Polytechnic University of the Philippines

Sta. Mesa, Manila

LAW ON SECRECY OF BANK DEPOSITS AND UNCLAIMED BALANCES LAW

GROUP 2
Masipag, Monica
Cabug, Jissa Mae
Del Corro, Kimberly
Dela Cruz, Marielle
Francisco, Jona Thea
Gallardo, Sean
Joaquin, Aira Jean
Liguid, Mary Joy
Pagsuyoin. Jasmin
Tamayo, Josenico

REPUBLIC ACT NO.1405

SECRECY OF BANK DEPOSITS

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS
WITH ANY BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR
Section 1. It is hereby declared to be the policy of the Government to give encouragement to the
people to deposit their money in banking institutions and to discourage private hoarding so that
the same may be properly utilized by banks in authorized loans to assist in the economic
development of the country.
Section 2. All deposits of whatever 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 when the examination is made in the course of a special or general
examination of a bank and is specifically authorized by the Monetary Board after being satisfied
that there is reasonable ground to believe that a bank fraud 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, or when the examination is 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, or 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. (As amended by PD No.1792, January 16, 1981)
Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to
any person other than those mentioned in Section two hereof any information concerning said
deposits.
Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations
which are inconsistent with the provisions of this Act are hereby repealed.
Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of
not more than five years or a fine of not more than twenty thousand pesos or both, in the
discretion of the court.
Section 6. This Act shall take effect upon its approval.
Approved: September 9, 1955

The purpose of this law is to encourage deposit in banking institutions; and discourage private
hoarding so that banks may lend such funds and assist in the economic development of the
country. (Sec. 1 Rep. Act No. 1405)

PROHIBITED ACTS:
1.Examination/inquiry/looking into all deposits of whatever nature with banks or banking
institutions in the Philippines (including investment in bonds issued by the government) by any
person, government official or office (Sec. 2)
(i) Deposits refer to money or funds placed with a bank that can be withdrawn on the depositors
order or demand, such as deposit accounts in the form of savings, current and time deposits.
Deposits are characterized as being in the nature of a simple loan. The placing of deposits in a
bank creates a creditor-debtor relationship between the depositor and the bank. As such, the
bank, being the debtor, has the obligation to pay a certain sum of money to the depositor, being
the creditor.
(ii) Investments in Government Bonds refer to investments in bonds issued by the Government
of the Philippines, its political subdivisions and its instrumentalities. Government bonds are debt
securities which are unconditional obligations of the State, and backed by its full taxing power.
Government bonds include treasury bills, treasury notes, retail treasury bonds, dollar linked peso
notes, and other risk-free bonds.
2. Disclosure by any official or employee of any banking institution to any authorized person of
any information concerning said deposit. (Sec. 3)

THE FOLLOWING ARE LIABLE UNDER THIS LAW:

(i) Any person or government official who, or any government bureau or office that, examines,
inquires or looks into a bank deposit or government bond investment in any of the instances not
allowed in Section 2;
(ii) Any official or employee of a banking institution who makes a disclosure concerning bank
deposits to another in any instance not allowed by law (Sec. 3, Rep. Act No. 1405); and
(iii) Any person who commits a violation of any of the provisions of the law (Sec. 5, Rep. Act
No. 1405). Any bank official, director, employee or agent who discloses information relative to
funds or properties in the custody of the bank may also be held liable under the applicable
provisions of the General Banking Law, Thrift Banks Act and Rural Banks Act.

EXCEPTIONS UNDER THE LAW ON SECRECY OF BANK DEPOSITS

Section 2 of Republic Act No. 1405 provides that bank deposits and government bond
investments may be examined, inquired and looked into in the following instances:
(a) Upon written permission or consent in writing by the depositor. For consent to be valid, it
should be made knowingly, voluntarily and with sufficient awareness of the relevant
circumstances and likely consequences.
(b) In cases of impeachment of the President, Vice President, members of the Supreme Court,
members of the Constitutional Commission (Commission on Elections, Civil Service
Commission and Commission on Audit) and the Ombudsman for culpable violation of the
Constitution, treason, bribery, graft and corruption, other high crimes or betrayal of public trust.
(Art. XI, Sec. 2, 1987 Philippine Constitution)
(c) Upon order of a competent court in cases of bribery or dereliction of duty of public officials.
(d) In cases where the money deposited or invested is the subject matter of the litigation. The
money deposited should be the very thing in dispute. (Mellon Bank, N.A.v. Magsino, 190
S.C.R.A. 633 [1990])

PENALTIES FOR VIOLATION

The penalty of imprisonment of not more than 5 years or a fine of not more than 20,000 pesos or
both, in the discretion of the court shall be imposed upon any official or employee of a banking
institution who, upon conviction, was found to have violated R.A. 1405.

