Philippine Deposit Insurance Corporation

Philippine Deposit Insurance banking system, and PROTECT it

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

STATE POLICY (S2) Section 3 – Composition of

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

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Philippine Deposit Insurance Corporation
2. Governor of BSP – Ex Officio
Member
3. Pres. of the Corp. (appointed)-
Vice Chairman (Chief
Executive Officer of the
Corporation)
4. 4 members from the private
sector
- “The presence of four (4)
members shall constitute a
quorum. All decisions of the
Board of Directors shall
require the concurrence of at
least four (4) members.
Asset (Sec.5)
refers to movable, immovable,
tangible, or intangible resources or
properties over which a bank has an
established or equitable interest,
including the proceeds of the sale of
its bank and branch licenses
subject to the approval of the
Bangko Sentral ng Pilipinas.
Asset Distribution plans
(Sec. 5)
refers to the plan of distribution of
the assets of a closed bank to its
creditors, based on its estimated
realizable value as of a certain cut-
off date, prepared in accordance
with the Rules on Concurrence and
Preference of Credits under the Civil
Code or other laws.
“An asset distribution plan may be
partial when it pertains to the
distribution of a portion or some of
the assets of the closed bank, or
final when it pertains to the
distribution of all the assets of the
closed bank.
4 kinds of Deposits which
cannot be insured by the
PDIC (Sec. 5) (IF-U2)
The Corporation shall not pay
deposit insurance for the following
accounts or transactions:
(1) Investment products such as
bonds and securities, trust accounts,
and other similar instruments;
(2) Deposit accounts or transactions
which are fictitious or fraudulent
as determined by the Corporation;
“(3) Deposit accounts or
transactions constituting, and/or
emanating from, unsafe and
unsound banking practice/s, as
determined by the Corporation, in
consultation with the Bangko
Sentral ng Pilipinas, after due notice
and hearing, and publication of a
directive to cease and desist issued
by the Corporation against such
deposit accounts, transactions or
practices; and
“(4) Deposits that are determined to
be the proceeds of an unlawful
activity as defined under Republic
Act No. 9160, as amended.
Liquidation court (Sec. 5 (l))
refers to the Regional Trial Court
(RTC) of general jurisdiction where
the petition for assistance in the
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Philippine Deposit Insurance Corporation
liquidation of a closed bank is filed
and given due course.
Deposit Liabilities (Sec. 6)
“SEC. 6. The deposit liabilities of
any bank 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.
“Whenever a bank is determined by
the Bangko Sentral ng Pilipinas to
be capital deficient, the
Corporation may conduct an
insurance risk evaluation on the
bank to enable it to assess the risks
to the Deposit Insurance Fund
(DIF). Such evaluation may include
the determination of:
(i) the fair market value of the
assets and liabilities of a
bank; or
(ii) the risk classification of a
bank; or
(iii) possible resolution modes
under Section 11 of this
Act, subject to such terms
and conditions as the PDIC
Board may prescribe.”
Examination and
Investigation (Sec. 8
Unsound Banking Practices)
(a) Whenever upon examination by
the Corporation into the condition of
any insured bank, it shall be
disclosed that an insured bank or
its directors or agents have
committed, are committing or
about to commit unsafe or
unsound practices in conducting
the business of the bank, or have
violated, are violating or about to
violate any provisions of any law
or regulation to which the insured
bank is subject, the Board of
Directors shall submit the report
of the examination to the
Monetary Board to secure
corrective action thereon. If no such
corrective action is taken by the
Monetary Board within 45 days
from the submission of the report,
the Board of Directors shall, motu
proprio, institute corrective action
which it deems necessary. The
Board of Directors may thereafter
issue a cease and desist order, and
require the bank or its directors or
agents concerned to correct the
practices or violations within 45
days. However, if the practice or
violation is likely to cause
insolvency or substantial dissipation
of assets or earnings of the bank, or
is likely to seriously weaken the
condition of the bank or otherwise
seriously prejudice the interests of
its depositors and the Corporation,
the period to take corrective action
shall not be more than fifteen (15)
days. The order may also include
the imposition of fines provided in
Section 26(g) hereof. The Board of
Directors shall duly inform the
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Philippine Deposit Insurance Corporation
Monetary Board of the Bangko
Sentral ng Pilipinas of action it has
taken under this subsection with
respect to such practices or
violations.
(b) The actions and proceedings
provided in the preceding
subsections may be undertaken by
the Corporation if, in its opinion, an
insured bank or its directors or
agents have violated, are violating or
about to violate any provision of this
Act or any order, rule or instruction
issued by the Corporation or any
written condition imposed by the
Corporation in connection with any
transaction with or grant by the
Corporation.
(c) The Corporation may terminate
the insured status of any bank that
fails or refuses to comply, within
thirty (30) days from notice, with
any cease-and-desist order issued
by the Corporation, or with any
corrective action imposed by the
Monetary Board, under this section
pertaining to a deposit-related
unsafe and/or unsound banking
practice.
Such termination shall be final
and executory, and shall be
effective upon publication of the
notice of termination in a newspaper
of general circulation.
[EXC: File Petition for Certiorari
ground that the action was taken in
excess of jurisdiction or with such
grave abuse of discretion as to
amount to a lack or excess of
jurisdiction -> File in CA
NOTE: The petition for certiorari
may only be filed within thirty (30)
days from notice of denial of claim
for deposit insurance.
EXC to EXC: SC – unique cases
(extreme urgency or involves a
constitutional issue)]
The deposits of each depositor in the
bank on the effective date of the
termination of insurance coverage,
less all subsequent withdrawals,
shall continue to be insured up to
the maximum deposit insurance
coverage for a period of one hundred
eighty (180) days. Additions to, or
renewal of, existing deposits and
new deposits in such bank after the
effective date of termination of
insured status of the bank shall not
be insured by the Corporation.
The bank shall not advertise or
represent that additions to, or
renewal of, existing deposits and
new deposits made after the effective
date of termination aye covered by
deposit insurance.
Two types of Examination
(RI No. 2009-05 or the Rules
and Regulations on
Examination of Banks. Sec.
2)
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Philippine Deposit Insurance Corporation

