banking notes (finals)

8/13/2019 Banking Notes (Finals)

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BANKING NOTES (FINALS)

A. DEPOSIT FUNCTION

NATURE OF DEPOSIT

SERRANO v. CENTRAL BANK, 96 SCRA 96 (1980)

DOCTRINE: Bank deposits are in the nature of irregular deposits. They are

really loans because they earn interest. All kinds of bank deposits, whether

fixed, savings, or current are to be treated as loans and are to be covered

by the law on loans. Current and savings deposits are loans to a bank

because it can use the same.

GUINGONA, JR. v. CITY FISCAL OF MANILA, 128 SCRA 577 (1984)

DOCTRINE: The relationship between the depositor and the bank is that ofcreditor and debtor. Consequently, the ownership of the amount deposited

was transmitted to the Bank upon the perfection of the contract and it can

make use of the amount deposited for its banking operations, such as to

pay interests on deposits and to pay withdrawals.

BPI FAMILY BANK v. FRANCO, 538 SCRA 184 (2007)

DOCTRINE: Money bears no earmarks of peculiar ownership. Its primary

function is to pass from hand to hand as a medium of exchange, without

other evidence of its title. Money, which passed through varioustransactions in the general course of banking business, even if of traceable

origin, bears no earmarks of peculiar ownership.

FULTON IRON WORKS CO. v. CHINA BANKING CORP., 55 PHIL. 208

(1930)

DOCTRINE: A depositor is presumed to be the owner of funds standing in

his name in a bank deposit, and where a bank is not chargeable with

notice that the money deposited therein is the property of another person,

it is justified in paying out the money to the depositor, or upon his order,and in so doing cannot be held liable to any other person as the true

owner.

BPI v. CA, 232 SCRA 302 (1994)

DOCTRINE: A bank is under no duty or obligation to make the application.

To apply the deposit to the payment of the loan is a privilege, a right to set-


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off which the bank has the option to exercise.

The relationship then between a depositor and a bank is one of creditor

and debtor. The deposit under the questioned account was an ordinary

bank deposit; hence, it was payable on demand of the depositor.

BPI cannot be relieved of its duty to pay Eastern simply because it already

allowed the heirs of Velasco to withdraw the whole balance of the account.

The petitioner should not have allowed such withdrawal because it had

admitted in the Holdout Agreement the unceertain ownership of the money

deposited in the account.

Moreover, the order of the court in the intestate case merely authorized the

heirs of Velasco to withdraw the account. BPI was not specifically ordered

to release the account to the said heirs; hence, it was under no judicial

compulsion to do so. The authorization given to the heirs of Velascocannot be construed as a final determination or adjudication that the

account belonged to Velasco. We have ruled that when the ownership of a

particular property is disputed, the determination by a probate court of

whether that property is included in the estate of a deceased is merely

provisional in character and cannot be the subject of execution.

Because the ownership of the deposit remained undetermined, BPI, as the

debtor with respect thereto, had no right to pay to persons other than those

in whose favor the obligation was constituted or whose right or authority to

receive payment is indisputable. The payment of the money deposited withBPI that will extinguish its obligation to the creditor-depositor is payment to

the person of the creditor or to one authorized by him or by the law to

receive it. Payment made by the debtor to the wrong party does not

extinguish the obligation as to the creditor who is without fault or

negligence, even if the debtor acted in utmost good faith and by mistake as

to the person of the creditor, or through error induced by fraud of a third

person. The payment then by BPI to the heirs of Velasco, even if done in

good faith, did not extinguish its obligation to the true depositor, Eastern.

CENTRAL BANK v. MORFE, 63 SCRA 114 (1975)

Fixed, savings, and current deposits of money in banks and similar

institutions are not true deposits. They are considered simple loans and, as

such, are not preferred credits.

Evidently, one purpose in prohibiting the insolvent bank from doing


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business is to prevent some depositors from having an undue or

fraudulent preference over other creditors and depositors.

That purpose would be nullified if, as in this case, after the bank is

declared insolvent, suits by some depositors could be maintained and

judgments would be rendered for the payment of their deposits and thensuch judgments would be considered preferred credits under article 2244(14) (b) of the Civil Code.

The general principle of equity that the assets of an insolvent are to bedistributed ratably among general creditors applies with full force to

the distribution of the assets of a bank. A general depositor of a bank

is merely a general creditor, and, as such, is not entitled to any

preference or priority over other general creditors.

GULLAS v. PNB, 62 PHIL. 519 (1935)

DOCTRINE: A bank has the right of set off of the deposit in its hands for

the payment of any indebtedness to it on the part of the depositor.

REPUBLIC v. CA, 65 SCRA 186 (1975)

DOCTRINE: Since the relation between a depositor and a bank is that of a

creditor and debtor, the depositor has the right to apply his deposits/credit

with the bank against the loans he had obtained from his deposits.

BPI v. CA, 512 SCRA 620 (2007)

DOCTRINE: A bank generally has the right of set-off over the deposits

therein for the payment of any withdrawals on the part of a depositorthe

right of a collecting bank to debit a clients account for the value of a

dishonored check that has previously been credited has fairly been

established by jurisprudence.

CONSOLIDATED BANK AND TRUST COMPANY v. CA, 410 SCRA 562(2003)

DOCTRINE: The fiduciary relationship means that the banks obligation to

observe high standards of integrity and performance is deemed written

into every deposit agreement between a bank and its depositors. It

requires banks to assume a degree of diligence higher than that of a good


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father of a family.

B. KINDS OF DEPOSIT

(1) DEMAND DEPOSITS

All those liabilities of the Bangko Sentral and of other banks, which aredenominated in Philippine currency and are subject to payment in

legal tender upon demand by the presentation of checks.

BPI FAMILY SAVINGS BANK v. FIRST METRO INVESTMENT CORP,

429 SCRA 30 (2004)

DOCTRINE: Demand Deposits are all those liabilities of the Bangko

Sentral and of other banks which are denominated in the Philippine

currecncy and are subject to payment in legal tender upon demand by the

presentation of depositors checks. Under CB Circular No. 22 (Series of

1994), demand deposits shall not be subject to any interest rate ceiling.

This, in effect, is an open authority to pay interest on demand deposits,

such interest not being subject to any rate ceiling.

(2) SAVINGS DEPOSITS

INTERNATIONAL EXCHANGE BANK v. CIR, 520 SCRA 688 (2007)

DOCTRINE: A Fixed Savings Deposit (FSD), like a time deposit, provides

for a higher interest rate when the deposit is not withdrawn within the

required fixed period, otherwise, it earns interest pertaining to a regular

savings deposit.

A depositor of a savings deposit-FSD is required to keep the money

with the bank for at least thirty (30) days in order to yield a higherinterest rate. Otherwise, the deposit earns interest pertaining only to aregular savings deposit. The same feature is present in a time deposit.

A depositor is allowed to withdraw his time deposit even before its

maturity subject to bank charges on its pre-termination and thedepositor loses his entitlement to earn the interest rate corresponding

to the time deposit. Instead, he earns interest pertaining only to a


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regular savings deposit.

In both cases, the deposit may be withdrawn anytime but the depositor

gets to earn a lower rate of interest. The only difference lies on the

evidence of deposit, a savings deposit-FSD is evidenced by a passbook,

while a time deposit is evidenced by a certificate of time deposit." In orderfor a depositor to earn the agreed higher interest rate in a SA-FSD, the

amount of deposit must be maintained for a fixed period. Thus, SA-FSD is

a deposit account with a fixed term. Withdrawal before the expiration of

said fixed term results in the reduction of the interest rate. Having a fixed

term and reduction of interest rate in case of pre-termination are essentially

the features of a time deposit. Ultimately, the Banks SA-FSD and time

deposit are substantially the same.

To claim that time deposits evidenced by passbooks should not be

subject to DST is a clear evasion of the rule on equality and uniformityin taxation that requires the imposition of DST on documents

evidencing transactions of the same kind, in this particular case, on all

certificates of deposits drawing interest.

CHINA BANKING CORP. v. CIR, 602 SCRA 316 (2009)

A certificate of deposit is a written acknowledgment by a bank or banker of

the receipt of a sum of money on deposit which the bank or bankerpromises to pay to the depositor, to the order of the depositor, or to some

other person or his order, whereby the relation of debtor and creditor

between the bank and the depositor is created.

