.
 COMMON PREFERRED CREDIT
 Bank deposits are insured under RA 3591, as amended (PDIC)
 In the event of closure of an insured bank, payment of the insured
deposits on such closed bank shall be made by the PDIC.
 The amount that is not paid by the PDIC shall be claimed in the
liquidation proceedings following the rules on Concurrence and
Preference of Credit under CC.
 Section 20 of PDIC Law
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
of the subrogated claim of the Corporation for its payment of insured
deposits in closed bank partake the nature of public funds, and as
such, must be considered a preferred credit in the order of
preference under Article 2244(9) of the NCC.
 While bank deposits enjoy preference, the preference is subject to
limitation that may prevent recovery of any portion thereof in some
cases where the liabilities are far greater than the remaining assets.
 Ex: bank deposits are just part of the common preferred credits under
Art. 2244. Hence, there are credits that enjoy higher preference
particularly those that are considered Special Preferred Credits under
Arts 2241 and 2242.
 Art 2244 provides for a rule of preference, meaning, the credits
enumerated therein shall be satisfied in the order that they are
enumerated in Article 2244.
 There are credits that must be satisfied before the payment of bank
deposits considering that bank deposits fall under no. 9 in the list.
 ASSIGNMENT
 The right to collect the deposit from the bank is an intangible right.
 As such it can be assigned to another person.
 An assignment of credit is an agreement by virtue of which the owner of
a credit, known as the assignor, by a legal cause, such as sale, dation
of payment, exchange or donation, and without the consent of the
debtor, transfer of his credit and accessory rights to another, known as
the assignee, who acquired the power to enforce it to the same extent
as the assignor could enforce it against the debtor.
 Entitle the assignee not only to the credit itself but also gives him the
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
person can recover the amount deposited from the bank.
 Assignment can also be in favor of a bank.
 The depositor may assign his deposit in favor of a bank by way of
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.
 DEPOSIT NOT TRUST UNDER THE CIVIL CODE.
 A bank is considered a fiduciary.
 As a trustee of the money of its customer, the bank is in a fiduciary
relationship with the customers.
 A bank’s relationship with the depositor is not a trustor-trustee
relationship under the NCC.
 A trust is one whereby one called the trustor reposes upon another
called a trustee, confidence as regards property for the benefit of
another.
 In ordinary trust agreement, the trustee does not become the owner of
the property.
 Although the trustee acquires legal title, beneficial ownership remains
with the trustor.
 In a deposit, the bank becomes the owner of the cash that is deposited
subject to the obligation to pay the depositor.
 Unlike an ordinary trustee who cannot use the money held in trust for its
own benefit, the bank is free to use the money deposited for its own
profit.
 BASIC OBLIGATIONS TO DEPOSITOR
 The depositary bank owns the deposited monies in the account of the
depositor because the CC provisions on simple loan or mutuum govern
the deposit of money in banks.
 As there is creditor-debtor relationship between a bank and its
depositors, the depositary bank ultimately acquires ownership of money
deposited, but ownership is coupled with a corresponding obligation to
pay him an equal amount on demand.
 Liability for Trust Account
 While deposits are not trust agreements with the bank, an account may
be opened in trust for another person.
 The deposit may be made whereby the depositor is the trustee the
depositor holds the deposit in his name in trust for a beneficiary.
 The relationship is still mutuum while the trust agreement is between the
depositor and the 3rd person beneficiary.
 No liability will be incurred by it to the beneficiaries unless it knows that
the account involved is a trust account.
 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.
 The bank’s concern is to ensure that the trustees act within the scope of
their apparent powers.
 Thus the bank has to ensure that a cheque drawn on the trust acct
carries all the required signatures.
 In the absence of express knowledge by the bank of improper or a
fraudulent design perpetrated by the trustees, the banks is not usually
liable for their misconduct.
 The bank is not required to assume the role of an amateur detective.
 Cause of Action Against Banks in case of Breach of Trust
 A bank may be made liable if it took part in committing the fraudulent
act.
 Ex: if it will assist the fiduciary in accomplishing misappropriate.
 Dishonest Assistance
 In common law, liability is imposed for “dishonest assistance” in anyone
who has dishonestly been an accessory to, or assisted in, a disposition
in breach of trust.
 The “accessory” or “assister” is even considered a constructive trustee.
 The requisites that must occur before “dishonest assistance” can
be considered as an exception are as follows:
1. There must be a trust or other fiduciary relationship;
2. There must be breach of trust;
3. The person upon whom liability is to be imposed must as a matter
of fact have been an accessory or assisted in the misfeasance or
breach of trust; and
4. The accessory must be dishonest.
 Knowing Receipt
 Another exception involving disposition in breach of trust that is
recognized in common law is when there is “knowing receipt.” Under
this exception, the claimant must show the ff:
1. A disposal of the claimant’s assets in breach of fiduciary duty;
2. The beneficial receipt by the defendant bank of assets which
are traceable as representing assets of the claimant; and
3. Knowledge on the part of the defendant bank that the assets he
received are traceable to a breach of fiduciary duty.

 Court Order or Garnishment
 The bank may also be made liable if there is already a court order that
recognized the right of a third person or that effectively prohibits the
bank from releasing funds from the account.
 A bank must not release the funds in the account if the same has
already been garnished at the instance of 3rd persons.
 ADVERSE CLAIM
 Existing laws do not impose a duty on a banks to freeze the deposit
upon a mere notice of adverse claim; banks first require either a court
order or an indemnity bond.
 A bank is under obligation to treat the accounts of its depositors with
meticulous care and always to have in monad the fiduciary nature of its
relationship with them.
 KINDS OF DEPOSITS
 MORB recognizes different types of deposits which include a Demand
Deposit, Savings Account, Time Deposit, and NOW Account.
DEMAND DEPOSITS
 All those liabilities of banks that are denominated in PH currency and
subject to payment in legal tender upon demand by presentation of
checks.
 BSP Circular No. 992, Series of 2018 defines a demand deposit as
deposits, subject to withdrawal by check thru available bank channels
and/or thru the automated tellering machine (ATM) w/c are otherwise
known as current or checking accounts.
 The bank may or may not pay interest on these accounts.
 No Separate Authority Required
 Only UB and KB can accept or create demand deposits without a
separate authority from BSP. These banks by their nature, are allowed
or empowered by law to accept or create demand deposit.
 Other banks need a prior approval of the MB of the BSP.
 MORB Rules
1. Commercial banks and Universal banks may accept or create
demand deposits subject to withdrawal by check w/o prior
authority from the BSP.
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
create deman deposits it shall also comply with:
a. Minimum capitalization requirement under Subsection
X111.1 of the MORB.
b. It must be a member of the PDIDC in good standing;
c. If it is not a member of the PH Clearing House Corporation
(PCHC)m it shall have designated a KB/TB thru which its
shall participate in the check clearing system; and
d. That it has complied with all other conditions that the BSP
may impose.
4. Temporary overdrawing against current accounts shall be
allowed unless caused by normal bank charges and other fees
incidental to handling such accounts;
5. Drawing against uncollected deposits (DAUD) are generally
prohibited.
6. Certain bank officers and employees of banks are prohibited
from maintaining demand deposits or current accounts with
banking office in which they are assigned.