a. Regular Examination - An valuation reserves on loans and

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

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

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

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Philippine Deposit Insurance Corporation
From the above-cited provisions, it
is clear that the process of
examination covers a wider scope
than that of investigation.
Examination involves an evaluation
of the current status of a bank and
determines its compliance with the
set standards regarding solvency,
liquidity, asset valuation, operations,
systems, management, and
compliance with banking laws, rules
and regulations.
Investigation, on the other hand, is
conducted based on specific findings
of certain acts or omissions which
are subject of a complaint or a Final
Report of Examination.
Clearly, investigation does not
involve a general evaluation of the
status of a bank. An investigation
zeroes in on specific acts and
omissions uncovered via an
examination, or which are cited in
a complaint.
An examination entails a review of
essentially all the functions and
facets of a bank and its operation. It
necessitates poring through
voluminous documents, and
requires a detailed evaluation
thereof. Such a process then
involves an intrusion into a banks
records.
In contrast, although it also involves
a detailed evaluation, an
investigation centers on specific acts
of omissions and, thus, requires a
less invasive assessment.
An examination of banks requires
the prior consent of the Monetary
Board, whereas an investigation
based on an examination report,
does not.
Sec. 9
The provisions of Presidential
Decree No. 1445, as amended,
Executive Order No. 292, and other
similar laws notwithstanding, to
compromise, condone or release,
in whole or in part, any claim or
settled liability to the Corporation,
regardless of the amount involved,
under such terms and conditions as
may be imposed by the Board of
Directors to protect the interest of
the Corporation, and to write off the
Corporation’s receivables and assets
which are no longer recoverable or
realizable.
To determine qualified interested
acquirers or investors for any of the
modes of resolution or liquidation of
banks
To determine the appropriate
resolution method and to implement
the same for a bank subject of
resolution
To determine the appropriate mode
of liquidation of a closed bank and
to implement the same.
Powers of the receiver (Sec. 13(b))
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Philippine Deposit Insurance Corporation
(a) The receiver is authorized to
adopt and implement, without need
of consent of the stockholders,
board of directors, creditors or
depositors of the closed bank, any
or a combination of the following
modes of liquidation:
(1) Conventional liquidation; and
(2) Purchase of assets and/or
assumption of liabilities.
(b) In addition to the powers of a
receiver provided under existing
laws, the Corporation, as receiver
of a closed bank, is empowered to:
“(1) Represent and act for and on
behalf of the closed bank;
“(2) Gather and take charge of all
the assets, records and affairs of the
closed bank, and administer the
same for the benefit of its creditors;
“(3) Convert the assets of the closed
bank to cash or other forms of liquid
assets, as far as practicable;
“(4) Bring suits to enforce liabilities
of the directors, officers, employees,
agents of the closed bank and other
entities related or connected to the
closed bank or to collect, recover,
and preserve all assets, including
assets over which the bank has
equitable interest;
“(5) Appoint or hire persons or
entities of recognized competence in
banking, finance, asset management
or remedial management, as its
deputies, assistants or agents, to
perform such powers and functions
of the Corporation as receiver of the
closed bank, or assist in the
performance thereof;
“(6) Appoint or hire persons or
entities of recognized competence in
forensic and fraud investigations;
“(7) Pay accrued utilities, rentals
and salaries of personnel of the
closed bank for a period not
exceeding three (3) months, from