(3) NEGOTIABLE ORDER OF WITHDRAWAL (NOW) ACCOUNTS

Section X223 of the Manual of Regulations for Banks definesNegotiable Order of Withdrawal (NOW) Accounts as "interest-

bearing deposit accounts that combine the payable on demandfeature of checks and the investment feature of savings

accounts."

PEOPLE v. REYES, 454 SCRA 635 (2005)


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DOCTRINE: NOW Accounts are defined as interest-bearing deposit

accounts that combine the payable on demand feature of checks and the

investment feature of savings accounts.

There is no estafa through bouncing checks when it is shown thatprivate complainant knew that the drawer did not have sufficientfunds in the bank at the time the check was issued to him. Such

knowledge negates the element of deceit and constitutes a

defense in estafa through bouncing checks.

(4) TIME DEPOSITS

SEC. X231, MRB: Time deposits shall be issued for a specific period ofterm.

BPI FAMILY SAVINGS BANK v. FIRST METRO INVESTMENT

CORP., 429 SCRA 30 (2004)

DOCTRINE: A Time Deposit is defined as one the payment of which

cannot legally be required within such a specified number of days.

INTERNATIONAL EXCHANGE BANK v. CIR, 520 SCRA 688 (2007)

DOCTRINE: Having a fixed term and the reduction of interest rate in case

of pre-termination are essential features of a time deposit.

(5) FOREIGN CURRENCY DEPOSITS

(6) MONEY MARKET PLACEMENTS

ALLIED BANKING CORP. v. LIM SIO WAN, 549 SCRA 504 (2008)

DOCTRINE: A Money Market is a market dealing in standardized short-

term credit instruments (involving large amounts) where lenders and

borrowers do not deal directly with each other by through a middle man or

dealer in open marketin a money market transaction, the investor is a


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lender who loans his money to a borrower through a middleman or dealer.

a money market placement is a simple loan or mutuum. In a moneymarket transaction, the investor is a lender who loans his money to a

borrower through a middleman or dealer.

C. CAPACITY OF DEPOSITORS

D. OPENING OF DEPOSIT ACCOUNTS

KYCS: Know Your Customer Standards - Specimen signatures, IDphotos.

Joint Accounts:

ART. 485, NCC: The share of the co-owners, in the benefits as well as in

the charges, shall be proportional to their respective interests. Any

stipulation in a contract to the contrary shall be void.

The portions belonging to the co-owners in the co-ownership shall be

presumed equal, unless the contrary is proved.

ART. 1207, NCC: The concurrence of two or more creditors or of two or

more debtors in one and the same obligation does not imply that each one

of the former has a right to demand, or that each one of the latter is bound

to render, entire compliance with the prestation. There is a solidary liability

only when the obligation expressly so states, or when the law or the nature

of the obligation requires solidarity.

ART. 1208, NCC: If from the law, or the nature or the wording of the

obligations to which the preceding article refers the contrary does not

appear, the credit or debt shall be presumed to be divided into as many

shares as there are creditors or debtors, the credits or debts being

considered distinct from one another, subject to the Rules of Court

governing the multiplicity of suits.

E. ADMINISTRATION OF DEPOSIT ACCOUNTS


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DEPOSIT OF FUNDS - Delivery is required. Acceptability of Withdrawal Slips as Deposits

Firestone Tire & Rubber Co. of the Phil. v CA

DOCTRINE: A bank is under the obligation to treat the accounts of its

depositors with meticulous care, whether such account consists only of a

few hundred pesos or millions of pesos. The fact that the other withdrawal

slips were honored and paid by the other bank was no license for the bank

to presume that subsequent slips would be honored and paid immediately.

By doing so, it failed in its fiduciary duty to treat the accounts of its clients

with the highest degree of care.

In the ordinary and usual course of banking operations, current accountdeposits are accepted by the bank on the basis of deposit slips

prepared and signed by the depositor, or the latter's agent or

representative, who indicates therein the current account number to

which the deposit is to be credited, the name of the depositor or

current account holder, the date of the deposit, and the amount of

the deposit either in cash or in check.

The withdrawal slips deposited with petitioner's current account withCitibank were not checks, as petitioner admits. Citibank was not

bound to accept the withdrawal slips as a valid mode of deposit. But

having erroneously accepted them as such, Citibank andpetitioner as account- holder must bear the risks attendant to the

acceptance of these instruments. Petitioner and Citibank could not

now shift the risk and hold private respondent liable for their

admitted mistake.

Acceptability of Checks Without Indorsement of Payee

PNB v Rodriguez

DOCTRINE: A bank that regularly processes checks that are neither

payable to the customer nor duly indorsed by the payee is apparently

grossly negligent in its operations.

In a checking transaction, the drawee bank has the duty to verify the

genuineness of the signature of the drawer and to pay the check


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strictly in accordance with the drawers instructions, i.e., to the named

payee in the check.

As a rule, when the payee is fictitious or not intended to be the truerecipient of the proceeds, the check is considered as a bearer

instrument based on Sections 8 and 9 of the NIL. The draweebank is then absolved from liability and the drawer bears the

loss. However, there is a commercial bad faith exception to the

fictitious-payee rule. A showing of commercial bad faith on the

part of the drawee bank, or any transferee of the check for thatmatter, will work to strip it of this defense.

For the fictitious-payee rule to be available as a defense, PNB mustshow that the makers did not intend for the named payees to be

part of the transaction involving the checks. At most, the banks

thesis shows that the payees did not have knowledge of the

existence of the checks. This lack of knowledge on the part ofthe payees, however, was not tantamount to a lack of intention

on the part of respondents-spouses that the payees would not

receive the checks proceeds. Considering that the respondents

were transacting with PEMSLA and not the individual payees, it isunderstandable that they relied on the information given by the

officers of PEMSLA that the payees would be receiving the

checks.

WITHDRAWAL OF FUNDS1 FROM CURRENT ACCOUNTS

When Funds Insufficient

Moran v CA

DOCTRINE: A bank is under no obligation to make part payment on a

check, up to only the amount of the drawer's funds, where the check is

drawn for an amount larger than what the drawer has on deposit. Such a

practice of paying checks in part has never existed. Upon partial payment,

the check holder could not be called upon to surrender the check, and the

bank would be without a voucher affording a certain means of showing the

payment. The rule is based on commercial convenience, and any rule thatwould work such manifest inconvenience should not be recognized. A

check is intended not only to transfer a right to the amount named in it, but

to serve the further purpose of affording evidence for the bank of the


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payment of such amount when the check is taken up.

Villanueva v Nite

DOCTRINE: If a bank refuses to pay a check (notwithstanding the

sufficiency of funds), the payee-holder cannot sue the bankthe payeeshould instead sue the drawer who might in turn sue the bank. Sec. 189 is

sound law based on logic and established legal principlesno privity of

contract exists between the drawee-bank and the payee.

Prior to Clearing

Associated Bank v Tan

DOCTRINE: Although a collecting bank has the right to debit a clients

account for the value of a dishonored check that has previously been

credited, it should nevertheless exercise such right with the highest degree

of diligence, as it is a business impressed with public interest.

A bank generally has the right to setoff over the deposits therein for thepayment of any withdrawals on the part of the depositor. The

right of a collecting bank to debit a clients account for the value of a

dishonored check that has previously been credited has fairly been

established by jurisprudence.

The degree of diligence required of banks is more than that of a goodfather of a family where the fiduciary nature of their relationshipwith their depositors is concerned. By the nature of its functions,

a bank is under obligation to treat the accounts of its depositors

with meticulous care. It is undisputed that purportedly as an act of accommodation to a

valued client, the bank allowed the withdrawal of the face valueof the deposited check prior to its clearing. That act certainlydisregarded the clearance requirement of the banking system.

Such a practice is unusual, because a check is not legal tender or

money, and its value can properly be transferred to a depositorsaccount only after the check has been cleared by the drawee bank.

When the bank came to know of the checks dishonour, it should haveimmediately and duly informed Tan of the debiting of his account.

Notice was proper and ought to be expected. As a valued client, Tan

deserved nothing less than an official notice of the precarious

condition of his account.


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When Check Crossed

Traders Royal Bank v Radio Philippine Network Inc.

DOCTRINE: The crossing of a check should put a bank on guard. It was

duty bound to ascertain the indorsers title to the check or the nature of hispossession. Its effects are that (a) the check may not be encashed but only

deposited in the bank; (b) the check may be negotiated only once to one

who has an account with a bank; and (c) the act of crossing the check

serves as a warning to the holder that the check has been issued for a

definite purpose so that he must inquire if he has received the check

pursuant to that purpose, otherwise, he is not a holder in due course.