Includes:
 officers and employees of banks,
 their spouses and relatives within the second degree of
consanguinity and affinity,
 including partnerships, associations or corporations in
which such officers and employees, their spouses and
relatives within the second degree of consanguinity and
affinity, individually or as a group, own or control at least a
majority of the capital are prohibited from maintaining
demand deposits or current accounts with the banking
office in which they are assigned
7. Demand deposits may also earn interest.
 UNCOLLECTED DEPOSITS
 The payment of the amount of the checks without previously clearing
the checks with the drawee bank especially where the drawee bank is a
foreign bank and that the checks involve huge amounts is not normal or
ordinary bank practice
 The regulations promulgated by the BSP disallow drawee banks from
honoring checks on uncollected deposits.
 Sec X202. Temporary Overdrawings;
Drawings Against Uncollected Deposits The following regulations
shall govern temporary overdrawings and drawings against
uncollected deposits (DAUDs).
a. Temporary overdrawings. Temporary overdrawings against
demand deposit account (DDA) shall not be allowed, unless caused
by normal bank charges and other fees incidental to handling such
accounts. Banks which violate these regulations shall be subject to a
fine of one-tenth of one percent (1/10 of 1%) per day of violation,
computed on the basis of the amount of overdrawing or fines in
amounts as may be determined by the Monetary Board, but not to
exceed P30,000 a day for each violation, whichever is lower.
Technical overdrawings arising from “force posting” in-clearing
checks shall be debited by banks under “Returned Checks and
Other Cash Items Not in Process for Collection” which is part of
“Other Assets” in the Statement of Condition. Items to be lodged
under this account shall consist only of in-clearing checks which may
result in “technical overdrawn” accounts and shall be immediately
reversed the following day.
The checks lodged under “returned checks, etc” shall either be
returned or honored the following day before clearing. The
items to be used as cover for the honored checks shall only
consist of any of the ff:
1. Cash
2. Cashier’s, Manager’s or Certified Checks;
3. Bank drafts
4. Postal money orders
5. Treasury warrants
6. Duly funded “On Us” Checks
7. Fund transfer/credit means within the same bank representing
proceeds of loans granted under existing regulation.
Peso demand deposit accounts maintained by foreign
correspondent banks with commercial banks shall not be subject to
the above-mentioned regulations: Provided, That:
a. The maintenance of non-resident correspondent bank’s peso
DDAs and overdrawings therefrom are covered by reciprocal
arrangement;
b. Temporary overdrawings are covered within fifteen (15) banking
days from the date overdrawings are incurred; and
c. Such accounts are credited only through foreign exchange
inward remittance.
b. Drawings against uncollected deposits. DAUDs shall be
prohibited except when the drawings are made against uncollected
deposits representing manager’s/cashier’s/treasurer’s checks,
treasury warrants, postal money orders and duly funded “on us”
checks which may be permitted at the discretion of each bank.
 Stopping Payment of Checks
 A check is a mere order on a bank to pay money from the drawer’s
account.
 As such it is subject to revocation by the drawer anytime before it is
accepted.
 Issuance of a check by itself is not an assignment of funds by the
drawee.
 If a bank pays a check after it has been notified to stop payment, it pays
on its own responsibility and will not be permitted to charge the account.
 Countermanding
 The drawer may countermand payment if he has a valid defense against
the holder of the check (Ex. Of the payee failed to deliver the goods that
he was supposed to deliver).
 If there was no valid reason to countermand payment, the drawee is still
contractually obligated to dishonor the check on the basis of the stop
payment order.
 However, if he has no defense, the drawer remains liable and he is not
released from the legal obligation that he contracted.
 SAVINGS DEPOSIT
 Interest or non-interest bearing deposits, which can be withdrawn upon
demand thru available bank channels.
 Has an investment feature in the sense that it is normally opened for the
purpose of earning interest.
 Islamic banks are expressly authorized to open savings accounts for
safekeeping or custody with no participation in profit and losses except
unless authorized by the account holders to be invested.
  Kinds of Savings Deposit
 BSP Circular 992, Series of 2018, amending portions of the Financial
Reporting Package required under Subsection X191.2 of the MORB.
1. REGULAR SAVINGS ACCOUNT
 Interest-bearing account which is withdrawable either upon
presentation of a properly accomplished withdrawal slip
together with the corresponding passbook or thru automated
tellering machine.
c. SOLICITORS
 Banks may be authorized by the BSP to solicit and accept
deposits outside the bank premises thru deposit solicitors.
 The passbook shall be retrieved from the depositor and it is the
bookkeeper or ledger clerk who shall record the deposit or
withdrawal therein- not the solicitor.
 The passbook shall be returned to the depositor not later than
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.
e. CLEARING OF NOW ACCOUNTS
 Any Now, which may be deposited with a bank other than the
drawee bank, may be cleared thru the PCHC in accordance with
the PCHC clearing house rules and regulations.
 The provision of Section X202 of the MORB on temporary
overdrawing of drawings against collected deposist shall also apply
for withdrawals on NOW Accounts.
9.04 TIME DEPOSITS
 Defined as: a deposit the payment of which generally cannot legally
be required within a specified number of days.
 “no time shall be accepted for a term of less than 30 days”
 Time deposit is covered by a cert of deposit.
a. Far East Bank vs Queremitt: certificate of deposit:
 “a written acknowledgment by a bank or banker of the recipient of a
sum of money on deposit which the bank or banker promises to pay
the depositor, to the order of the depositor, or to some other person
or his order, whereby the relation of the debtor and creditor
between the bank and the depositor is created
 “a receipt issued by a bank for an interest-bearing time deposit
coming due at a specified future date.
b. “a passbook representing an interest-bearing deposit account issued by a
banks qualifies as a certificate of deposit drawing interest.
 A document to be deemed a cert of deposit requires no specific form
as long as there is some written memorandum that the bank
accepted a deposit of a sum of money from a depositor
 What is important and controlling: nature or meaning conveyed by
the passbook and not the particular label or nomenclature attached
to it, inasmuch as substance, not form is paramount.
c. NEGOTIABLE CERTIFICATE OF TIME DEPOSIT.
X233.3 Minimum features
a. Form; denomination - NCTDs may be issued in bearer or other form
denoting negotiability and shall have a standard format to be prescribed by
the Bangko Sentral which shall be prenumbered serially and
predenominated. The minimum denomination shall be at the discretion of the
issuing bank. No certificate payable to bearer shall contain words prohibiting
its negotiation.
b. Term - The minimum maturity of the certificates shall be 731 days.
c. Manner of issuance - The certificates shall be issued only upon receipt of
funds equivalent to their face value. d. Manner of printing - NCTDs shall be
printed on security paper by the Security Plant Complex (SPC) of the
Bangko Sentral.
Orders for the printing of the desired forms shall not exceed a total value
equivalent to twenty percent (20%) of the issuing bank’s capital accounts
(based on the quarter immediately preceding the request for printing) at any
one time. Additional orders for printing which shall result in an excess over
the prescribed benchmark shall require prior Bangko Sentral approval.