available funds of the closed bank;
“(8) Collect loans and other claims of
the closed bank and for this purpose,
modify, compromise or restructure
the terms and conditions of such
loans or claims as may be deemed
advantageous to the interests of the
creditors of the closed bank;
“(9) Hire or retain private counsel as
may be necessary;
“(10) Borrow or obtain a loan, or
mortgage, pledge or encumber any
asset of the closed bank, when
necessary to preserve or prevent
dissipation of the assets, or to
redeem foreclosed assets of the
closed bank, or to minimize losses
to its depositors and creditors;
“(11) If the stipulated interest rate
on deposits is unusually high
compared with prevailing applicable
interest rates, the Corporation as
receiver, may exercise such powers
which may include a reduction of
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Philippine Deposit Insurance Corporation
the interest rate to a reasonable
rate: Provided, That any
modifications or reductions shall
apply only to earned and unpaid
interest;
“(12) Utilize available funds of the
bank, including funds generated by
the receiver from the conversion of
assets to pay for reasonable costs
and expenses incurred for the
preservation of the assets, and
liquidation of, the closed bank,
without need for approval of the
liquidation court;
“For banks with insufficient funds,
the Corporation is authorized to
advance the foregoing costs and
expenses, and collect payment, as
and when funds become available.
“(13) Charge reasonable fees for the
liquidation of the bank from the
assets of the bank: Provided, That
payment of these fees, including any
unpaid advances under the
immediately preceding paragraph,
shall be subject to approval by the
liquidation court;
“(14) Distribute the available assets
of the closed bank, in cash or in
kind, to its creditors in accordance
with the Rules on Concurrence and
Preference of Credits under the Civil
Code or other laws;
“(15) Dispose records of the closed
bank that are no longer needed in
the liquidation in accordance with
guidelines set by the PDIC Board of
Directors, notwithstanding the laws
on archival period and disposal of
records; and
“(16) Exercise such other powers as
are inherent and necessary for the
effective discharge of the duties of
the Corporation as receiver.
Petition for a closed bank
A petition for assistance in the
liquidation is a special proceeding
for the liquidation of a closed bank,
and includes the declaration of the
concomitant right of its creditors
and the order of payment of their
valid claims in the disposition of its
assets.
“Any proceeding initiated under this
section shall be considered in rem.
Jurisdiction over all persons affected
by the proceeding shall be
considered as acquired upon
publication of the order setting the
case for initial hearing in any
newspaper of general circulation in
the Philippines.
Periods to file
Insured depositors may claim for
insured deposit 60 days from the
date of the publication of notice.
Q: Can you transact business
when you have a receiver?
A: NO.
Note: 2-year period – The depositor
of a closed bank has 24 months
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Philippine Deposit Insurance Corporation
from the date of bank takeover to
file his deposit insurance claim.
Permanent Insurance Fund
(Sec. 17)
3 billion pesos
NOTE: The risk insured against is
the closure of a bank.
Enhanced Receivership and
Liquidation Power
allows the receiver, among others, to
suspend the powers and allowances
of bank directors upon closure;
place bank assets in custogia legis
and prohibit garnishment of such
assets; and to terminate the
employment of bank officers and
employees of a closed bank, among
others.
(preferred credit likened to a tax due
to a government)
7 reasons for appointment of
a receiver
---
“Deposit” (Sec. 5(g))
means the unpaid balance of
money or its equivalent received by
a bank in the usual course of
business and for which it has given
or is obliged to give credit to a
commercial, checking, savings, time
or thrift account, evidenced by a
passbook, certificate of deposit, or
other evidence of deposit issued in
accordance with Bangko Sentral ng