By encashing in favor of unknown persons checks which were ontheir face payable to the BIR. A government agency which canonly act through its agents, TRB did so in at its peril and mustsuffer the consequences of the unauthorized endorsement. TRB

cannot exculpate itself from liability by claiming that RPN was

itself negligent.

In contrast with managers check

Equitable PCI Bank v Ong

DOCTRINE: A managers check is an order of the bank to pay, drawn

upon itself, committing in effect its total resources, integrity and honor

behind its issuance, and by its peculiar character and general use in

commerce, a managers check is regarded substantially to be as good as

the money it represents.

Said check stands on the same footing as a certified check. As statedin Sec 187 of the NIL, when the managers check is certified bythe bank on which it was drawn, the certification is equivalent to

an acceptance. Jurisprudence adds that a manager's check is one drawn by the

bank's manager upon the bank itself. It is similar to a cashier's

check both as to effect and use. A cashier's check is a check ofthe bank's cashier on his own or another check. In effect, it is abill of exchange drawn by the cashier of a bank upon the bank


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itself, and accepted in advance by the act of its issuance. It is

really the bank's own check and may be treated as a promissorynote with the bank as a maker. The check becomes the primaryobligation of the bank which issues it and constitutes its writtenpromise to pay upon demand. The mere issuance of it is

considered an acceptance thereof.

2 FROM SAVINGS ACCOUNT

BPI v CA (2000)

DOCTRINE: The requirement of presentation of the passbook when

withdrawing an amount cannot be given mere lip service even though theperson making the withdrawal is authorized by the depositor to do so.

A bank is under obligation to treat the accounts of its depositors "withmeticulous care, always having in mind the fiduciary nature of their

relationship."27As such, in dealing with its depositors, a bank should

exercise its functions not only with the diligence of a good father of a

family but it should do so with the highest degree of care.

From Time Deposits

Far East Bank and Trust Company v Querimit

DOCTRINE: A bank acts at its peril when it pays deposits evidenced by a

certificate of deposit, without its production and surrender after

proper endorsement.

A certificate of deposit is defined as a written acknowledgment by a bankor banker of the receipt of a sum of money on deposit which the

bank or banker promises to pay to the depositor, to the order of the

depositor, or to some other person or his order, whereby the relation

of debtor and creditor between the bank and the depositor is


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created.

The principles governing other types of bank deposits are applicableto certificates of deposit, as are the rules governing promissory

notes when they contain an unconditional promise to pay a sum

certain of money absolutely.

The principle that payment, in order to discharge a debt, must bemade to someone authorized to receive it is applicable to the

payment of certificates of deposit. Thus, a bank will be protected

in making payment to the holder of a certificate indorsed by the

payee, unless it has notice of the invalidity of the indorsement or

the holder's want of title.

A bank acts at its peril when it pays deposits evidenced by acertificate of deposit, without its production and surrender after

proper indorsement. As a rule, one who pleads payment has the

burden of proving it. Even where the plaintiff must allege non-

payment, the general rule is that the burden rests on thedefendant to prove payment, rather than on the plaintiff to

prove payment. The debtor has the burden of showing with legal

certainty that the obligation has been discharged by payment.

From Foreign Currency Deposits

SEC. 5, FCDA: Withdrawability and transferability of deposits. There

shall be no restriction on the withdrawal by the depositor of his deposit or

on the transferability of the same abroad except those arising from the

contract between the depositor and the bank.

If Deceased Depositor: Tax Clearance Required

If a bank has knowledge of the death of a person, who maintained abank deposit account alone, or jointly with another, it shall notallow any withdrawal from the said deposit account, unless the

Commissioner has certified that the taxes imposed thereon by

this Title have been paid. Provided, however, That the administrator of the estate or any one

(1) of the heirs of the decedent may, upon authorization by the

Commissioner, withdraw an amount not exceeding Twentythousand pesos (P20,000) without the said certification.

For this purpose, all withdrawal slips shall contain a statement to theeffect that all of the joint depositors are still living at the time of

withdrawal by any one of the joint depositors and such


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statement shall be under oath by the said depositors.

Survivorship Agreements

Vitug v CA

DOCTRINE: Survivorship agreements are permitted by the Civil Code. The

validity of the contract seems debatable by reason of its survivor-take-all

feature. But in reality, the contract imposed a mere obligation with a term

being death. However, if it be shown that such an agreement is a mere

cloak to hide an inofficious donation, it may be assailed and annulled on

such ground.

The agreement didnt modify the conjugal funds of the spouse. Spousesare not prohibited by law to invest conjugal property, say by way of a

joint and several bank account, or an and/or account.

When the spouses Vitug opened the savings account, they merely putwhat rightfully belonged to them in a money-making venture. They

did not dispose of it in favor of the other, which would have arguably

been sanctionable as a prohibited donation. And since the funds

were conjugal, it cannot be said that one spouse could have

pressured the other in placing his or her deposits in the money pool. The agreement was in the nature of an aleatory contract. In reality what

is involved here is a contract with a term the fulfillment of which

depends on either the happening of an event which is (1)

uncertain, (2) which is to occur at an indeterminate time.

BOOKING OF DEPOSITS

INTEREST ON DEPOSITSSEC. X242, MRB: Interest onDeposits/Deposit Substitutes. Demand, savings, NOW accounts,

time deposits and deposit substitutes shall not be subject to interest

ceilings.

X242.1 Time of payment of interest on time deposits/deposit substitutes.

Interest or yield on time deposit/deposit substitute may be paid at maturity

or upon withdrawal or in advance: Provided, however, That interest or yield


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paid in advance shall not exceed the interest for one (1) year.

X242.2 Treatment of matured time deposits/deposit substitutes a. A timedeposit not withdrawn or renewed on its due date shall be treated as a

savings deposit and shall earn interest from maturity to the date of actual

withdrawal or renewal at a rate applicable to savings deposits.

b. A deposit substitute instrument not withdrawn or renewed on its maturity

date shall from said date become payable on demand and shall earn an

interest or yield from maturity to actual withdrawal or renewal at a rate

applicable to a deposit substitute with a maturity of fifteen (15) days.

Banks performing quasi-banking functions shall continue to consider

matured and unwithdrawn deposit substitutes as such and subject to

reserves.

Citibank, NA v Cabamongan

DOCTRINE: In a loan or forbearance of money, the interest due should be

that stipulated in writing and in the absence thereof, the rate shall be 12%

per annum counted from the time of demand.

CLOSING OF ACCOUNTSFar East Bank and Trust Company v Pacilan, Jr.DOCTRINE: No malice or bad faith could be imputed on a bank for closing

the account of a depositor for frequently drawing checks against

insufficient funds. Neither is there malice or bad faith, but only negligence,

when the bank accepted a deposit made by the depositor the day following

the closure of his account.

Petitioner bank has the right to close the account. The Bank Rules alsostate that: "...the depositor is NOT ENTITLED, AS A MATTER OF

RIGHT, TO OVERDRAW on this deposit and the bank reserves the

right at any time to return checks of the depositor which are drawn

against insufficient funds or for any other reason."

There was no right of the petitioner that was violated. The fact thatpetitioner constantly overdrew his account and used signatures not

on file was sufficient ground to close the account; therefore, there


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was no bad faith. He had improperly handled his account hundreds

of time. The depositor is bound by the terms and conditions of the

agreement with the bank.

Neither the fact that petitioner bank accepted the deposit made by therespondent the day following the closure of his account constitutes

bad faith or malice on the part of petitioner bank. The same could be

characterized as simple negligence by its personnel. Said act, by

itself, is not constitutive of bad faith. No legal right was established

nor bad faith proved by Pacilan. Damnum Absque Injuria.

F. SECRECY OF BANK DEPOSITS

REPUBLIC v. EUGENIO, 545 SCRA 384 (2008)

DOCTRINE: There is a right to privacy governing bank accounts in the

Philippines, as expressed in Sec. 2, RA 1405 (Bank Secrecy Act of 1995).

Exceptions provided for in Sec. 2 (may be examined by any person,

government official, bureau or office), are as follows:

Upon written permission of the depositor; In cases of impeachment; Examination of bank accounts is upon order of a competent court

in cases of bribery or dereliction of duty of public officials;

Money deposited or invested is the subject matter of litigation.