D. LONG-TERM NEGOTIABLE CERTS OF TIME DEPOSIT
CIRCULAR 304 SERIES OF 2001
1. Form; denomination - An LTNCD shall be in scripless form with a third
party Registry Bank maintaining the Electronic Registry Books. To have legal
effect, it shall comply with the provisions of R.A. No. 8792 (Electronic
Commerce Act) particularly on the existence of an assurance on the
integrity, reliability and authenticity of the LTNCD in electronic
form. LTNCDs shall be registered in the name of individuals or corporations,
negotiable and prenumbered serially. The minimum denomination shall be
at the discretion of the Issuing Bank.
2. Currency - Denomination shall be in Philippine pesos.
3. Term - The minimum maturity of the LTNCD shall be five (5) years.
4. Primary Offering/Secondary Trading – The initial offering shall be
executed through an Underwriter or an Arranger. Subsequent negotiation in
secondary trading must be executed through authorized Market Maker(s).
E. LONG-TERM NEGOTIABLE TAX-EXEMPT CERTF OF TIME
DEPOSITS
1. Form; denomination - The certificate
2. Term - The minimum maturity of the certificate shall be five (5) years.
3. Manner of issuance - The certificate shall be issued only upon receipt
of funds equivalent to their face value.
4. Manner of printing - The certificate shall be printed on security paper.
5. Pre-termination - In case of pretermination, the deposit shall be subject
to income tax as provided under Section 24(B)(1) of the Tax Reform Act
of 1997 which states that “xxx a final tax shall be imposed on the entire
income and shall be deducted and withheld by the depository bank from
 the proceeds of the long-term deposit or investment certificate based on
the remaining maturity thereof
6. the deposits shall be insured with the PDIC
10. DEPOSITING FUNDS
 The Civil code provides that the contract of sample loan itself shall
not be perfected until the delivery of the object of the contract.
 An accepted promise to deliver something by way of simple loan is
binding upon the parties.
 The agreement between the bank and its customer to accept a
deposit form the latter is binding.
 The duty of the bank over the amount shall commence only from
the delivery of the amount by the depositor, that is, upon actual
deposit of the amount.
10.01 THE PROCESS
PBComm VS CA:
“ In the ordinary and usual course of banking operations, current account
deposits are accepted by the bank on the basis of deposit slips prepared and
signed by the depositor, or the latter's agent or representative, who indicates
therein the current account number to which the deposit is to be credited, the
name of the depositor or current account holder, the date of the deposit, and
the amount of the deposit either in cash or checks. The deposit slip has an
upper portion or stub, which is detached and given to the depositor or his
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
the deposit slip is retained by the bank, while the duplicate copy is returned
or given to the depositor.”
10.02 DIRECT CREDIT
 The bank may directly credit the account of the depositor whenever
the bank is obligated to pay an amount to the same depositor under a
separate agreement or contract.
 If the depositor is the beneficiary of a letter of credit issued by the
bank, the bank may credit the account of the depositor up to the extent
of what is due to the latter.
10.03 PROOF OF DEPOSIT
 Deposit slips serve as proof of that amount was deposited to an
account.
a. CANCELLATION AND REVERSAL
 The bank teller must retrieve all copies of the deposit slips of the
depositor requested for the reversal of the deposit or cancellation of
the deposit.
 The cancellation of deposit or payment transactions upon request by
any depositor or payor, requires that all copies of the deposit slips
must be retrieved or surrendered to the bank.
 This practice cancel the deposit or payment transaction thus it leaves
no evidence for any subsequent claim or misrepresentation made by
any innocent 3rd person,
 SC: fraudulent transaction were made possible thru the teller’s failure
to retrieve the duplicate original copies of the deposit slips from the
employee of the depositor every time the latter asked for cancellation
or reversal of the deposit or payment transaction.
10.04 VALIDATION OF DEPOSIT.
 SC: the bank cannot be relieved of liability if it validated blank or
incomplete duplicate copies of deposit slips thereby facilitating the
taking of the funds of the depositor by the latter’s employee.
 A bank was made liable when it accepted withdrawals slips for
deposit that turned out to be unfunded. The fact that withdrawal
slips were honored in the past does not excuse it from liability. The
bank bears the risk attendant to the acceptance of the withdrawal
slips.
11.WITHDRAWAL OF FUNDS
 When cash is deposited in the account, the depositor can withdraw
the amount at any time provided that he complies with the
prescribed procedure.
 When the depositor deposits a check, he cannot withdraw the
amount covered by the check from his account until the drawee
bank clears the same.
 Even after the lapse of a number of days or even a month, the
amount of a deposited check cannot be withdrawn in the absence
of a clearance thereon.
 BSP regulations prohibit drawings and withdrawals against
uncollected deposits except when the drawings or withdrawal are
made against uncollected treasurer’s check, manager’s check,
cashier’s check, treasury warrants, postal money orders and duly
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.
Withdrawal slips are not negotins and cannot be treated as checks.
b. With respect to savings accounts covered by passbooks, banks
are prohibited from issuing/accepting withdrawal slips or any other
similar instruments designated to effect withdrawals of savings
deposits without requiring the depositors concerned to present
their passbooks and accomplishing the necessary withdrawal slips,
except for bank authorized by the BSP to adopt the no passbook
withdrawal system.
a bank is negligent if it allows the withdrawal without requiring the
presentation of a passbook.
11.01 ENCASHMENT SLIP
 May be used to withdraw funds from an account.
 They are commercial documents – docs or instruments that are
used by merchants or businessmen to promote or facilitate trade.
 Necessarily facilitates bank transactions for it allows the person
whose name and signature appears thereon to encash a check and
withdraw the amount indicated therein.
11.02 WITHDRAWAL THROUGH ELECTRONIC INSTRUCTIONS.
 SC ruled that the electronic messages are not negotiable bills
exchange under Section 1 of Negotin law.
11.03 DUE CARE IN HANDLING WITHDRAWAL
 Withdrawals from a bank account can be made upon the authority
of the depositor as reflected in the withdrawal slips.
 The bank is liable if it allows withdrawal of funds on the basis of
forged signatures in withdrawal slips.
 The bank is also liable if it allows withdrawal of funds against
uncollected check/s which have it yet been cleared.
a. “as a standard banking practice intended precisely to prevent
unauthorized and fraudulent withdrawals, a bank manager must
verify with the client-depositor to authenticate and confirm that he or
she has validly authorized such withdrawal.
b. If the bank allows unauthorized withdrawal, the bank can be
required to return the amount that was illegally withdrawn plus
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
demand.
c. PNB vs Pike : the bank allowed a depositor to pre-sign the
withdrawal slip thereby making it appear that he was the one
actually withdrawing from his account and receiving the withdrawn
amount although in truth and in fact it was another person who
made the withdrawal,
d. Cagungun vs Planters Devt Bank: SC: the bank grossly negligent in
allowing withdrawal of funds thru falsified withdrawal slips without
the depositor’s authority and knowledge. The fact that the depositor
left and entrusted to the bank employees his passbook will not
excuse the bank from liability. The bank employees went beyond
their authority and were able to withdraw from the depositor’s
account without the latter’s consent.
e. BPI vs CA: the depositor allowed a 3rd person to deposit a
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.
