DEPOSITS

BANK DEPOSITS
A deposit transaction, which is peculiar to the banking business,105 is the
act of placing money, checks and the like with a bank.106 The bank receiving
such funds is called a depositary, and the fund a deposit.107 The deposit is
more than an ordinary debt since it is a fund subject to the depositor’s call,
carrying distinct legal qualities, and requiring the bank to repay the same at a
designated place in accordance with banking rules.108

Nature

Bank deposits are in the nature of irregular deposits.109 They are not true
deposits but are simple loans,110 based on Article 1980 of the Civil Code
which provides that “fixed, savings and current deposits of money in banks
and similar institutions shall be governed by the provisions concerning
simple loan.”111

Simple loan or mutuum is a contract whereby one of the parties

delivers to another, money or other consumable thing and the latter
acquires ownership thereof upon the condition that the same amount of
the same kind and quality shall be paid.112 Banks where monies are
deposited are considered the owners.113 The ownership of the amount
deposited is transmitted to the bank upon the perfection of the contract and it
can make use of the amount deposited for its banking operations, such as to
pay interests on deposits and to pay withdrawals.114

105
THE EDITORIAL STAFF OF THE MICHIE COMPANY, BANKS AND BANKING 42 (Vol. 5A, Replacement ed. 2003).
106
Id. at 43.
107
Id.
108
Id.
109
Serrano v. Central Bank, G.R. No. L-30511, Feb. 14, 1980 (96 S.C.R.A. 96).
110
Allied Banking Corporation v. Lim Sio Wan, G.R. No. 133179, Mar. 27, 2008 (549
S.C.R.A. 504); Integrated Realty Corp. v. Philippine National Bank, G.R. No. L-60705, June 28,
1989 (174 S.C.R.A. 295); Serrano v. Central Bank, G.R. No. L-30511, Feb. 14, 1980 (96 S.C.R.A.
96); Central Bank v. Morfe, G.R. No. L-38427, Mar. 12, 1975 (63
S.C.R.A. 114).
111
Rep. Act No. 386, Art. 1980 (1950).
112
Id. Art. 1933.
113
People v. Puig, G.R. Nos. 173654-173765, Aug. 28, 2008 (563 S.C.R.A. 564).
114
Guingona v. City Fiscal of Manila, G.R. No. L-60033, Apr. 4, 1984 (128 S.C.R.A. 577).
Contract

The relationship between a bank and its depositors is governed by

contract. The savings or current deposit agreement between the bank and
the depositor is the contract that determines the rights and obligations of
the parties.115 Being contractual in nature, a bank may receive or decline
deposits and do business with whom it pleases.116

In order to have a valid contract, the following essential elements

must be present, namely:117
(i) Consent of the contracting parties;
(ii) Object certain which is the subject matter of the contract;
and
(iii) Cause of the obligation which is established.

Moreover, since deposit is a real contract, there should be delivery of

money.118

Customer Acceptance Policy

The Bangko Sentral, pursuant to the Anti-Money Laundering Act,119

developed the following customer acceptance policy120 which banks must
observe:

§ 806.1. Customer acceptance 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.

115
BPI Family Bank v. Buenaventura, G.R. Nos. 148196 & 148259, Sept. 30, 2005 (471
S.C.R.A. 431); Consolidated Bank & Trust Corporation v. Court of Appeals, G.R. No. 138569, Sept. 11,
2003 (410 S.C.R.A. 562).
116
THE EDITORIAL STAFF OF THE MICHIE COMPANY, BANKS AND BANKING 72 (Vol. 5A, Replacement ed. 2003).
117
Rep. Act No. 386, Art. 1318 (1950).
118
See id. Art. 1316.
119
Rep. Act No. 9160 (2001), as amended by Rep. Act No. 9194 (2003).
120
BSP Cir. No. 706 (2011).
 In line with the aforesaid policy, banks are mandated to specify the
criteria and description of the type of customers that are likely to pose low,
normal or high risk to their operations as well as the standards in applying
reduced, average and enhanced due diligence including a set of conditions
for the denial of account opening. In designing a customer acceptance
policy, the following factors shall be taken into account:121
(i) Background and source of funds;
(ii) Country of origin and residence or operations;
(iii) Public or high profile position of the customer or its
directors/trustees, stockholders, officers and/or authorized
signatory;
(iv) Linked accounts;
(v) Watch list of individuals and entities engaged in illegal
activities or terrorist related activities as circularized by
Bangko Sentral, Anti-Money Laundering Council, and other
international entities or organizations such as the Office of
Foreign Assets Control of the
U.S. Department of the Treasury and United Nations Sanction List;
(vi) Business activities; and
(vii) Type of services/products/transactions to be entered with the
covered institution.