Pilipinas rules and regulations and
other applicable laws.
Determination of the amount due
the depositor
(Atty. Rondez Notes)
1. Insured deposits under the law
means the net amount due the
depositor for any deposits in the
insured bank after deducting any
offsets but should not exceed PHP
500,000.00.
2. Hence, if a depositor has two or
more accounts maintained in the
same right and capacity, the
coverage of PHP 500,000.00 shall be
held to apply to the sum of all such
accounts.
3. A joint account (whether “and/or,
“or”, “and” shall be insured
separately from any individual-
owned account.
NOTE: If held by a juridical person
or entity with a natural person,
the account shall be presumed to
belong to the juridical person.
3.1 Accounts under joint ownership
is considered equally shared among
co-depositors unless otherwise
indicated in the deposit document.
Proof of Claims
ORIGINAL EVIDENCE OF
DEPOSITS such as savings
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Philippine Deposit Insurance Corporation
passbook, certificate of time deposit,
bank statement, used or unused
checks, or ATM card.
NOTE: Claim filed -> PDIC must
comply within 6 months (beyond:
Arresto mayor)
Waiver
Implication of upgrading insured
deposit for a period of 2 years
constitutes a waiver.
Splitting of Deposits
(Sec. 26)
Splitting of deposits or creation of
fictitious or fraudulent loans or
deposit accounts.
“Splitting of deposits occurs
whenever a deposit account with an
outstanding balance of more than
the statutory maximum amount of
insured deposit maintained under
the name of natural or juridical
persons is broken down and
transferred into two (2) or more
accounts in the name/s of natural
or juridical persons or entities who
have no beneficial ownership on
transferred deposits in their names
within 120 days immediately
preceding or during a bank-
declared bank holiday, or
immediately preceding a closure
order issued by the Monetary Board
of the Bangko Sentral ng Pilipinas
for the purpose of availing of the
maximum deposit insurance
coverage.
Basis of PDIC liability
Existence of deposits
Coverage of Deposit
Q: Cash, Time Deposit, Manager’s
check. Which is not considered a
deposit?
A: Manager’s check???
NOTE: Trust funds as it was was
expressly excluded from the term
“deposit” under R.A. 7400 and
money market placement as it is not
included in the term “deposit.”
Exclusions from deposit insurance
coverage as stipulated in R.A. No.
9576:
1. Investment products such as
bonds, securities and trust
accounts;
2. Deposit accounts which are
unfunded, fictitious or
fraudulent;
3. Deposit products constituting
or emanating from unsafe and
unsound banking practices;
4. Deposits that are determined
to be proceeds of an unlawful
activity as defined under the
Anti-Money Laundering Law.
Predetermination of Time
Deposit
If time deposit is terminated prior to
the time of renewal of the time
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Philippine Deposit Insurance Corporation
deposit, divide time deposit in 28.
(No transaction out??)
Note: Insider information must not
be a mere conjecture.
Insured Deposit (Sec. 5(j))
means the amount due to any
bonafide depositor for legitimate
deposits in an insured bank as of
the date of closure but not to exceed
Five hundred thousand pesos
(P500,000.00). Such amount shall
be determined according to such
regulations as the Board of
Directors may prescribe.
Per Bank basis not per
branch
CASES:
CASE 1: REPUBLIC OF THE
PHILIPPINES, petitioner, vs.
COURT OF APPEALS and
PHILIPPINE COMMERCIAL
AND INTERNATIONAL BANK
(Santa Ana Branch Davao
City),* respondents.
DOCTRINE: Prescription of
action does not run against the
government.
FACTS:
On December 28, 1988, a
complaint for escheatwas filed
by petitioner, Republic of the
Philippines, with the Regional
Trial Court of Davao City
against several banks which
had branches within the
jurisdiction of the said court.
The complaint alleged that
pursuant to Act No. 3936 as
amended by P.D. 679, the
respective managers of the
defendant banks submitted to
the Treasurer of the Republic
of the Philippines separate
statements prepared under
oath which listed all deposits