The bank allowed the withdrawal of an amount that is definitely over
and above the aggregate amount of the depositor’s deposit that had
not yet been cleared.
f. Citibank vs Cabamongan: the bank is held liable when it allowed
the pre-termination of the deposit despite noticing discrepancies in
the signature and photograph of the person claiming to be the
depositor and the failure to surrender the original certificate of time
deposit.
11.03.01 SOLIDARY OBLIGATION
 The bank should be solidarily liable with its employees for the
damages caused to its depositors.
 Art 2180 of the CC: employers shall be held primarily and solidarily
liable for damages caused by their employees acting within the
scope of their assigned tasks.
a. Oliver vs PSB: the acting branch manager and the bank must be
held liable.
11.04 AUTOMATIC TRANSFER FROM SAVINGS ACCOUNT.
 The depositor may maintain a savings account and a checking
account with the same bank and agree that funds may be
automatically transferred from the savings account if the balance of
the checking account is nor sufficient to cover checks that were
drawn on the same account.
 Called: Combo plan accounts
a. There must be stipulation to that effect. Where a depositor has 2
accounts with a bank, an open or checking account a saving
account, and draws a check upon the open account for more
money that the account contains, the bank may rightfully refuse
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
effect.
11.05 CASH CARD OR ATM CARD
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
that facilitated the purported withdrawal.
The bank’s burden of proof requires it to preponderantly demonstrate that
the depositor’s ATM card has been used to make withdrawals, and that the
depositor used the ATM card and PIN by himself or by another person to
make the fraudulent withdrawals.
Electronic Commerce Act of 2000: RA 8792
Section 16. Formation of Validity of Electronic Contracts.
(2) Electronic transactions made through networking among banks, or
linkages thereof with other entities or networks, and vice versa, shall be
deemed consummated upon the actual dispensing of cash or the debit of
one account and the corresponding credit to another, whether such
transaction is initiated by the depositor or by an authorized collecting party:
Provided, that the obligation of one bank, entity, or person similarly situated
to another arising therefrom shall be considered absolute and shall not be
subjected to the process of preference of credits.
CONSUMER PROTECTION
 BSP requires banks to establish and maintain comprehensive
information security program and ensure that they are properly
implemented and strictly enforced.
 The information security program shall include, at a minimum the ff:
1. Identification and assessment of risks associated with e-banking
products and services
2. Identification of risk mitigation action including appropriate
authentication technology and internal controls
3. Information disclosure and customer privacy policy
4. Evaluation of consumer awareness efforts.
BSP CIRCULAR NO 542 SERIES OF 2006
12. WRONGFUL DISHONOR OR CHECKS
 By virtue of contract of deposit between the banker and its
depositor, the banker agrees to pay checks drawn by the depositor
provided that said depositor has money in the hands of the bank.
 Where the bank possesses funds of a depositor, it is bound to
honor his checks to the extent of the amount of his deposits.
 When the bank honors the check, the bank is allowing the
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
the value of the check.
a. A banking institution has the direct obligation to supervise very
closely the employees handling its depositors’ accounts and should
always be mindful of the fiduciary nature of its relationship with the
depositors.
b. Failure of the bank employees to credit the amount deposited by the
drawer-depositor to his account resulting in the dishonor of the
checks that the latter issued constitutes actionable negligence. There
is actionable negligence of the drawee fails to transfer funds from the
drawer’s savings account to his checking account as previously
agreed upon thereby leaving the balance in the checking account
insufficient to cover checks that were issued by the drawer.
13. BOOKING OF DEPOSITS
§ X261.1 Clearing cut-off time.
As a general rule, all deposits and withdrawals during regular banking hours
shall be credited or debited to deposit liability accounts on the date of receipt
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
clearing at the BSP, and not earlier than three and one-half (3-1/2) hours
before the start of clearing for all its branches, agencies and extension
offices doing business in the Philippines, after which time, deposits received
shall be booked as hereinafter provided: Provided, further, That banks which
are located in areas where there are no BSP regional/clearing arrangements
may set a clearing cut-off time not earlier than two (2) hours before the start
of their local clearing after which time, deposits received shall be booked
likewise as hereinafter provided.
§ X261.2 Definitions. As used in this Section, the following terms shall have
the following meanings: a. Regular banking hours shall refer to the banking
hours reported to the BSP pursuant to Sec. X156, including the extended
banking hours reported for servicing deposits and withdrawals; and b.
Clearing cut-off time shall mean the bank’s closing time for the acceptance
of deposits in the form of checks, bills and other demand items for clearing
on the day of their receipt.
§ X261.3 Booking of cash deposits Cash deposits received after the
selected clearing cut-off time until the close of the regular banking hours
shall be booked as deposits on the day of receipt.
§ X261.4 Booking of non-cash deposits Deposits of checks including “on
us” checks, manager’s/cashier’s/ treasurer’s checks and demand drafts,
which are drawn against the depository bank and all its offices, as well as
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
option of the bank, be booked as deposits on the day of receipt. Other non-
cash deposits received after the selected clearing cut-off time shall be
treated as contingent accounts on the day of receipt and shall be booked as
deposits the following banking day.
§ X261.5 Booking of deposits after regular banking hours. Deposits,
whether cash or non-cash, received after the close of the regular banking
hours shall be treated as contingent accounts on the day of receipt and shall
be booked as deposits the following banking day.
§ X261.6 Other records required. For record and control purposes, banks
shall prepare a daily abstract of deposit transactions treated as contingent
accounts.
§ X261.7 Notice required. Banks shall post at a conspicuous place near
each teller’s window a notice to depositors indicating their selected clearing
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. STATEMENT OF ACCOUNT AND PASSBOOKS.
a. In general, savings accounts are covered by passbooks although
bank statements may also be sent to depositors. Entries in the bank
statements and passbooks are prima facie proof of the entries
therein. Hence, the statement and passbooks may be proof of the
amounts deposited or withdrawn and the respective dates thereof,
as well as the balances of the accounts.
b. However, the parties may establish proof of inaccuracy of the
entries in the passbooks or SOA. For instance, the bank may prove
that a bigger amount was erroneously credited.
c. On the other hand, the depositor may prove that the bank failed to
credit a deposit and his balance is bigger. A depositor-drawer may
also prove that the value of a check containing his forged signature
or forged indorsement was wrongfully debited from his account.
The drawer is not estopped or bound by the bank statement that
was sent to it by the drawee bank.
d. In one case, there is a printed provision in the bank statement that
state: “if no error is reported in 10 days, account will be correct.”
SC: the depositor is estopped from questioning any mistake in the
bank statement after the lapse of the 10-day period. The notice is a
simple confirmation or circularization that requests client-depositors
to affirm the accuracy of items recorded by the banks. It purpose it
to obtain from depositors a direct corroboration of the correctness
of their account balances with their respective banks.
14.01 EXAMINATION OF STATEMENT
 Failure of the depositor to examine the SOA will not necessarily
result in the absence of liability on the part of the drawee bank that
issued the statement.
 The depositor shall bear the loss only if it its negligence is the
proximate cause of his loss.
a. In some cases, even if the drawee-bank that issued the bank
statement is liable, such liability may be mitigated by the
contributory negligence of the depositor-drawer.
b. SC in one case held that he account holder’s failure to timely
examine the account, cancel the checks, and notify the drawee
bank of their alleged loss/theft should mitigate petitioner’s liability, in
accordance with Art 2179 of the CC which provides that if the
plaintiff’s negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of due
care, the plaintiff may recover damages but the courts shall mitigate
the damages to be awarded.