Special Capacity of Minors

By special provision of law, minors, in their own right and in their own
names, are allowed to open savings and time deposits. Section 35 of
Republic Act No. 337 reads:

Section 35. Married women and minors may, in their own right and
in their own names, 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 savings bank not to make payments of
deposits, dividends, or interest to the minor of whom he is guardian,
then such payment shall be made only to the guardian.

121
Id.
 Thereafter, Section 1 of Presidential Decree No. 734122 modified the
authority granted to minors under Republic Act No. 337, as follows:

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.

Further, Section 22 of the Thrift Banks Act of 1995123 authorizes

minors to open deposits stating:

Section 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.

Creditor-Debtor Relationship

The relationship between banks and depositors has been held to be that
of a debtor and creditor, respectively. The depositor lends the bank money
and the bank agrees to pay the depositor on demand.124

Among the consequences for the transfer of ownership and title to the
banks of money deposited by its clients are as follows:
(i) The bank can make use of the money deposited for its
ordinary transactions and for the banking business

122
Enacted in 1975.
123
Rep. Act No. 7906 (1995).
124
Central Bank v. Citytrust Banking Corporation, G.R. No. 141835, Feb. 4, 2009 (578
S.C.R.A. 27).
 in which it was engaged without the necessity of the depositors’
consent.125
(ii) The bank has the right to invoke the rules on compensation. It
can set-off the deposits in its hands for the payment of any
indebtedness to it on the part of a depositor.126

Bank deposits, however, are not preferred credits. The general

principle of equity that the assets of an insolvent are to be distributed
ratably among general creditors applies with full force to the distribution
of the assets of a bank. A general depositor of a bank is merely a general
creditor and, as such, is not entitled to any preference or priority over
other general creditors. The assets of a bank in the process of liquidation are
held in trust for the equal benefit of all creditors, and one cannot be
permitted to obtain an advantage or preference over another by attachment,
execution or otherwise.127

Types of Accounts

Deposit accounts in banks may be opened by natural persons, corporate

entities, and other institutions. Prior to entering into deposit contract
with said persons, banks must obtain minimum information from
individual customers and authorized signatory/ies of corporate and juridical
entities and confirm said information with valid identification documents.128

(i) Natural Persons

Natural persons may open bank accounts in the form of

individual/personal account or joint account.

(a) Individual/Personal Accounts

Individual accounts may be opened by any person having legal

capacity to enter into contracts. A depositor is presumed

125
In re: Liquidation of Mercantile Bank of China, Tan Tiong Tick v. American Apothecaries Co., 65
Phil. 414 (1938).
126
Associated Bank v. Tan, G.R. No. 156940, Dec. 14, 2004 (446 S.C.R.A. 282); Gullas v.
Philippine National Bank, 62 Phil. 519 (1935).
127
Central Bank v. Morfe, G.R. No. L-38427, Mar. 12, 1975 (63 S.C.R.A. 114).
128
See BSP Cir. No. 706 (2011).
to be the owner of funds standing in his name in a bank deposit, and where a
bank is not chargeable with notice that the money deposited in such account
is the property of some other person than the depositor, the bank is justified
in paying out the money to the depositor or upon his order, and cannot be
liable to any other person as the true owner.129

(b) Joint Account

Joint account refers to a bank account owned by two (2) or more

persons, who equally share rights and liabilities of the account.130

The funds deposited in the joint deposit account are under co-
ownership because the ownership or right over the same belongs to
different persons, the joint depositors. The share or portion belonging to the
joint depositors in the joint deposit account shall be presumed equal131 and
the benefits as well as the charges in the joint account shall be
proportional to their respective shares.132

1. “AND” Account

A joint “and” account is a type of account, commonly used by

business partners, in which the approval of both owners is needed to
make withdrawals.133 The conjunctive word “and” means “in addition to,”
and whether it is used to connect words, phrases or full sentences, must be
accepted as binding together and as relating to one another. “And” in
statutory construction implies conjunction or union.134 Thus, a joint
“and” account implies that withdrawal from said account may only be
made with the signatures of all co-depositors.