and credits held by them in
favor of depositors or creditors
either known to be dead, have
not been heard from, or have
not made depositors or
withdrawals for ten years or
more since December 31, 1970.
The complaint prayed that
after due notice to the
defendant banks, and after
hearing, judgment be rendered
declaring that the deposits,
credits and unpaid balances in
question be escheated to
petitioner, commanding
defendant banks to forthwith
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deposit the same with the
Treasurer of the Philippines.
On April 12, 1989, the lower
court issued an order directing
petitioner to show cause why
the complaint should not be
dismissed for failure to state a
cause of action. According to
the order, the complaint
contained no allegation that
defendant banks have
complied with two of the
conditions in Section 2 of Act
No. 3936, compliance with the
requirements being necessary
for the complaint to prosper.
On April 27, 1989, petitioner
submitted its manifestation
and motion to allow
amendment of the petition to
allege compliance with the
conditions set forth in Section
2 of Act. No. 3936 as amended
by P.D. 679 (Unclaimed
Balances Law).
The amended complaint prayed
that judgment be rendered
ordering that the amount of
P97,263.38, deposited with the
defendant banks by depositors
who are known to be dead or
have not made further deposits
or withdrawals during the
preceding ten years or more be
escheated in favor of the
Republic of the Philippines in
accordance with Section 1, Act
3936 as amended by P.D. 679.
The trial court found the
amendment sufficient and
issued an order dated June 7,
1989 requiring petitioner to
publish a notice in the
Mindanao Forum Standard
once a week for two
consecutive weeks, containing
the summons, notice to the
public, the amended petition
incorporated in the summons
and the list of unclaimed
balances. The notice was
estimated to occupy 27 pages
of the said newspaper at an
estimated cost of P50,000.00.
On July 11, 1989, petitioner
submitted a manifestation to
the lower court praying that
the publication of the list of the
unclaimed balances be
dispensed with. Petitioner
posited that under Section 3,
Act No. 3936, only the
following are required to be
published: (1) summons to
respondent banks; and (2)
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Philippine Deposit Insurance Corporation
notice to all persons other than
those named defendants
therein. Petitioner submitted
that to require it to publish the
names and list of unclaimed
balances would only result in
additional and unnecessary
expense to the government.
On August 1, 1989, the trial
court DISMISSED the case
WITHOUT PREJUDICE.
Petitioner filed a motion for
reconsideration of the above
Order, which was denied by
the lower court for lack of
merit.
Subsequently, the trial court
issued an Order dated October
31, 1989 dismissing Civil Case
No. 19488-89 without
prejudice for plaintiffs failure
to agree to the required
publication and shoulder the
costs thereof.
Petitioner received a copy of
the aforesaid Order on
November 15, 1989. On
January 10, 1990, petitioner
filed with the Court of Appeals
a petition for mandamus and
certiorari, alleging grave abuse
of discretion on the part of
respondent judge in ordering
the publication of the list of
unclaimed balances. The
petition for certiorari and
mandamus was dismissed by
the Court of Appeals, on the
ground that the proper remedy
was ordinary appeal. Thus:
It is axiomatic that the
extraordinary remedy of
certiorari is available only in
the absence of a plain, speedy
and adequate remedy like
appeal. The order of the
respondent court dated
October 31, 1989 dismissing
the case is final and appealable
(Monares vs. CWA Enterpises,
105 Phil. 1333; Vol. I,
Francisco, Rules of Court, at
pp. 967-968). No timely appeal
having been taken therefrom,
the same became final and
executory and this petition for
certiorari filed on January 10,
1989 to review the
interlocutory orders issued by
the court before the case was
dismissed can no longer be
entertained.
ISSUES:
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Philippine Deposit Insurance Corporation