INTENGAN v. CA, 377 SCRA 63 (2002)

DOCTRINE: Where the accounts in question are US dollar deposits, the

applicable law is RA 6426 (FCDA), not RA 1405 (Bank Secrecy Law).

Under the applicable law, the only exception to the secrecy of foreigncurrency deposits is upon the written permission of the depositor.

Applicability of Exclusionary Rule


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EJERCITO v. SANDIGANBAYAN, 509 SCRA 190 (2006)

DOCTRINE: RA 1405 nowhere provides that an unlawful examination of

bank accounts shall render the evidence obtained therefrom inadmissible

in evidence. Sec. 5 only states that any violation of this law will subject the

offender upon conviction, to an imprisonment of not more than 5 years orfine of not more than P20,000 or both, in the discretion of the court.

Section 5 of R.A. 1405 only states that [a]ny violation of this lawwill subject the offender upon conviction, to an imprisonment ofnot more than five years or a fine of not more than twenty

thousand pesos or both, in the discretion of the court. Even assuming arguendo, however, that the exclusionary rule

applies in principle to cases involving R.A. 1405, the Court finds

no reason to apply the same in this particular case.

Clearly, the fruit of the poisonous tree doctrine1[13] presupposes aviolation of law. If there was no violation of R.A. 1405 in the instantcase, then there would be no poisonous tree to begin with, and,

thus, no reason to apply the doctrine.

Rules for Peso Deposits

SEC. 2, LAW ON SECRECY OF BANK DEPOSITS: All deposits ofwhatever nature with banks or banking institutions in the Philippines

including investments in bonds issued by the Government of the

Philippines, its political subdivisions and its instrumentalities, are

hereby considered as of an absolutely confidential nature and may

not be examined, inquired or looked into by any person, government

official, bureau or office, except upon written permission of the

depositor, or in cases of impeachment, or upon order of a competent

court in cases of bribery or dereliction of duty of public officials, or in

cases where the money deposited or invested is the subject matter

of the litigation.

EJERCITO v. SANDIGANBAYAN, 509 SCRA 190 (2006)

DOCTRINE: The term deposits used therein is to be understood broadly

and not limited only to accounts, which give rise to a creditor-debtor

relationship between the depositor and the bank. If the money deposited


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under an account may be used by banks for authorized loans to third

persons, then such accounts, regardless of whether it creates a creditor-

debtor relationship between the depositor and the bank, falls under the

category of accounts which the law precisely seeks to protect for the

purpose of boosting the economic development of the country.

Under the Anti-Graft and Corrupt Practices Act

SEC. 8, RA 3019: Dismissal due to unexplained wealth. If in accordance

with the provisions of Republic Act Numbered One thousand three hundred

seventy-nine, a public official has been found to have acquired during his

incumbency, whether in his name or in the name of other persons, an

amount of property and/or money manifestly out of proportion to his salary

and to his other lawful income, that fact shall be a ground for dismissal orremoval. Properties in the name of the spouse and unmarried children of

such public official may be taken into consideration, when their acquisition

through legitimate means cannot be satisfactorily shown. Bank deposits

shall be taken into consideration in the enforcement of this section,

notwithstanding any provision of law to the contrary.

Cases

PNB v. GANCAYAO, 15 SCRA 91 (1965)

DOCTRINE: Sec. 8 of RA 3019 directs in mandatory terms that bank

deposits shall be taken into consideration in the enforcement of this

section, notwithstanding any provision of law to the contrary.

Anti Graft and Corrupt Practices Act prevails over the Bank SecrecyLaw. The anti graft law directs in mandatory terms that bank

deposits shall be taken into consideration in the enforcement ofthis section, notwithstanding any provision of law to the

contrary. The only conclusion possible is that Section 8 of the

Anti Graft Law is intended to amend Section 2 of the BankSecrecy Law by providing an additional exception to the rule against

the disclosure of bank deposits.

BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. PURISIMA, 161

SCRA 576 (1988)


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DOCTRINE: By enacting Sec. 8 of RA 3019, Congress intended to provide

an additional ground for the examination of bank deposits for without such

provision, the prosecutors would be hampered if not altogether frustrated in

the prosecution of those charged with having acquired unexplained wealth

while in public office.

The inquiry into illegally acquired property or property NOT"legitimately acquired" extends to cases where such property is

concealed by being held by or recorded in the name of other

persons. This proposition is made clear by R.A. No. 3019 which

quite categorically states that the term, "legitimately acquired

property of a public officer or employee shall not include .. property

unlawfully acquired by the respondent, but its ownership is

concealed by its being recorded in the name of, or held by,

respondent's spouse, ascendants, descendants, relatives or any

other persons.

To sustain the petitioner's theory, and restrict the inquiry only toproperty held by or in the name of the government official or

employee, or his spouse and unmarried children is unwarrantedin the light of the provisions of the statutes in question, and

would make available to persons in government who illegally

acquire property an easy and fool-proof means of evadinginvestigation and prosecution; all they would have to do wouldbe to simply place the property in the possession or name ofpersons other than their spouse and unmarried children. This is

an absurdity that we will not ascribe to the lawmakers.

Under the Ombudsman Act

SEC. 15 (8), RA 6770: Powers, Functions and Duties. The Office ofthe Ombudsman shall have the following powers, functions and

duties: Administer oaths, issue subpoena and subpoena duces

tecum, and take testimony in any investigation or inquiry, includingthe power to examine and have access to bank accounts and

records.

MARQUEZ v. DESIERTO, 359 SCRA 772 (1991)

DOCTRINE: Before an in camera inspection by the Ombudsman may be

allowed, there must be a pending case before a court of competent

jurisdiction. Further, the account must be clearly identified, the inspection


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limited to the subject matter of the pending case before the court of

competent jurisdiction. The bank personnel and the account holder must

be notified to be present during the inspection, and such inspection may

cover only the account identified in the pending case.

ISSUE

(Ombudsman act) whether petitioner may be cited for indirect contempt for

her failure to produce the documents requested by the Ombudsman. And

whether the order of the Ombudsman to have an in camera inspection of

the questioned account is allowed as an exception to the law on secrecy of

bank deposits (R. A. No. 1405).

RULING

NO, she may not be held in contempt or may the Ombudsman have an incamera inspection.

Examination of the secrecy of bank deposits law (R. A. No. 1405) would

reveal the following exceptions:

1.Where the depositor consents in writing;2.Impeachment case;3.By court order in bribery or dereliction of duty cases against public

officials;

4.Deposit is subject of litigation;5.Sec. 8, R. A. No. 3019, n cases of unexplained wealth as held in thecase of PNB vs. Gancayco. - The order of the Ombudsman to

produce for in camera inspection the subject accounts with the

Union Bank of the Philippines, Julia Vargas Branch, is based on a

pending investigation at the Office of the Ombudsman against

Amado Lagdameo, et. al. for violation of R. A. No. 3019, Sec. 3 (e)

and (g) relative to the Joint Venture Agreement between the Public

Estates Authority and AMARI.

We rule that before an in camera inspection may be allowed, there mustbe a pending case before a court of competent jurisdiction. Further,

the account must be clearly identified, the inspection limited to the

subject matter of the pending case before the court of competent

jurisdiction.

In Union Bank of the Philippines v. Court of Appeals, we held that


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Section 2 of the Law on Secrecy of Bank Deposits, as amended,

declares bank deposits to be absolutely confidential except:

(1) In an examination made in the course of a special or general

examination of a bank that is specifically authorized by the Monetary Boardafter being satisfied that there is reasonable ground to believe that a bankfraud or serious irregularity has been or is being committed and that it is

necessary to look into the deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to

conduct its regular audit provided that the examination is for audit

purposes only and the results thereof shall be for the exclusive use of the

bank,

(3) Upon written permission of the depositor, (4) In cases of impeachment,

(5) Upon order of a competent court in cases of bribery or dereliction ofduty of public officials, or

(6) In cases where the money deposited or invested is the subject matter

of the litigation

In the case at bar, there is yet no pending litigation before any court of

competent authority. What is existing is an investigation by the office of the

Ombudsman. In short, what the Office of the Ombudsman would wish todo is to fish for additional evidence to formally charge Amado Lagdameo,

et. al., with the Sandiganbayan. Clearly, there was no pending case in

court, which would warrant the opening of the bank account for inspection.