129
Fulton Iron Works Company v. China Banking Corporation, 55 Phil. 208 (1930).
130
THOMAS P. FITCH, DICTIONARY OF BANKING TERMS 259 (Barron’s Educational Series, Inc. 5th ed.
2006).
131
Rep. Act No. 386, Art. 485 (1950).
132
Bureau of Internal Revenue Ruling (Sept. 8, 2003) (Letter to Ishiwata Gatmaytan & Associates)
(citing Rep. Act. No. 386, Arts. 484-485 [1950]).
133
See THOMAS P. FITCH, DICTIONARY OF BANKING TERMS 259 (Barron’s Educational Series, Inc. 5th ed.
2006).
134
Commissioner of Internal Revenue v. Ariete, G.R. No. 164152, Jan. 21, 2010 (610
S.C.R.A. 464).
 2. “OR” and “AND/OR” Accounts

Joint “or” and “and/or” accounts are types of accounts, commonly used
by husband and wife, in which either, acting separately, can make deposits
or withdrawals at any time.135

(ii) Corporate Entities

The opening of an account with a bank is among the preconditions for

the issuance by the Securities and Exchange Commission (SEC) of a
certificate of incorporation. Such certificate can only be issued upon the
filing and approval by the SEC of the articles of incorporation which must
be accompanied, among other things, with a bank certificate covering the
deposit of the paid-up capital notarized in place where the bank is located.136

(iii) Other Institutions

Other types of institutions which may open accounts with banks

include: (a) retirement benefit programmes; (b) mutuals/ friendly societies,
cooperatives and provident societies; (c) charities, clubs and associations;
(d) trusts and foundations; and
(e) professional intermediaries.

Anonymous Accounts/Accounts under Fictitious Names

Theprovisionsofexistinglawstothecontrarynotwithstanding, the use of

anonymous accounts, accounts under fictitious names and all other similar
accounts are absolutely prohibited.137

Deceased Depositor

If a bank has knowledge of the death of a person, who maintained

a bank deposit account alone or jointly with another, it shall not allow any
withdrawal from the said deposit account, unless the Commissioner of the
Bureau of Internal Revenue certifies that the estate taxes imposed thereon
have been paid.138

135
See THOMAS P. FITCH, DICTIONARY OF BANKING TERMS 259 (Barron’s Educational Series, Inc. 5th ed.
2006).
136
Citizen’s Manual on Registration of Corporation and Partnership, Securities and Exchange Commission
Pamphlet No. 2, 31 (2005).
137
The Anti-Money Laundering Act of 2001, Rep. Act No. 9160, § 9(a) (2001).
138
National Internal Revenue Code of 1997, Rep. Act No. 8424, § 97 (1998).
An exception is when, upon authorization by the Commissioner, the
administrator of the estate or any one (1) of the heirs of the decedent may
withdraw an amount not exceeding Php20,000.00 without the said
certification. 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.139

Survivorship Agreement

A survivorship agreement is an aleatory contract supported by a lawful

consideration - the mutual agreement of the joint depositors permitting
either of them to withdraw the whole deposit during their lifetime, and
transferring the balance to the survivor upon the death of one of them.140

A survivorship agreement is valid. The validity of the contract seems

debatable by reason of its “survivor-take-all” feature, but in reality, that
contract imposes a mere obligation with a term, the term being death. Such
agreement is permitted by the Civil Code141 under Article 2010, which
provides that “by an aleatory contract one of the parties binds himself, or
both reciprocally bind themselves, to give or to do something as an
equivalent for that which the other party is to give or do in case of the
occurrence of an event which is uncertain or will happen at an
indeterminate time.”142 Such contract, as any other contract, is binding upon
the parties.143

A bank account may be so created that two (2) persons shall be

joint owners thereof during their mutual lives, and the survivor takes the
whole on the death of the other. The right to make such joint deposits has
not been removed by statutes abolishing joint tenancy and survivorship
generally as they existed at common law.144

139
Id.
140
Rivera v. Peoples Bank & Trust Co., 73 Phil. 546 (1942).
141
Vitug v. Court of Appeals, G.R. No. 82027, Mar. 29, 1990 (183 S.C.R.A. 755).
142
Rivera v. Peoples Bank & Trust Co., 73 Phil. 546 (1942).
143
Macam v. Gatmaitan, 64 Phil. 187 (1937).
144
Rivera v. Peoples Bank & Trust Co., 73 Phil. 546 (1942).
 Although the survivorship agreement is per se not contrary to law, its
operation or effect may be violative of law. For instance, if it be shown in a
given case that such agreement is a mere cloak to hide an inofficious
donation, to transfer property in fraud of creditors, or to defeat the
legitime of a forced heir, it may be assailed and annulled upon such
grounds.145