14.02 EFFECT OF MISCREDIT.
 A depositor is entitled to recover from the bank the amount that was
erroneously deducted from his account.
 Also when amount was deducted from is account without his
authority.
 This applies in the case of checks that contain the forged signature
of the drawer of the indorsers.
 The bank can also recover the amount that was erroneously
credited to the account of the depositor
15. INTEREST IN DEPOSITS
 Demand, savings,NOW accounts, time deposits and deposit
substitutes shall not be subject to interest ceilings
 Interest or yield on time deposit/ deposit substitute may be paid at
maturity or upon withdrawal or in advance. However, interest or
yield paid in advance shall not exceed the interest for 1 year.
15.01 MATURED TIME DEPOSITS/DEPOSIT SUBSTITUTES
 A time deposit not withdrawn or renewed on its due date shall be
treated as a savings deposit and shall earn interest from maturity to
the date of the actual withdrawal or renewal at a rate applicable to
savings deposits.
  A deposit substitute instrument not withdrawn or renewed on its
maturity date shall from said date become payable on demand and
shall earn an interest or yield from maturity to actual withdrawal or
renewal at a rate applicable to a deposit substitute with a maturity
of 15 days.
 However, the foregoing rules do not prevent the parties from
continuing with the same terms and conditions. Thus, there may be
a provision in the agreement that automatically renews the contract
under the same terms and conditions.
15.02 DISCLOSURE REQUIREMENT
 Banks are required to disclose to depositors the ff information on
interest computation and payments.
1. Type/ kind of deposit
2. Nominal rate of interest and period covered
3. Manner of interest payment (whether credited in advance or
otherwise)
4. Basis of interest payment ( whether based in average daily
balance compounded quarterly or otherwise)
5. Effective rate of interest expressed as a simple annual rate, on
the basis of the information above given and indicating the
formula used to arrive at the effective rate of interest.
6. Illustration of basis of computing interest on a hypothetical
deposit account.
* Copies of the above-mentioned info shall be made available to each
and every depositor by attaching these copies to savings deposit
passbooks and time deposit certificate.
16. TYPES OF DEPOSIT ACCOUNTS
 In addition to the classification of bank deposits by deposit type or
as to their nature, bank deposits may also be classified by currency
– Philippine Peso or Foreign currencies.
 There is also a 3rd classification of bank deposits and that is by
deposit account or in relation to the name/s in which the accounts
are held.
 SINGLE ACCOUNT: in the name of a single person – natural or
juridical
 JOINT ACCOUNT: in the name of 2 or more persons.
 An account may also be a “by” account, “in trust for (ITF) account”
or for the account of (FAO) another person.
16.01 JOINT ACCOUNTS
 Whenever 2 or more persons open an account, the same may be
an “and/or account” or an “and” account.
 If the joint account is an “and/or” account, any one of the depositors
may withdraw funds therefrom and the signature of 1 is enough to
authorize the bank to allow such withdrawal
 If it is an “And” account, the depositor are joint creditors of the
banks and the signatures of all depositors are necessary to allow
withdrawal.
a. The concurrence of 2 or more creditors on one and the same
obligation does not imply that each one has the right to demand
compliance with the obligation
 The presumption is that the liability is joint, unless a specific law
or the contract itself indicates otherwise.
 If the joint account is an”and/or” account there is an indication in
the contract that any one of the creditors-depositors has the right
to demand full compliance with the obligation.
 The depositors would then be considered splodary creditors of
the bank.
 If the joint account is an “And” account, the tenor of the contract
is to the effect that all the depositors must demand compliance
with the obligation of the debtor-bank, that is, both must
authorize the withdrawal of funds from the account.
b. The presumption is that the depositors own equal shares in the
deposit.
 This is consistent with Art 485 of the CC : “portions belonging
to the co-owner in the co-ownership shall be presumed equal,
unless the contrary is proved.
 If there are 2 depositors, the presumption is that they each own
½ in accordance with the rule in co-ownership.
 In case of death of one of the depositors, the share belonging
to the deceased depositor forms part of his/her estate and
withdrawal thereof would be subject to prevailing tax laws.
 The authority previously given to the co-depositor to withdraw
from the “and/or” account ceases upon the death of the other
co-depositor.
16.02 BY, ITF, FAO ACCOUNTS
 It is incumbent upon the banks during account opening to ascertain
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
considered the depositor.
ITF ACCOUNT TRUST ACCOUNT
Creates a debtor-creditor Investment product wherein the
relationship between the bank and relationship between the banks and
the depositor the client is that of trustee-trustor.
Subsection X806.2.g of the MORB, where
1) An account is opened by;
2) Relationship established through
3) Any transaction is conducted by, a trustee, nominee, agent or
intermediary, either as an individual or thru a fiduciary relationship
or similar arrangements
- the covered person (the bank) shall establish and record the true
and full identity and existence of both the (1) trustee, nominee,
agent or intermediary and (2) trustor, principal, beneficial owner
or person on whose behalf the account/relationship/transaction is
being opened/established/conducted
16.03 ANONYMOUS ACCOUNT
 Circular NO 251, to combat money laundering and Section 9(a0 of
AMLA of 2001 (RA 9160) prohibit anonymous accounts or accounts
under fictitious names.
 In fact, when accounts are opened, banks must employ a system to
establish the identity of the depositor
 In addition, at least 3 specimen signatures of the depositor are required.
It should be noted that use of pseudonyms or alias may amount to criminal
offenses.
a. It is a felony under Art 178 of the RPC:
i. To publicly use a fictitious name for the purpose of concealing a
crime, evading the execution of a judgment or causing damage
b. Commonwealth Act No. 142 ( as amended by Ra 6085) makes it
unlawful for any person to use an alias unless the same is
registered in the proper civil registry except only as a pseudonym
for litereary and athletic events
a. Under the Family Code, the use of name and surname not
appearing in the cert of live birth of a person is also disallowed
except as pen name or stage name so long as it is done in good
faith and no injury to 3rd person results.
b. EXCEPTION
 Section 3(1) of the Foreign Currency Deposit Act:
 “numbered accounts for recording and servicing of said foreign
currency deposits shall be allowed”.
 Said act was amended and the MORB now allows only
numbered non-checking accounts (peso or foreign currency),
and absolutely prohibits numbered checking accounts.
16.04 NUMBERED ACCOUNTS
 Section 9(a) of RA 9160 provides for absolute prohibition of
anonymous accounts, accounts under fictitious names, and all other
similar accounts.
 The same provision provides that “peso and foreign non-checking
numbered accounts shall be allowed.
160.5 DORMANT ACCOUNTS
Section 2 of BSP CIRCULAR 928 :
Definition of dormant accounts
1) Current or checking accounts showing no deposit or withdrawal for
a period of one (1) Year.
2) Savings account showing no deposit or withdrawal for a period of
two (2) Years.
 Banks are required to exert all efforts to prevent deposit accounts
from becoming dormant.