Under the Plunder Law

SEC. 1 (D), RA 7080: Ill-gotten wealth means any asset, property,

business enterprise or material possession of any person within the

purview of Section Two (2) hereof, acquired by him directly or indirectly

through dummies, nominees, agents, subordinates and/or business

associates by any combination or series of the following means or similar

schemes:

1) Through misappropriation, conversion, misuse, or malversation of public

funds or raids on the public treasury;


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2) By receiving, directly or indirectly, any commission, gift,

share, percentage, kickbacks or any other form of pecuniary benefit from

any person and/or entity in connection with any government contract or

project or by reason of the office or position of the public officer concerned;

3) By the illegal or fraudulent conveyance or disposition of assetsbelonging to the National Government or any of its subdivisions, agencies

or instrumentalities or government-owned or -controlled corporations and

their subsidiaries;

4) By obtaining, receiving or accepting directly or indirectly any shares of

stock, equity or any other form of interest or participation including promise

of future employment in any business enterprise or undertaking;

5) By establishing agricultural, industrial or commercial monopolies or

other combinations and/or implementation of decrees and orders intendedto benefit particular persons or special interests; or

6) By taking undue advantage of official position, authority, relationship,

connection or influence to unjustly enrich himself or themselves at the

expense and to the damage and prejudice of the Filipino people and the

Republic of the Philippines.

EJERCITO v SANDIGANBAYAN, 509 SCRA 190 (2006)

DOCTRINE: The plunder case under the Sandiganbayan necessarily

involves an inquiry into the whereabouts of the amount purportedly

acquired illegally by Erap, and the subject matter of the litigation cannot belimited to bank accounts under his name alone, but must include those

accounts to which the money purportedly acquired illegally or a portion

thereof was alleged to have been transferred. A public office is a public

trust.

Under the AMLA

REPUBLIC v. EUGENIO, 545 SCRA 384 (2008)

DOCTRINE: Even if bank inquiry order may be availed of without need of a

pre-exisitng case under the AMLA, it does not follow that such order may


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be availed of ex parte.

Under section 10, the AMLC is authorized to inquire into a bank accountupon establishing probable cause where the deposits are related tokidnapping for ransom, violation of the Dangerous Drugs Act,

hijacking, destructive arson and murder. The exception does not

dispense the Bank Secrecy Act to all deposits, except for cases

related to the enumerations above.

Section 10 contains the application for ex parte, but it is connected to

freezing of accounts. This must be done ex parte, since notifying the

accused my cause him to disburse the account before the order freezing

the account is issued. Section 11 does not contain the application for exparte, for the fact that there is nothing wrong with the accused knowing that

his accounts are being checked. It is immaterial for the accused to know

that his accounts are being checked, since he cannot hide the bank

records to prove that the accounts are linked to the crime imputed against

him. Hence, using the ex parte application found in section 10 in inquiring

into bank accounts (section 11) may be stayed with injunction.

Independent Auditor

MARQUEZ v. DESIERTO, 359 SCRA 772 (2001)

DOCTRINE: Sec. 2 of Bank Secrecy Law provides for exceptions to the

confidentiality rule of bank deposits, one of which is in an examination

made by an independent auditor hired by the bank to conduct its regular

audit provided that the examination is for audit purposes only and the

results thereof shall be for the exclusive use of the bank.

RATIO

We rule that before an in camera inspection may be allowed,there must be a pending case before a court of competent

jurisdiction. Further, the account must be clearly identified, the

inspection limited to the subject matter of the pending case before the

court of competent jurisdiction. The bank personnel and the account holder

must be notified to be present during the inspection, and such inspection


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may cover only the account identified in the pending case.

In Union Bank of the Philippines v. Court of Appeals, we held that Section

2 of the Law on Secrecy of Bank Deposits, as amended, declares bankdeposits to be absolutely confidential except:

(2) In an examination made by an independent auditor hired by the bank to

conduct its regular audit provided that the examination is for audit

purposes only and the results thereof shall be for the exclusive use of the

bank

In the case at bar, there is yet no pending litigation before any court of

competent authority. What exists is an investigation by the office of theOmbudsman. In short, what the Office of the Ombudsman would wish to

do is to fish for additional evidence to formally charge Amado Lagdameo,et. al., with the Sandiganbayan. Clearly, there was no pending case in

court, which would warrant the opening of the bank account for inspection.

Under the Rules of Court

1 Garnishment

SEC. 9 (C), RULE 39: Garnishment of debts and credits. - The officer may

levy on debts due the judgment obligor and other credits, including bank

deposits, financial interests, royalties, commissions and other personal

property not capable of manual delivery in the posssession or control of

third parties. Levy shall be made by serving notice upon the person owing

such debts or having in his possession or control such credits to which the

judgment obligor is entitled. The garnishment shall cover only such amount

as will satisfy the judgment and all lawful fees. The garnishee shall make a

written report to the court within five (5) days from service of the notice ofgarnishment stating whether or not the judgment obligor has sufficient

funds or credits to satisfy the amount of the judgment. If not, the reportshall state how much funds or credits the garnishee holds for the judgment

obligor. The garnished amount in cash, or certified bank check issued in

the name of the judgment obligee, shall be delivered directly to the

judgment obligee within ten (10) working days from service of notice on


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said garnishing requiring such delivery, except the lawful fees which shall

be paid directly to the court. In the event there are two or more garnishees

holding deposits or credits sufficient to satisfy the judgment, the judgment

obligor, if available, shall have the right to indicate the garnishee or

garnishees who shall be required to deliver the amount due; otherwise, the

choice shall be made by the judgment obligee. The executing sheriff shall

observe the same procedure under paragraph (a) with respect to

delivery of payment to the judgment obligee.

CHINA BANKING CORPORATION v. ORTEGA, 49 SCRA 356 (1973)

DOCTRINE: Garnishment of bank deposit judgment debtor is not violative

of RA 1405. The Court merely required the cashier of the bank to inform

the court whether or not the defendant had a deposit in said bank only forpurposes of the garnishment issued by it, so that the bank would hold the

same intact and not allow any withdrawal until further order.

2 Preliminary Attachment

Examination of party whose property is attached and persons indebted to

him or controlling his property; delivery of property to sheriff.

3 Rules for Foreign Currency Deposits

SEC. 8, FCDA: Secrecy of foreign currency deposits. All foreign currency

deposits authorized under this Act, as amended by PD No. 1035, as well

as foreign currency deposits authorized under PD No. 1034, are hereby

declared as and considered of an absolutely confidential nature and,

except upon the written permission of the depositor, in no instance shall

foreign currency deposits be examined, inquired or looked into by any

person, government official, bureau or office whether judicial or

administrative or legislative, or any other entity whether public or private;

Provided, however, That said foreign currency deposits shall be exempt

from attachment, garnishment, or any other order or process of any court,

legislative body, government agency or any administrative body

whatsoever. (As amended by PD No. 1035, and further amended by PD

No. 1246, prom. Nov. 21, 1977.)


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Cases

SALVACION v. CENTRAL BANK, 278 SCRA 27 (1997)

DOCTRINE: Sec. 113 of CB Circular No. 960, which exempts from

garnishment, attachment or any other order or process of any court,legislative body, government agency or any administrative body

whatsoever foreign currency deposits, is NOT applicable to a foreign

transient, but only to foreign lenders and investors to the development of

the Foreign Currency Deposit System and Offshore Banking System in the

Philippines.

CHINA BANKING CORP. v. CA, 511 SCRA 110 (2006)

DOCTRINE: The only exception to the secrecy of foreign currency deposits

is in the case of a written permission of the depositor.

Rules for Deposits in Specific Banks and Financial Institutions

Under the GBL SEC. 55.1 (B), GBL: No director, officer, employee, or

agent of any bank shall, without order of a court of competent

jurisdiction, disclose to any unauthorized person any information

relative to the funds or properties in the custody of the bank belongingto private individuals, corporations, or any other entity: Provided, That

with respect to bank deposits, the provisions of existing laws shallprevail;

G. GARNISHMENT

SEC. 13, RULE 39 OF RULES OF COURT: Property exempt from

execution.