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

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

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

is no reason why the question is correctible in an ordinary

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

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Philippine Deposit Insurance Corporation

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

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

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Philippine Deposit Insurance Corporation
said report certain items
amounting to P18,589.89
which, properly speaking, are
not credits or deposits within
the contemplation of Act No.
3936. Hence, it prayed that
said items be not included in
the claim of plaintiff.
After hearing the court a
quo rendered judgment holding
that cashier's is or manager's
checks and demand drafts as
those which defendant wants
excluded from the complaint
come within the purview of Act
No. 3936, but not the
telegraphic transfer payment
which orders are of different
category. Consequently, the
complaint was dismissed with
regard to the latter. But, after a
motion to reconsider was filed
by defendant, the court a
quo changed its view and held
that even said demand drafts
do not come within the purview
of said Act and so amended its
decision accordingly. Plaintiff
has appealed.lawphil.net
Section 1, Act No. 3936,
provides:
Section 1. "Unclaimed
balances" within the meaning
of this Act shall include credits
or deposits of money, bullion,
security or other evidence of
indebtedness of any kind, and
interest thereon with banks, as
hereinafter defined, in favor of
any person unheard from for a
period of ten years or more.
Such unclaimed balances,
together with the increase and
proceeds thereof, shall be
deposited with the Insular
Treasure to the credit of the
Government of the Philippine
Islands to be as the Philippine
Legislature may direct.
It would appear that the term
"unclaimed balances" that are
subject to escheat include
credits or deposits money, or
other evidence of indebtedness
of any kind with banks, in
favor of any person unheard
from for a period of 10 years or
more. And as correctly stated
by the trial court, the term
"credit" in its usual meaning is
a sum credited on the books of
a company to a person who
appears to be entitled to it. It
presupposes a creditor-debtor
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Philippine Deposit Insurance Corporation
relationship, and may be said
to imply ability, by reason of
property or estates, to make a
promised payment ( In re Ford,
14 F. 2d 848, 849). It is the
correlative to debt or
indebtedness, and that which
is due to any person, a
distinguished from that which
he owes (Mountain Motor Co.
vs. Solof, 124 S.E., 824, 825;
Eric vs. Walsh, 61 Atl. 2d 1,
4; See also Libby vs. Hopkins,
104 U.S. 303, 309; Prudential
Insurance Co. of America vs.
Nelson, 101 F. 2d, 441, 443;
Barnes vs. Treat, 7 Mass. 271,
274). The same is true with the
term "deposits" in banks where
the relationship created
between the depositor and the
bank is that of creditor and
debtor (Article 1980, Civil
Code; Gullas vs. National Bank,
62 Phil. 915; Gopoco Grocery,
et al. vs. Pacific Coast Biscuit
Co., et al., 65 Phil. 443).
ISSUES:
1. Do demand draft and
telegraphic orders come
within the meaning of the
term "credits" or
"deposits" employed in
the law?
2. Can their import be
considered as a sum
credited on the books of
the bank to a person who
appears to be entitled to
it?
3. Do they create a creditor-
debtor relationship
between drawee and the
payee?
HELD:
To begin with, we may say that
a demand draft is a bill of
exchange payable on demand
Considered as a bill of
exchange, a draft is said to be,
like the former, an open letter
of request from, and an order
by, one person on another to
pay a sum of money therein
mentioned to a third person,
on demand or at a future time
therein. As a matter of fact, the
term "draft" is often used, and
is the common term, for all
bills of exchange. And the
words "draft" and "bill of
exchange" are used