 Banks are required to give 60-day notice to a depositor of the
potential dormancy of his/her/its account.
 The notice to be given to the depositor shall contain information on
the
o effect of dormancy to transfer the account from active to
dormant status
o Advice on how to reactivate the account
o And a reminder that the dormant account will be included in the
list of unclaimed balances to be submitted to the Treasurer of
The Philippines for escheat pursuant to unclaimed balances
act, in case the account has no activity for 10 years.
 A dormancy fee may be imposed by a bank on a dormant deposit
account 5 years after the last activity therein, subject to the ff
conditions:
o The balance fall below the minimum monthly average daily
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
2. Notice when an account is about to be subject to dormancy
fee at least 60 days prior to the imposition of the fee to be
sent to the depositor.
17. DECEASED DEPOSITOR
 Prior to the enactment of RA 10963(TRAIN LAW), if a depositor
dies, the heirs cannot withdraw the bank deposits of the deceased
without the settlement of the latter’s estate and submission of a
clearance or cert of payment of estate tax.
 Before the amendment of the NIRC by the TRAIN law, a bank that
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
estate tax is submitted and the only exception to the rule was when
the CIR allows withdrawal of an amount not exceeding P20,000.00
17.01 TRAIN LAW
 A bank may now allow any withdrawal from the back deposit
account of a deceased depositor without the need for a clearance
of cert of payment of estate tax issued by the BIR.
 The bank that allows such withdrawal is required to deduct a 6%
final withholding tax from the deposit account.
Section 27. Section 97 of the NIRC, as amended, is hereby further
amended to read as follows:
"Sec. 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds
or Rights - x x x.
"If a bank has knowledge of the death of a person, who maintained a bank
deposit account alone, or jointly with another, it shall allow any withdrawal
from the said deposit account, subject to a final withholding tax of six percent
(6%). For this purpose, all withdrawal slips shall contain a statement to the
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
the said depositors."
A. REVENUE REGULATION NO 12-2018 (Consolidate RR on Estate tax
and donor’s tax incorporating the amendments introduced by RA
10963)
Page 107
RR imposes a 1-year limit from the date of the death of the deceased
depositor on the withdrawals from the bank accounts of a deceased
depositor without need to submit to the bank an eCAR.
RR requires the submission of BIR from No 1904 of the deceased
depositor’s estate duly stamped received by the BIR, to the bank where the
withdrawal is made.
B. REVENUE MEMORANDUM CIRCULAR (RMC) NO 62-2018.
 RMC provides that “for joint account, the final withholding tax shall
be based in the share of the decedent in the joint bank deposits”.
 Since the estate of the deceased co-depositors covers only his/her
share in the joint deposit account, them it is but right that only said
amount/share would be subject to the 6% withholding tax and not
the entire amount remaining in the joint deposit account.
1) By virtue of the surviving agreement between among the co-
depositors, the remaining balance in the joint account at the time of
death of the co-depositor would pertain to the surviving co-
depositor and no part thereof would accrue to the estate of the
deceased co-depositor.
2) In the case of a deposit account maintained in the name of one
person, where the depositor at the time of the account opening is
marries, the presumption under the law is that the account is
community or conjugal property of the spouses, unless it is shown
that the spouses opted for another property regime in a marriage
settlement.
The presumptive share of the surviving spouse should not be
subject to the 6% final withholding tax.
3) Banks are not prevented from requiring pertinent documents in
accordance with its existing policy or in pursuance of a requirement
under applicable laws rules and regulation for the purpose of
ascertaining the identity and the right to claim of the heirs, or its
authorized reps before allowing any withdrawal from the bank
deposit accounts.
18. DEPOSITOR IN FINANCIAL DISTRESS.
 Under the Financial Rehabilitation and Insolvency Act 2010 (FRIA),
a petition for voluntary or involuntary rehabilitation may be filed
against an insolvent debtor.
 Within 5 days from the filing of the proper petition with all the
required attachments, the Court will issue a Commencement Order
which includes a Stay order and the appointment of Rehabilitation
Receiver.
 The rehabilitation receiver has the power to take possession,
custody and control, and to preserve the value of all the properties of
the debtor.
  Section 48: no funds or property of the debtor shall be used or
disposed of except in the ordinary course of business of the debtor
or unless necessary to finance the administrative expenses of the
rehabilitation proceedings.
a. Under Section 47: the management of the juridical debtor shall
remain with the existing management subject to the applicable
laws/and agreements if any on the election or appointment of
directors, managers or managing partner. However, all
disbursements, payments or sale, disposal or sale. Disposal,
assignment, transfer or encumbrance of property, or any other act
affecting title or interest in property, shall be subject to the
approval of the rehabilitation receiver and/or the court.
b. The rehabilitation receiver shall also have the right to sue and
recover amounts owed to and all properties pertaining to the
debtor. Hence, upon approval of the court, the rehab receiver can
file an action tor recover the deposits if they are duly withheld by
the depositary banks.
c. Section 17: commencement order shall best the rehab receiver
with all the powers and functions provided for in FRIA, such as the
right to review and obtain record to which the debtor; management
and directors have access, including bank accounts or whatever
nature of the debtor subject to the approval by the court of the
performance bond filed by the rehab receiver.
d. In case of liquidation, the remaining balances in the bank accounts
of the insolvent shall be included in the properties that will be taken
over by the court appointed liquidator that will eventually be made
to answer for claims in accordance with the rule on concurrence
and preferences of credits under new civil code.
19. SURVIVORSHIP AGREEMENTS.
 In case of death of one of the depositors in a joint account, it is
presumed that the depositors own the account share and share-
alike, hence, if there are 2 depositors, half of the deposit shall
pertain to the estate of the deceased depositor and the other half
shall pertain to the surviving co-depositor.
a. Survivorship agreement: aleatory contract supported by
consideration where the joint depositors agree to permit either to
them to withdraw the whole deposit during their lifetime and
transferring the balance to the survivor upon the death of one of
them.
Article 2010. By an aleatory contract, one of the parties or both
reciprocally bind themselves to give or to do something in
consideration of what the other shall give or do upon the happening
of an event which is uncertain, or which is to occur at an
indeterminate time
20. CLOSURE OF ACCOUNT
 The bank can expressly reserve the right to choose an account
(even without prior notice) whenever certain identified events occur.
 Far east bank vs Pacilan Jr.
21. HOLD-OUT OF DEPOSIT
 The bank is authorized to withhold the amount deposited as
security for any and all obligations of the depositor to the bank.
 It may also provide that the bank may assert a lien on any balance
of the account and may apply the same balance to the
indebtedness of the depositor.
 An authority to compensate the deposit with the obligations of the
depositor with the same bank.
 Hold-out provision applies only if there is a valid and existing
obligation arising from any sources of obligation under Art 1157of
the CC,
22.DUTY OF CARE
 The law acknowledges the fiduciary nature of banking that requires
high standards of integrity and performance.