Except as otherwise expressly provided by law, the following property, and

no other, shall be exempt from execution:

(a) The judgment obligor's family home as provided by law, or the

homestead in which he resides, and land necessarily used in connection

therewith;


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(b) Ordinary tools and implements personally used by him in hs trade,

employment, or livelihood;

(c) Three horses, or three cows, or three carabaos, or other beasts of

burden such as the judgment obligor may select necessarily used by him in

his ordinary occupation;

(d) His necessary clothing and articles for ordinary personal use, excluding

jewelry;

(e) Household furniture and utensils necessary for housekeeping, and

used for that purpose by the judgment obligor and his family, such as the

judgment obligor may select, of a value not exceeding one hundred

thousand pesos;

(f) Provisions for individual or family use sufficient for four months;

(g) The professional libraries and equipment of judges, lawyers,

physicians, pharmacists, dentists, engineers, surveyors, clergymen,

teachers, and other professionals, not exceeding three hundred thousand

pesos in value;

(h) One fishing boat and accessories not exceeding the total value of one

hundred thousand pesos owned by a fisherman and by the lawful use of

which he earns his livelihood;

(i) So much of the salaries, wages, or earnings of the judgment obligor of

his personal services within the four months preceding the levy as are

necessary for the support of his family;

(j) Lettered gravestones;

(k) Monies benefits, privileges, or annuities accruing or in any manner

growing out of any life insurance;

(l) The right to receive legal support, or money or property obtained as

such support, or any pension or gratuity from the Government;

(m) Properties specially exempt by law.

But no article or species of property mentioned in his section shall be


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exempt from executio issued upon a judgment recovered for its price or

upon a judgment of foreclosure of a mortgage thereon.

No violation of Law on Secrecy of Bank Deposits CasesCHINA BANKING v. ORTEGA, 49 SCRA 356 (1973) The prohibition against examination of or inquiry into a bank deposit under

Republic Act 1405 does not preclude its being garnished to insure

satisfaction of a judgment. Indeed there is no real inquiry in such a case,

and if the existence of the deposit is disclosed the disclosure is purely

incidental to the execution process. It is hard to conceive that it was everwithin the intention of Congress to enable debtors to evade payment of

their just debts, even if ordered by the Court, through the expedient of

converting their assets into cash and depositing the same in a bank.

PCI BANK v. CA, 193 SCRA 452 (1991)

It is clear from the discussion of the conference committee report on

Senate Bill No. 351 and House Bill No. 3977, which later became Republic

Act 1405, that the prohibition against examination of or inquiry into a bank

deposit under Republic Act 1405 does not preclude its being garnished toinsure satisfaction of a judgment. Indeed there is no real inquiry in such a

case, and if existence of the deposit is disclosed the disclosure is purelyincidental to the execution process. It is hard to conceive that it was ever

within the intention of Congress to enable debtors to evade payment of

their just debts, even if ordered by the Court, through the expedient of

converting their assets into cash and depositing the same in a bank.

Liability for Release Cases

RCBC v. DE CASTRO. 168 SCRA 49 (1988)

Moreover, by virtue of the order of garnishment, the same was placed in

custodia legis and therefore, from that time on, RCBC was holding the

funds subject to the orders of the court a quo. That the sheriff, upon

delivery of the check to him by RCBC encashed it and turned over the


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proceeds thereof to the plaintiff was no longer the concern of RCBC as the

responsibility over the garnished funds passed to the court. Thus, no

breach of trust or dereliction of duty can be attributed to RCBC in delivering

its depositor's funds pursuant to a court order, which was merely in the

exercise of its power of control over such funds.

The bank had no choice but to comply with the order demanding deliveryof the garnished amount in check. The very tenor of the order called for

immediate compliance therewith. On the other hand, the bank cannot be

held liable for the subsequent encashment of the check as this was upon

order of the court in the exercise of its power of control over the funds

placed in custodia legis by virtue of the garnishment.

H. DEPOSIT INSURANCE

SEC. 5, PDIC CHARTER: The deposit liabilities of any bank or banking

institution, which is engaged in the business of receiving deposits as herein

defined on the effective date of this Act, or which thereafter may engage in

the business of receiving deposits, shall be insured with the Corporation.

(As amended by R.A. 6037, 04 August 1969; renumbered from Sec. 4 by

R.A. 9302, 12 August 2004)

SEC. 9, FCDA: Deposit insurance coverage. The deposits under this Act

shall be insured under the provisions of Republic Act No. 3591, asamended (Philippine Deposit Insurance Corporation), as well as its

implementing rules and regulations: Provided, That insurance payment

shall be in the same currency in which the insured deposits are

denominated.

Amount Insured

SEC. 4 (G), PDIC CHARTER: The term insured deposit means the

amount due to any bona fide depositor for legitimate deposits in an insured

bank net of any obligation of the depositor to the insured bank as of the

date of closure, but not to exceed Five Hundred Thousand Pesos

(P500,000.00).2 Such net amount shall be determined according to such

regulations as the Board of Directors may prescribe. In determining such


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amount due to any depositor, there shall be added together all deposits in

the bank maintained in the same right and capacity for his benefit either in

his own name or in the name of others. A joint account regardless of

whether the conjunction "and," "or," "and/or" is used, shall be insured

separately from any individually- owned deposit account: Provided, That

(1) If the account is held jointly by two or more natural persons, or by two

or more juridical persons or entities, the maximum insured deposit shall be

divided into as many equal shares as there are individuals, juridical

persons or entities, unless a different sharing is stipulated in the document

of deposit, and (2) if the account is held by a juridical person or entity

jointly with one or more natural persons, the maximum insured deposit

shall be presumed to belong entirely to such juridical person or entity:

Provided, further, That the aggregate of the interest of each co-owner over

several joint accounts, whether owned by the same or different

combinations of individuals, juridical persons or entities, shall likewise besubject to the maximum insured deposit of Five Hundred Thousand Pesos

(P500,000.00): Provided, furthermore, That the provisions of any law to the

contrary notwithstanding, no owner/holder of any negotiable certificate of

deposit shall be recognized as a depositor entitled to the rights provided in

this Act unless his name is registered as owner/holder thereof in the books

of the issuing bank: Provided, finally, That, in case of a condition that

threatens the monetary and financial stability of the banking system that

may have systemic consequences, as defined in section 17 hereof, as

determined by the Monetary Board, the maximum deposit insurance cover

may be adjusted in such amount, for such a period, and/or for such depositproducts, as may be determined by a unanimous vote of the Board of

Directors in a meeting called for the purpose and chaired by the Secretary

of Finance, subject to the approval of the President of the Philippines. (As

amended by R.A. 9302, 12 August 2004; R.A. 9576, 2009)

Rules on Payment

SEC. 10 (B), PDIC CHARTER: REPEALED ALREADY. For purposes ofthis Act an insured bank shall be deemed to have been closed on account

of insolvency when ordered closed by the Monetary Board of the Central

Bank of the Philippines pursuant to Section 29 of R.A. 265, as amended.


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Liability of PDIC Cases

PDIC v. CA

It doesn't matter. Whether the CTDs in question are negotiable ornot is immaterial in the present case. The Philippine DepositInsurance Corporation was created by law and, as such, isgoverned primarily by the provisions of the special law creating

it. The liability of the PDIC for insured deposits therefore is

statutory and such liability rests upon the existence of deposits

with the insured bank, not on the negotiability or non-negotiability of the certificates evidencing these deposits.

the deposit liability of PDIC is determined by the provisions of thelaw that created it, RA 3519, and statements in the certificates

that the same are insured by PDIC are not binding upon the

latter. PDIC not liable. In order that a claim for deposit insurance with the

PDIC may prosper, the law requires that a corresponding deposit

be placed in the insured bank. The problem is that Regent didnot receive anything in consideration for the CTDs it issued,

since the check representing the vale of the CTDs (issued by

Premiere) bounced; therefore no deposit ever came into

existence. Accordingly, there is nothing here for PDIC to insure.

I. UNCLAIMED BALANCES

SEC. 1, UNCLAIMED BALANCES LAW: "Unclaimed balances", within the

meaning of this Act, shall include credits or deposits of money, bullion,

security or other evidence of indebtedness of any kind, and interest

thereon with banks, buildings and loan associations, and trust

corporations, as hereinafter defined, in favor of any person known to be

dead or who has not made further deposits or withdrawals during the

preceding ten years or more. Such unclaimed balances, together with theincrease and proceeds thereof, shall be deposited with the Treasurer of the

Philippines to the credit of the Government of the Republic of

the Philippines to be used as the National Assembly may direct.

"Banks", "building and loan associations" and "trust corporations", within

the meaning of this Act, shall refer to institutions defined under Section


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two, thirty-nine and fifty-six, respectively, of Republic Act Numbered Three

Hundred Thirty Seven, otherwise known as the General Banking Act, as

amended, whether organized under special charters or not.