indiscriminately.
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Philippine Deposit Insurance Corporation
On the other hand, a bill of
exchange within the meaning
of our Negotiable Instruments
Law (Act No. 2031) does not
operate as an assignment of
funds in the hands of the
drawee who is not liable on the
instrument until he accepts it.
This is the clear import of
Section 127. It says: "A bill of
exchange of itself does not
operate as an assignment of
the funds in the hands of the
drawee available for the
payment thereon and the
drawee is not liable on the bill
unless and until he accepts the
same." In other words, in order
that a drawee may be liable on
the draft and then become
obligated to the payee it is
necessary that he first accepts
the same. In fact, our law
requires that with regard to
drafts or bills of exchange
there is need that they be
presented either for acceptance
or for payment within a
reasonable time after their
issuance or after their last
negotiation thereof as the case
may be (Section 71, Act 2031).
Failure to make such
presentment will discharge the
drawer from liability or to the
extent of the loss caused by
the delay (Section 186, Ibid.)
Since it is admitted that the
demand drafts herein involved
have not been presented either
for acceptance or for payment,
the inevitable consequence is
that the appellee bank never
had any chance of accepting or
rejecting them. Verily, appellee
bank never became a debtor of
the payee concerned and as
such the aforesaid drafts
cannot be considered as
credits subject to escheat
within the meaning of the law.
But a demand draft is very
different from a cashier's or
manager's cheek, contrary to
appellant's pretense, for it has
been held that the latter is a
primary obligation of the bank
which issues it and constitutes
its written promise to pay upon
demand. Thus, a cashier's
check has been clearly
characterized in In Re Bank of
the United States, 277 N.Y.S.
96. 100, as follows:
A cashier's check issued by a
bank, however, is not an
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Philippine Deposit Insurance Corporation
ordinary draft. The latter is a
bill of exchange payable
demand. It is an order upon a
third party purporting to
drawn upon a deposit of
funds. Drinkall v. Movious State
Bank, 11 N.D. 10, 88 N.W. 724,
57 L.R.A. 341, 95 Am. St. Rep.
693; State v. Tyler County
State Bank (Tex. Com. App.)
277 S.W. 625, 42 A.L.R. 1347.
A cashier's check is of a very
different character. It is the
primary obligation of the bank
which issues it (Nissenbaum v.
State, 38 Ga. App. 253, S.E.
776) and constitutes its written
promise to pay upon demand
(Steinmetz v. Schultz, 59 S.D.
603, 241 N.W.
734)....lawphil.net
The following definitions cited
by appellant also confirm this
view:
A cashier's check is a check of
the bank's cashier on his or
another bank. It is in effect a
bill of exchange drawn by a
bank on itself and accepted in
advance by the act of issuance
(10 C.J.S. 409).
A cashier's check issued on
request of a depositor is the
substantial equivalent of a
certified check and the deposit
represented by the check
passes to the credit of the
checkholder, who is thereafter
a depositor to that amount
(Lummus Cotton Gin Co. v.
Walker, 70 So. 754, 756, 195
Ala. 552).
A cashier's check, being merely
a bill of exchange drawn by a
bank on itself, and accepted in
advance by the act of issuance,
is not subject to countermand
by the payee after indorsement,
and has the same legal effects
as a certificate deposit or a
certified check (Walker v.
Sellers, 77 So. 715, 201 Ala.
189).
A demand draft is not therefore
of the same category as a
cashier's check which should
come within the purview of the
law.
The case, however, is different
with regard to telegraphic
payment order. It is said that
as the transaction is for the
establishment of a telegraphic
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Philippine Deposit Insurance Corporation

or cable transfer the agreement remain for sometime in the

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

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