 They are therefore required to exercise the highest degree of are in
the handling of the amounts deposited by their clients.
a. Simex vs CA
b. BPI vs CA
c. Go vs IAC
23. GARNISHMENT OF DEPOSITS.
Rule 39 of Section 9 of Rules of Court
Section 9.Execution of judgments for money, how enforced. —
(c) Garnishment of debts and credits. — The officer may levy on debts
due the judgment obligor and other credits, including bank deposits, financial
interests, royalties, commissions and other personal property not capable of
manual delivery in the possession or control of third parties. Levy shall be
made by serving notice upon the person owing such debts or having in his
possession or control such credits to which the judgment obligor is entitled.
The garnishment shall cover only such amount as will satisfy the judgment
and all lawful fees.
The garnishee shall make a written report to the court within five (5) days c. EXEMPT UNDER THE RULES OF COURT.
from service of the notice of garnishment stating whether or not the judgment Section 13.
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.
judgment obligee within ten (10) working days from service of notice on said
garnishee requiring such delivery, except the lawful fees which shall be paid
directly to the court.
In the event there are two or more garnishees holding deposits or credits b.
sufficient to satisfy the judgment, the judgment obligor, if available, shall
have the right to indicate the garnishee or garnishees who shall be required
to deliver the amount due, otherwise, the choice shall be made by the c.
judgment obligee.
The executing sheriff shall observe the same procedure under paragraph (a)
with respect to delivery of payment to the judgment obligee. (8a, 15a)
d.
23.01 NOT COVERED BY SECRECY
 Garnishment of deposits does not violate the law on Secrecy of
Bank Deposits e.
 The bank account is not inquired into when the funds are
garnished.
23.02 DEPOSITS EXEMPT FROM GARNISHMENT.
 Foreign currency deposits f.
 Deposits of government funds.
g.
A. FOREIGN CURRENCY DEPOSITS.
 Exempt from attachment or garnishment under Section 8 of FCDA.
 The wording or the law does not admit any exception:
“provided, however, that said foreign currency deposit shall be
exempt from attachment, garnishment and other order or process of h.
any court, legislative body, govt agency or any administrative body
whatsoever.
1) EXCEPTIONAL CASE: Salvacion vs Centran Bank of the PH.
2) China Banking Corp v Hon. Court of appeals i.
b. GOVERNMENT FUNDS
 Govt funds and properties may not be seized under writs of execution
or garnishment to satisfy judgment. j.
k.
Property exempt from execution. — Except as otherwise
The judgment obligor's family home as provided by law, or the
homestead in which he resides, and land necessarily used in
connection therewith;
Ordinary tools and implements personally used by him in his trade,
employment, or livelihood;
Three horses, or three cows, or three carabaos, or other beasts of
burden, such as the judgment obligor may select necessarily used by
him in his ordinary occupation;
His necessary clothing and articles for ordinary personal use,
excluding jewelry;
Household furniture and utensils necessary for housekeeping, and
used for that purpose by the judgment obligor and his family, such as
the judgment obligor may select, of a value not exceeding one
hundred thousand pesos;
Provisions for individual or family use sufficient for four months;
The professional libraries and equipment of judges, lawyers,
physicians, pharmacists, dentists, engineers, surveyors, clergymen,
teachers, and other professionals, not exceeding three hundred
thousand pesos in value;
One fishing boat and accessories not exceeding the total value of one
hundred thousand pesos owned by a fisherman and by the lawful use
of which he earns his livelihood;
So much of the salaries, wages, or earnings of the judgment obligor
for his personal services within the four months preceding the levy as
are necessary for the support of his family;
Lettered gravestones;
Monies, benefits, privileges, or annuities accruing or in any manner
growing out of any life insurance;
 l. The right to receive legal support, or money or property obtained as
such support, or any pension or gratuity from the Government;
m. Properties specially exempted by law.
But no article or species of property mentioned in this section shall be
exempt from execution issued upon a judgment recovered for its price or
upon a judgment of foreclosure of a mortgage thereon. (12a)
 The depositor may prove that the amounts deposited constitute the
provision for individual or family use sufficient for 4 months.
23.03 NO LIABILITY FOR RELEASE
 The bank is not liable whenever it releases the amount garnished as
ordered by a court of competent jurisdiction
 It is not even required to look into the validity or legality of the
garnishment as it is in fact in no position to do so.
 Case: by virtue of the order of garnishment, the account was placed in
custodia legis and therefore, from that time one, the bank holds the
funds subject to the ordered of the court a quo.
 No breach of trust or dereliction of duty can be attributed to the bank in
delivering its depositor’s funds pursuant to a court order that was
merely in the exercise of its power of control over such funds.
24. UNCLAIMED BALANCE.
 Deposits that have become dormant for a period of 10years may be
escheated in favor of the govt.
 The bank concerned is required to report to the Treasurer of the PH
the existence of such deposits.
 The treasurer will turn inform the SolGEn who will then initiate the
proper escheat proceedings in Court.
 Publication of a list of unclaimed balances is also required in order
to safeguard the right of the depositors, their heirs, and successors
in interest to due process.
Act No 3936: Unclaimed balances law
Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended
to read as follows:
"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall
include credits or deposits of money, bullion, security or other evidence of
indebtedness of any kind, and interest thereon with banks, buildings and
loan associations, and trust corporations, as hereinafter defined, in favor of
any person known to be dead or who has not made further deposits or
withdrawals during the preceding ten years or more. Such unclaimed
balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the
Government of the Republic of the Philippines to be used as the National
Assembly may direct.
"Banks", "building and loan associations" and "trust corporations", within the
meaning of this Act, shall refer to institutions defined under Section two,
thirty-nine and fifty-six, respectively, of Republic Act Numbered Three
Hundred Thirty Seven, otherwise known as the General Banking Act, as
amended, whether organized under special charters or not.
"Sec. 2. Immediately after the taking effect of this Act and within the month
of January of every odd year, all banks, building and loan associations, and
trust corporations shall forward to the Treasurer of the Philippines a
statement, under oath, of their respective managing officers, of all credits
and deposits held by them in favor of persons known to be dead, or who
have not made further deposits or withdrawals during the preceding ten
years or more, arranged in alphabetical order according to the names of
creditors and depositors, and showing:
"(a) The names and last known place of residence or post office
addresses of the persons in whose favor such unclaimed balances
stand;
"(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,
the nature of the same;
"(c) The date when the person in whose favor the unclaimed
balance stands died, if known, or the date when he made his last
deposit or withdrawal; and
"(d) The interest due on such unclaimed balance, if any, and the
amount thereof.
"A copy of the above sworn statement shall be posted in a conspicuous
place in the premises of the bank, building and loan association, or trust
corporation concerned for at least sixty days from the date of filing thereof:
Provided, That immediately before filing the above sworn statement, the
bank, building and loan association, and trust corporation shall communicate
with the person in whose favor the unclaimed balance stands at his last
known place of residence or post office address.
"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
banks, building and loan associations, and trust corporations.
"Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed
balances, he shall commence an action or actions in the name of the People
of the Republic of the Philippines in the Court of First Instance of the
province or city where the bank, building and loan association or trust
corporation is located, in which shall be joined as parties the bank, building
and loan association or trust corporation and all such creditors or depositors.
All or any of such creditors or depositors or banks, building and loan
association or trust corporations may be included in one action. Service of
process in such action or actions shall be made by delivery of a copy of the
complaint and summons to the president, cashier, or managing officer of
each defendant bank, building and loan association or trust corporation and
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
locality where the bank, building and loan association or trust corporation is
situated, if there be any, and in case there is none, in the City of Manila, at
such time as the court may order.