Cases

Republic v. CA, 345 SCRA 63 (2000)

The publication of the list of unclaimed balances is intended to safeguard

the right of the depositors, their heirs and successors to due process. This

was made clear by the lower court in its assailed Order, to wit:

Moreover, how would other persons who may have an interest in any of

the unclaimed balances know what this case is all about and whether they

have an interest in this case if the amended complaint and list of unclaimed

balances are not published? Such other persons may be heirs of the bankdepositors named in the list of unclaimed balances.

xxx

The fact that the government is in a tight financial situation is not a

justification for this Court to dispense with the elementary rule of due

process.

As declared by the trial court in its Order dated August 1, 1989, the

dismissal of the petition for escheat is without prejudice. In other words, the

State can refile the said petition, notwithstanding the lapse of time.

Prescription of action does not run against the government.

Escheat Proceedings

SEC. 3, UNCLAIMED BALANCES LAW: Whenever the Solicitor General

shall be informed of such unclaimed balances, he shall commence

an action or actions in the name of the People of the Republic of the

Philippines in the Court of First Instance of the province or city where thebank, building and loan association or trust corporation is located, in whichshall be joined as parties the bank, building and loan association or trust

corporation and all such creditors or depositors. All or any of such creditors

or depositors or banks, building and loan association or trust corporations

may be included in one action.


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Effects of Compliance/Non-Compliance SEC. 4, UNCLAIMED BALANCES LAW: If the president, cashier or

managing officer of the bank, building and loan association, or trustcorporation neglects or refuses to make and file the sworn statement

required by this action, such bank, building and loan association, or trust

corporation shall pay to the Government the sum of five hundred pesos a

month for each month or fraction thereof during which such default shall

continue.

J. ANTI-MONEY LAUNDERING ACT

Declared PolicySEC. 2, AMLA: Declaration of Policy. - It is hereby declaredthe policy of the State to protect and preserve the integrity and

confidentiality of bank accounts and to ensure that the Philippines shall not

be used as a money laundering site for the proceeds of any unlawful

activity. Consistent with its foreign policy, the State shall extend

cooperation in transnational investigations and prosecutions of personsinvolved in money laundering activities wherever committed.

Covered TransactionsSEC. 3 (B), AMLA: "Covered transaction" is a single, series, or

combination of transactions involving a total amount in excess of Four

million Philippine pesos (Php4,000,000.00) or an equivalent amount in

foreign currency based on the prevailing exchange rate within five (5)

consecutive banking days except those between a covered institution and

a person who, at the time of the transaction was a properly identified clientand the amount is commensurate with the business or financial capacity of

the client; or those with an underlying legal or trade obligation, purpose,

origin or economic justification.

It likewise refers to a single, series or combination or pattern of


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unusually large and complex transactions in excess of Four million

Philippine pesos (Php4,000,000.00) especially cash deposits andinvestments having no credible purpose or origin, underlying tradeobligation or contract.

Suspicious Transactions SEC. 3 (B-1), AMLA: SEC. 3 (B), AMLA:

"Covered transaction" is a single, series, or combination of

transactions involving a total amount in excess of Four million

Philippine pesos (Php4,000,000.00) or an equivalent amount in foreigncurrency based on the prevailing exchange rate within five (5)consecutive banking days except those between a covered institutionand a person who, at the time of the transaction was a properly

identified client and the amount is commensurate with the business or

financial capacity of the client; or those with an underlying legal ortrade obligation, purpose, origin or economic justification.

Covered Institutions SEC. 3 (A), AMLA: "Covered Institution"

refers to:

1. banks, non-banks, quasi-banks, trust entities, and allother institutions and their subsidiaries and affiliates

supervised or regulated by the Bangko Sentral ng

Pilipinas (BSP);

2. insurance companies and all other institutions supervisedor regulated by the Insurance Commission; and

3. securities dealers, brokers, salesmen, investment housesand other similar entities managing securities or

rendering services as investment agent, advisor, orconsultant, (ii) mutual funds, close and investment

companies, common trust funds, pre-needcompanies and other similar entities, (iii) foreign

exchange corporations, money changers, moneypayment, remittance, and transfer companies and

other similar entities, and (iv) other entities

administering or otherwise dealing in currency,

commodities or financial derivatives based thereon,valuable objects, cash substitutes and other similar

monetary instruments or property supervised or


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regulated by Securities and Exchange

Commission.

Obligations of Covered Institutions SEC. 9, AMLA: Prevention ofMoney Laundering; Customer Identification Requirements and

Record Keeping.

Money-Laundering Crime

SEC. 4, AMLA: Money Laundering Offense. - Money laundering is a crime

whereby the proceeds of an unlawful activity are transacted, thereby

making them appear to have originated from legitimate sources. It is

committed by the following:

1.Any person knowing that any monetary instrument or propertyrepresents. involves, or relates to the proceeds of any unlawful

activity, transacts or attempts to transact said monetary instrument

or property.

2.Any person-knowing that any monetary instrument or property involvesthe proceeds of any unlawful activity, performs or fails to perform

any act as a result of which he facilitates the offense of moneylaundering referred to in paragraph (a) above.

3.Any person knowing that any monetary instrument or property is requiredunder this Act to be disclosed and filed with the Anti-Money

Laundering Council (AMLC), fails to do so.

(a) Transacting or attempting to transact, with monetary instrument or

property, knowing it represents, involves, or related to proceeds of any

Unlawful Activity(b) Facilitating money-laundering referred to in Item (a) above, by failing to

perform an act

(c) Failing to disclose and file report with AMLC of any monetary

instrument or property as required under AMLA


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Unlawful Activities

SEC. 3 (i), AMLA: "Unlawful activity" refers to any act or omission or series

or combination thereof involving or having relation to the following:

1.Kidnapping for ransom under Article 267 of Act No.3815, otherwiseknown as the Revised Penal Code, as amended;

2.Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No.6425, asamended, otherwise known as the Dangerous Drugs Act of 1972;

3.Section 3 paragraphs B,C,E,G,H and I of Republic Act No.3019, asamended; otherwise known as the Anti-Graft and Corrupt Practices

Act;

4.Plunder under Republic Act No.7080, as amended;5.Robbery and extortion under Articles 294,295,296,299,300,301 and302 of the Revised Penal Code, as amended;

f. Jueteng and Masiao punished as illegal gambling under Presidential

Decree No.1602;

g. Piracy on the high seas under the Revised Renal Code, as amendedand Presidential Decree No.532;

h. Qualified theft under Article 310 of the Revised Penal Code, as

amended; (9) Swindling under Article 315 of the Revised Penal Code, as

amended;

i. Smuggling under Republic Act Nos. 455 and 1937; j. Violations underRepublic Act No.8792, otherwise known as the

Electronic Commerce Act of 2000; k. Hijacking and other violations underRepublic Act No.6235; destructive arson and murder, as defined under theRevised Penal Code, as amended, including those perpetrated by

terrorists against non- combatant persons and similar targets;

l. Fraudulent practices and other violations under Republic Act No.8799.

otherwise known as the Securities Regulation Code of 2000;


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m. Felonies or offenses of a similar nature that are punishable under the

penal laws of other countries.

Prohibition against Political HarassmentSEC. 16, AMLA: Prohibitions Against Political Harassment. - This Act shall

not be used for political prosecution or harassment or as an instrument to

hamper competition in trade and commerce.

No case for money laundering may be filed against and no assets shall be

frozen, attached or forfeited to the prejudice of a candidate for an electoral

office during an election period.

Civil Forfeiture

SEC. 12, AMLA: Forfeiture Provisions.

1.Civil Forfeiture. - When there is a covered transaction report made, andthe court has, in a petition filed for the purpose ordered seizure of

any monetary instrument or property, in whole or in part, directly or

indirectly, related to said report, the Revised Rules of Court on civil

forfeiture shall apply.

2.Claim on Forfeited Assets. - Where the court has issued an order offorfeiture of the monetary instrument or property in a criminal

prosecution for any money laundering offense defined under Section4 of this Act, the offender or any other person claiming an interest

therein may apply, by verified petition, for a declaration that the

same legitimately belongs to him and for segregation or exclusion of

the monetary instrument or property corresponding thereto. The

verified petition shall be filed with the court which rendered the

judgement of conviction and order of forfeiture, within fifteen (15)

days from the date of the order or forfeiture, in default of which the

said order shall become final and executory. This provision shall

apply in both civil and criminal forfeiture.