Garnishment

Bank deposits may be subject of garnishment.146 It is not beyond the

reach of execution to satisfy a final judgment. The prohibition against
examination of, or inquiry into, a bank deposit under Republic Act No.
1405 does not preclude its garnishment to insure satisfaction of a
judgment. There is no real inquiry in such a case. If the existence of the
deposit is disclosed, the disclosure is purely incidental to the execution
process. It is not within the intention of Congress to enable debtors to
evade payment of their just debts, even if ordered by the Court, through
the expedience of converting their assets into cash and depositing the same in
a bank.147

Exemptions from Garnishment

The following deposits are exempt from garnishment:

(i) Receivership or Liquidation
The assets of institutions shall be deemed in custodia legis in
the hands of the receiver and shall, from the moment the
institution is placed under such receivership or liquidation, be
exempt from any order of garnishment, levy, attachment, or
execution.148
(ii) Exceptional case involving foreign currency deposits

SALVACION v. CENTRAL BANK

G.R. No. 94723, August 21, 1997 (278 S.C.R.A. 27)

FACTS: Greg Bartelli, an American tourist, coaxed and lured

a 12-year old Filipina to go with him to his

145
Id.
146
See Rules of Court, Rule 39, § 9 & Rule 57, § 8.
147
China Banking Corp. v. Ortega, G.R. No. L-34964, Jan. 31, 1973 (49 S.C.R.A. 355).
148
Rep. Act No. 7653, § 30 (1993).
apartment where she was raped ten (10) times for four
(4) consecutive days. Notwithstanding his conviction, the
American tourist was able to escape from jail and avoid
punishment. The complainant, however, received favorable
judgment in the civil case for damages in the amount of
Php1,000,000, which was sought to be enforced by way of a writ
of preliminary attachment against the dollar deposits of the
accused in the Philippines. The enforcement against the
accused’s dollar deposits was claimed to be in violation of Section
113 of Central Bank Circular No. 960 and Section 8 of Republic
Act No. 6426, as amended, otherwise known as the Foreign
Currency Deposit Act, which exempt foreign currency deposits
from attachment, garnishment, or any other process of any court,
legislative body, government agency or any administrative body
whatsoever.

HELD: [T]he application of the law depends on the extent

of its justice. Eventually, if we rule that the questioned Section
113 of Central Bank Circular No. 960, which exempts [foreign
currency deposits] from attachment, garnishment, or any other
order or process of any court, legislative body, government agency
or any administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen aggrieved
by a foreign guest like accused Greg Bartelli. This would negate
Article 10 of the New Civil Code which provides that “in case of
doubt in the interpretation or application of laws, it is presumed
that the lawmaking body intended right and justice to prevail.
“Ninguno non deue enriquecerse tortizeramente con dano de
otro.” Simply stated, when the statute is silent or ambiguous, this
is one of those fundamental solutions that would respond to the
vehement urge of conscience. (Padilla v. Padilla, 74 Phil. 377).

It would be unthinkable that the questioned Section 113 of

Central Bank No. 960 would be used as a device by accused Greg
Bartelli for wrongdoing, and in so doing, acquitting the guilty at the
expense of the innocent.

... This situation calls for fairness against legal tyranny.

 ... [T]he provisions of Section 113 of Central Bank Circular
No. 960 and Presidential Decree No. 1246, insofar as [they
amend] Section 8 of Republic Act No. 6426, are hereby held to
be INAPPLICABLE to this case because of its peculiar
circumstances.

(iii) Rules of Court

Those exempt under the Rules of Court such as provisions for
individual and family use sufficient for four (4) months.149

Types of Deposits

Bank deposits may take the form of demand deposit, savings deposit,
negotiable order of withdrawal (NOW) account, time deposit, or long
term negotiable certificates of deposit.

(i) Demand Deposit

This refers to all those liabilities of banks which are denominated in

Philippine currency and are subject to payment in legal tender upon demand
by the presentation of checks.150 It also refers to deposits, subject to
withdrawal either by check or thru the automated tellering machines, and are
otherwise known as current or checking accounts. The bank may or may not
pay interest on these accounts.151

(ii) Savings Deposit

This refers to interest-bearing deposits which are withdrawable either

upon presentation of a properly accomplished withdrawal slip together with
the corresponding passbook or thru the automated tellering machines.152
Savings deposit is an interest bearing deposit account without a stated
maturity, as opposed to a time deposit. Funds can be deposited or withdrawn
at will,

149
Rules of Court, Rule 39, § 13.
150
Rep. Act No. 7653, § 58 (1993).
151
BSP Cir. No. 512 (2006), as amended by BSP Cir. Nos. 568 (2007), 658 (2009).
152
Id.
and most savings account pay interest from day of deposit to day of
withdrawal.153