Upon the trial, the court must hear all parties who have appeared therein,
and if it be determined that such unclaimed balances in any defendant bank,
building and loan association or trust corporation are unclaimed as
hereinbefore stated, then the court shall render judgment in favor of the
Government of the Republic of the Philippines, declaring that said unclaimed
balances have escheated to the Government of the Republic of the
Philippines and commanding said bank, building and loan association or
trust corporation to forthwith deposit the same with the Treasurer of the
Philippines to credit of the Government of the Republic of the Philippines to
be used as the National Assembly may direct.
"At the time of issuing summons in the action above provided for, the clerk of
court shall also issue a notice signed by him, giving the title and number of
said action, and referring to the complaint therein, and directed to all
persons, other than those named as defendants therein, claiming any
interest in any unclaimed balance mentioned in said complaint, and requiring
them to appear within sixty days after the publication or first publication, if
there are several, of such summons, and show cause, if they have any, why
the unclaimed balances involved in said action should not be deposited with
the Treasurer of the Philippines as in this Act provided and notifying them
that if they do not appear and show cause, the Government of the Republic
of the Philippines will apply to the court for the relief demanded in the
complaint.
A copy of said notice shall be attached to, and published with the copy of,
said summons required to be published as above, and at the end of the copy
of such notice so published, there shall be a statement of the date of
publication, or first publication, if there are several, of said summons and
notice. Any person interested may appear in said action and become a party
thereto.
Upon the publication or the completion of the publication, if there are several,
of the summons and notice, and the service of the summons on the
defendant banks, building and loan associations or trust corporations, the
court shall have full and complete jurisdiction in the Republic of the
Philippines over the said unclaimed balances and over the persons having or
claiming any interest in the said unclaimed balances, or any of them, and
shall have full and complete jurisdiction to hear and determine the issues
herein, and render the appropriate judgment thereon.
"Sec. 4. If the president, cashier or managing officer of the bank, building
and loan association, or trust corporation neglects or refuses to make and
file the sworn statement required by this action, such bank, building and loan
association, or trust corporation shall pay to the Government the sum of five
hundred pesos a month for each month or fraction thereof during which such
default shall continue.
"Sec. 5. Any bank, building and loan association or trust corporation which
shall make any deposit with the Treasurer of the Philippines in conformity
with the provisions of this Act shall not thereafter be liable to any person for
the same and any action which may be brought by any person against in any
bank, building and loan association, or trust corporation for unclaimed
balances so deposited with the Treasurer of the Philippines shall be
defended by the Solicitor General without cost to such bank, building and
loan association or trust corporation."
24.01 REQUIREMENTS
1) There is credit or deposit of money, or other evidence of indebtedness
of any kind with banks
2) Such credit, deposit or evidence of indebtedness has a balance
3) The balance has been unclaimed for a period of 10 years or more
4) Notice should be given to the depositor
5) After due notice to the depositor, a sworn statement with the Treasurer
should be filed stating the list of depositors with unclaimed balances
6) There must be publication of a list of unclaimed balances
7) The escheat proceedings is commenced
8) Escheat proceedings should be filed by the State thru the SolGen.
24.02 ACCOUNTS COVERED.
 The term “unclaimed balances” include credits or deposits of money
or other evidence of indebtedness of any kind with banks.
 Credit: “ a sum credited in the books of a company to a person who
appears to be entitled to it. It presupposes a creditor-debtor
relationship, and may be said to imply ability, by reason of property or
esttaes, to make a promised payment.

A. DEMAND DRAFT.
 Is a bill of exchange payable on demand
 If demand drafts payable to the depositor have not been presented
either for acceptance or for payment, the inevitable consequence ins
that the appellee bank never had any chance of accepting or rejecting
them
 Verily, the bank never became a debtor of the payee concerned and
as such the aforesaid drafts cannot be considered as credit subject to
escheat within the meaning of the law.
B. CASHIER’S OR MANAGER’S CHECK
 Primary obligation of the bank which issues it and constitutes its
written promise to pay upon demand.
 The bank is both the drawer and the drawee.
C. TELEGRAPHIC TRANSFERS
 Do not come within the meaning of term credit or deposits.
 They cannot be considered as a sum credited on the books of the
bank to a person who appears to be entitled to it.
 The purchaser of a telegraphic transfer upon making payment
completes the transaction insofar as he is concerned, though
insofar as the remitting bank is concerned, the contract is executory
until the credit is established.
24.03 NOTICE REQUIREMENT BEFORE FILING A CASE.
 It is an indispensable requirement under the Unclaimed Balances
Law that prior notice is given to the depositor
 Rizal Commercial Banking vs Hi-tri devt corp:
o the law sets a detailed system for notifying depositors of
unclaimed balances. This notification is meant to inform them
that their deposit could be escheated if left unclaimed.
Accordingly, before filing a sworn statement, banks and other
similar institutions are under obligation to communicate with
owners of dormant accounts. The purpose of this initial notice is
for a bank to determine whether an inactive account has indeed
been unclaimed, abandoned, forgotten, or left without an owner.
If the depositor simply does not wish to touch the funds in the
meantime, but still asserts ownership and dominion over the
dormant account, then the bank is no longer obligated to include
the account in its sworn statement.20 It is not the intent of the
law to force depositors into unnecessary litigation and defense of
their rights, as the state is only interested in escheating balances
that have been abandoned and left without an owner.
o In case the bank complies with the provisions of the law and the
unclaimed balances are eventually escheated to the Republic,
the bank "shall not thereafter be liable to any person for the
same and any action which may be brought by any person
against in any bank xxx for unclaimed balances so deposited xxx
shall be defended by the Solicitor General without cost to such
bank."21 Otherwise, should it fail to comply with the legally
outlined procedure to the prejudice of the depositor, the bank
may not raise the defense provided under Section 5 of Act No.
3936, as amended.
24.04 PUBLICATION OF LIST
 Intended to safeguard the right of the depositor, their heirs and
successors to due process.
 Publication is necessary so that other persons who may have an
interest in any of the unclaimed balance know what this case is all
about and whether they have an interest in this case if the amended
complaint and list of unclaimed balances are not published.
24.05 ESCHEAT PROCEEDINGS.
 Must be initiated before the unclaimed balances will be turned over the
Govt
24.05.01 REAL PARTY-INTEREST
 The depositors or creditors of the respondent Republic bank, who can
move for the dismissal of the complaint for escheat inasmuch as what
are being escheated in favor of the govt are their own unclaimed or
dormant deposits and not money of the respondent Republic bank.
a. the depositary bank fall under the definition real party in interest for the
escheat of the dormant deposits in favor of the government would
necessarily deprive said bank of the use of such deposits.
Real party in interest: party who would be benefitted or injured by the
judgment of the suit or the party entitled to avail of the suit
Section 3 of RA 3936: the bank shall be joined as a party in the action for
escheat.
24.05.02 JOINDER OF ACTIONS.
SECTION 3 of RA 3936 direct the SolGEn to commence the action in the
name of the people of the Philippines in the RTC of the province where the
bank is located.
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.