Payment in Lieu of Forfeiture. - Where the court has issued an order of

forfeiture of the monetary instrument or property subject of a money

laundering offense defined under Section 4, and said order cannot be


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enforced because any particular monetary instrument or property cannot,

with due diligence, be located, or it has been substantially altered,

destroyed, diminished in value or otherwise rendered worthless by any act

or omission, directly or indirectly, attributable to the offender, or it has been

concealed, removed, converted or otherwise transferred to prevent the

same from being found or to avoid forfeiture thereof, or it is located outside

the Philippines or has been placed or brought outside the jurisdiction of the

court, or it has been commingled with other monetary instruments or

property belonging to either the offender himself or a third person or entity,

thereby rendering the same difficult to identify or be segregated for

purposes of forfeiture, the court may, instead of enforcing the order of

forfeiture of the monetary instrument or property or part thereof or interest

therein, accordingly order the convicted offender to pay an amount equal to

the value of said monetary instrument or property. This provision shall

apply in both civil and criminal forfeiture.

Cases

Republic v. Glasgow Credit and Collection Services, 542 SCRA 384

(2008) RULE 12 Forfeiture Provisions xxx xxx xxx Rule 12.2. When Civil Forfeiture May be Applied. When there is a

SUSPICIOUS TRANSACTION REPORT OR A COVERED

TRANSACTION REPORT DEEMED SUSPICIOUS AFTERINVESTIGATION BY THE AMLC, and the court has, in a petition filed for

the purpose, ordered the seizure of any monetary instrument or property,

in whole or in part, directly or indirectly, related to said report, the Revised

Rules of Court on civil forfeiture shall apply. RA 9160, as amended, and its

implementing rules and regulations lay down two conditions when applying

for civil forfeiture: (1) when there is a suspicious transaction report or acovered transaction report deemed suspicious after investigation by the

AMLC (Anti-Money Laundering Council)(2) the court has, in a petition filedfor the purpose, ordered the seizure of any monetary instrument or

property, in whole or in part, directly or indirectly, related to said report. Since account of Glasgow in CSB was (1) covered by several suspicious

transaction reports and (2) placed under the control of the trial court upon

the issuance of the writ of preliminary injunction, the conditions provided in

RA 9160 were satisfied. Hence, the Republic, represented by the AMCL,

properly instituted the complaint for civil forfeiture. Whether or not there is


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truth in the allegation that account of Glasgow contains the proceeds of

unlawful activities is an evidentiary matter that may be proven during trial.

The complaint, however, did not even have to show or allege that Glasgow

had been implicated in a conviction for, or the commission of, the unlawful

activities of estafa and violation of the Securities Regulation Code. Acriminal conviction for an unlawful activity is not a prerequisite for the

institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt

for an unlawful activity is not an essential element of civil

forfeiture.Thus, regardless of the absence, pendency or outcome of acriminal prosecution for the unlawful activity or for money laundering, an

action for civil forfeiture may be separately and independently prosecuted

and resolved. - There was no failure to prosecute on the part of the Republic.

Immediately after the complaint was filed, the trial court ordered the

process server to serve summons to Glasgow. The subpoena to Glasgow

was, however, returned unserved as Glasgow "could no longer be found at

its given address" and had moved out of the building. Republic then filed a

motion for issuance of alias summons and leave of court to serve

summons by publication. The court archived the case for failure to cause

service of alias summons, still, the Republic motioned the case to be

reinstated. Meanwhile, the Republic continued to exert efforts to obtain

information from other government agencies on the whereabouts or current

status of respondent Glasgow. Its efforts, however, proved futile. The alias

summons was again unserved. It was then that Glasgow filed the motion todismiss. Given these circumstances, how could the Republic be faulted forfailure to prosecute the complaint for civil forfeiture? While there wasadmittedly a delay in the proceeding, it could not be entirely or primarily

ascribed to the Republic. That Glasgows whereabouts could not be

ascertained was not only beyond the Republics control, it was also

attributable to Glasgow which left its principal office address without

informing the Securities and Exchange Commission or any official

regulatory body of its new address. Moreover, as early as October 8, 2003,

the Republic was already seeking leave of court to serve summons by

publication. ADDINTIONAL RULING: the service of summons may be made by

publication in cases of civil forfeiture as they are proceedings in rem. The

Rules of Procedure in Cases of Civil Forfeiture also allows summons by

publication in cases where the whereabouts of the owner are unknown and

cannot be ascertained by diligent inquiry.


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Freezing of Accounts SEC. 10, AMLA: Authority to Freeze. - Upon determination that probable

cause .exists that any deposit or similar account is in any way related to anunlawful activity, the AMLC may issue a freeze order, which shall be

effective immediately, on the account for a period not exceeding fifteen

(15) days. Notice to the depositor that his account has been frozen shall be

issued simultaneously with the issuance of the freeze order. The depositor

shall have seventy-two (72) hours upon receipt of the notice to explain why

the freeze order should be lifted. The AMLC has seventy-two (72) hours to

dispose of the depositor's explanation. If it fails to act within seventy-two

(72) hours from receipt of the depositors explanation, the freeze order

shall automatically be dissolved. The fifteen (15)-day freeze order of the

AMLC may be extended upon order of the court, provided that the fifteen(15)-day period shall be tolled pending the court's decision to extend the

period. No court shall issue a temporary restraining order or writ of injunction

against any freeze order issued by the AMLC except the Court of

Appeals or the Supreme Court.

CasesRepublic v. Eugenio

ISSUE

Whether a bank inquiry order issued in accordance with section 10 AMLA

may be stayed with injunction.RULING

YES . Under this section, the AMLC may file an application ex parte, with

the CA, and upon determination of probable cause, they may issue a

freeze order effective immediately. This is to prevent funds that is relatedto any money-laundering from being misused while the case is being tried.

It is ex parte because the fact of freezing the account must be kept secret

from the owner, else the funds may just be moved elsewhere before the

freeze order may be issued. Since the application of AMLC has nothing todo with any of the provided enumerations under Section 11, it must prove

that there is probable cause with the case, in order to inquire into the bank


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accounts. Probable cause may only be decided by the courts (Art III, Sec 2

of Constitution). Section 10 contains the application for ex parte, but it is

connected to freezing of accounts. This must be done ex parte, since

notifying the accused my cause him to disburse the account before the

order freezing the account is issued. Section 11 does not contain the

application for ex parte, for the fact that there is nothing wrong with the

accused knowing that his accounts are being checked. It is immaterial for

the accused to know that his accounts are being checked, since he cannot

hide the bank records to prove that the accounts are linked to the crime

imputed against him. Hence, using the ex parte application found in section

10 in inquiring into bank accounts (section 11) may be stayed with

injunction.

Examination of Accounts

SEC. 11, AMLA: Authority to Inquire into Bank Deposits.

- Notwithstanding the provisions of Republic Act No.1405, as amended; Republic Act No. 6426, as amended;

Republic Act No. 8791, and other laws, the AMLC may

inquire into or examine any particular deposit or

investment with any banking institution or non- bankfinancial institution upon order of any competent court

in cases of violation of this Act when it has been

established that there is probable cause that thedeposits or investments involved are in any way relatedto a money laundering offense: Provided, That this

provision shall not apply to deposits and investments

made prior to the effectivity of this Act. AMLA: Mutual

Assistance among States. 1. Request for assistancefrom a Foreign State. - Where a foreign State makes a

request for assistance in the investigation orprosecution of a money laundering offense, the AMLC

may execute the request or refuse to execute the same

and inform the foreign State of any valid reason for not

executing the request or for delaying the executionthereof. The principles of mutuality and reciprocity

shall, for this purpose, be at all times recognized.

Requirements for Requests for Mutual Assistance from ForeignStates.


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- A request for mutual assistance from a foreign State must (1)

confirm that an investigation or prosecution is being conducted inrespect of a money launderer named therein or that he has beenconvicted of any money laundering offense; (2) state the groundson which any person is being investigated or prosecuted for money

laundering or the details of his conviction; (3) gives sufficientparticulars as to the identity of said person; (4) give particularssufficient to identify any covered institution believed to have any

information, document, material or object which may be of

assistance to the investigation or prosecution; (5) ask from the

covered institution concerned any information, document, materialor object which may be of assistance to the investigation or

prosecution; (6) specify the manner in which and to whom said

information, document, material or object detained pursuant to said

request, is to be produced; (7) give all the particulars necessary forthe issuance by the court in the requested State of the writs, orders

or processes needed by the requesting State; and (8) contain such

other information as may assist in the execution of the request.

banking notes (finals)

Documents