(iii) Negotiable Order of Withdrawal Accounts

This refers to the interest-bearing savings deposits which are

withdrawable by means of Negotiable Orders of Withdrawal (NOW).154
NOW accounts are deposit accounts that combine the payable on demand
feature of checks and investment feature of savings accounts.155

(iv) Time Certificates of Deposit

This refers to interest-bearing deposits with specific maturity dates and

evidenced by certificates issued by the bank.156 Time deposit is a deposit
account paying interest for a fixed term, with the understanding that funds
cannot be withdrawn before maturity without giving advance notice.157 This
kind of deposit shall be issued for a specific period of term.158

(v) Long Term Negotiable Certificates of Deposit

This refers to interest bearing negotiable certificates of deposit with a

minimum maturity of five (5) years. 159

Interest

Demand, savings, NOW accounts, time deposits and deposit substitutes

shall not be subject to interest ceilings160 except when it constitutes unsafe
and unsound banking practice.161 Banks,

153
THOMAS P. FITCH, DICTIONARY OF BANKING TERMS 408 (Barron’s Educational Series, Inc. 5th ed. 2006).
154
BSP Cir. No. 512 (2006), as amended by BSP Cir. Nos. 568 (2007), 658 (2009).
155
MORB, §§ X223-X224 (2009).
156
BSP Cir. No. 512 (2006), as amended by BSP Cir. Nos. 568 (2007), 658 (2009).
157
THOMAS P. FITCH, DICTIONARY OF BANKING TERMS 470 (Barron’s Educational Series, Inc. 5th ed. 2006).
158
MORB, § X231 (2009).
159
BSP Cir. No. 512 (2006), as amended by BSP Cir. Nos. 568 (2007), 658 (2009).
160
MORB, § X242 (2009).
161
§ 56. See MORB, Appendix 48 (2009).
however, are required to disclose to depositors the following information on
interest computation and payments:162
(i) Type/kind of deposit;
(ii) Nominal rate of interest and period covered;
(iii) Manner of interest payment, i.e., whether credited in advance
or otherwise;
(iv) Basis of interest payment, i.e., whether based on average
daily balance, compounded quarterly or otherwise;
(v) 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; and
(vi) Illustration of basis of computing interest on a hypothetical
deposit account.

Interest or yield on time deposit may be paid at maturity or upon

withdrawal or in advance, however, interest or yield paid in advance shall
not exceed the interest for one (1) year.163 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 actual withdrawal or renewal at a rate
applicable to savings deposits.164

Reserves

Banks operating in the Philippines are required to comply with the

reserve requirement imposed by the Monetary Board against their deposit
liabilities,165 subject to certain exceptions.166 Reserve requirements refer to
the percentage of bank deposits and deposit substitute liabilities that banks
must keep on hand

162
MORB, § X243 (2009).
163
Id. § X242.1.
164
Id. § X242.2.
165
Rep. Act No. 7653, § 94 (1993).
166
(i) All collections credited to the special account “Due to BSP - Internal Revenue Account (Other Cities
and Municipalities);
(ii) Special time and savings deposits from the Agrarian Reform Fund Commission and special
savings deposits from farmer-borrowers; and
(iii) Certain unclaimed balances of deposit liabilities already reported to the Treasurer of the
Philippines in accordance with law. MORB, § X255 (2009).
or in deposit with the Bangko Sentral and therefore may not be lent.
Changes in reserve requirements have a significant effect on money supply
in the banking system, making them a powerful means of liquidity
management.167

Reserve requirements apply to peso demand, savings, time deposit

and deposit substitutes (including long-term non- negotiable tax-exempt
certificates of time deposit) of universal banks and commercial banks and
may be kept in the form of cash in vault, deposits with the Bangko Sentral
and government securities.168

Insurance

While bank deposits are not preferred credits, all deposits of any
bank are insured with the Philippine Deposit Insurance Corporation
(PDIC).169 The term “insured deposit” means the amount due to any bona
fide depositor for legitimate deposits in an insured bank net of any
obligation of the depositor to the insured bank as of the date of closure,
but not to exceed Php500,000.170 Banks shall indicate the coverage of the
PDIC in each passbook, certificate of time deposit and/or cover of
checkbook for demand deposit/NOW accounts stating, among other things,
the maximum amount of insurance.171

167
http://www.bsp.gov.ph/monetary/targeting.asp (last visited June 2011).
168
Id.
169
Rep. Act No. 3591, § 5 (1963), as amended.
170
Id. § 4(g), as amended by Rep. Act No. 9576 (2009).
171
MORB, § X262.2 (2009).