SAMPLE CASES
1. M, a newspaper columnist, while making a deposit in a bank, overheard a bank teller
informing a co-employee that G, a well-known public official, has just a few hundred pesos
in Gs bank account and that her check will probably bounce. M wrote about this information
in his newspaper column. G filed a complaint against M for unlawfully disclosing
information about her bank account. The suit will not prosper.
The Law on Secrecy of Bank Deposits does not penalize the mere receipt of information
about a bank account. M, having merely overheard the information on Gs account and not
having examined, inquired or looked into the said account cannot be penalized under Sec. 2
of the Bank Secrecy Law. Neither could he be penalized under Sec. 3 of the Bank Secrecy
Law since Sec. 3 refers to disclosures made by officials or employees of banking institutions.

2. A has P10,000 in his savings account, P20,000 in his checking account, P30,000 in his
money market placement and P40,000 in a trust fund. Which of the accounts are covered by
the Secrecy of Bank Deposits Law?
Only the savings and checking account are covered. The money market placement and the
trust fund is not covered.
A bought some goods from a department store and paid with his personal check. The check
was dishonored. On the assumption that the department store did not know who A was, the
store manager inquired from the checks drawee bank the name of the dishonored check. The
drawee bank refused to disclose the name of the drawer invoking the Secrecy of Bank
Deposits Law. In this case, the bank is not justified in not divulging the name of the drawer to
the store manager. The store manager is merely inquiring as to the name of the drawer of the
check. To divulge the same would not in any way amount to disclosure of any information
concerning his deposits. Also, the inquiry is not an investigation of any balance in favor of
the drawer. To include such disclosure within the ambit of the prohibition would be unduly
straining and stretching the meaning of the Secrecy of Bank.

FIRST DIVISION

[G.R. No. 134699. December 23, 1999]

UNION BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and ALLIED
BANK CORPORATION, respondents.
DECISION
KAPUNAN, J.:
Section 2 of the Law on Secrecy of Bank Deposits, [1] 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 Board after being satisfied that there is reasonable
ground to believe that a bank fraud 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 of duty of public
officials, or
(6) In cases where the money deposited or invested in the subject matter of the litigation.
Whether or not the case at bar falls under the last exception is the issue in the instant
petition.
The facts are not disputed.
On March 21, 1990, a check (Check No. 11669677) dated March 31, 1990 in the amount of
One Million Pesos (P1,000,000.00) was drawn against Account No. 0111-01854-8 with private
respondent Allied Bank payable to the order of one Jose Ch. Alvarez. The payee deposited the
check with petitioner Union Bank who credited the P1,000,000.00 to the account of Mr.
Alvarez. On May 21, 1990, petitioner sent the check for clearing through the Philippine Clearing
House Corporation (PCHC). When the check was presented for payment, a clearing discrepancy
was committed by Union Banks clearing staff when the amount of One Million Pesos
(P1,000,000.00) was erroneously under-encoded to One Thousand Pesos (P1,000.00) only.
Petitioner only discovered the under-encoding almost a year later. Thus, on May 7, 1991,
Union Bank Notified Allied Bank of the discrepancy by way of a charge slip for Nine Hundred
Ninety-Nine Thousand Pesos (P999,000.00) for automatic debiting against the account of Allied
Bank. The latter, however, refused to accept the charge slip since [the] transaction was completed
per your [Union Banks] original instruction and clients account is now insufficiently funded.
Subsequently, Union Bank filed a complaint against Allied Bank before the PCHC
Arbitration Committee (Arbicom), praying that:
judgment be rendered in favor of plaintiff against defendant sentencing it to pay plaintiff:
1. The sum of NINE HUNDRED NINETY-NINE THOUSAND PESOS (P999,000.00);
2. The sum of THREE HUNDRED SIXTY-ONE AND FOUR HUNDRED EIGHTY AND
20/XX P361,480.20 as of October 9, 1991 representing reimbursements for opportunity losses
and interest at the rate of 24% per annum arising from actual losses sustained by plaintiff as of
May 21, 1990;
3. The amount for attorneys fees at the rate of 25% of any and all sums due;
4. Penalty Charges at the rate of 1/8 of 1% of P999,000.00 from May 22, 1990 until payment
thereof.
5. Exemplary and punitive damages against the defendant in such amounts as may be awarded by
this Tribunal in order to serve a lesson to all member-Banks under the PCHC umbrella to strictly
comply with the provisions thereof;

6. The costs of suit which includes filing fee in addition to litigation expenses which shall be
proven in the course of arbitration.
7. Such other damages they may be awarded by this Tribunal.[2]
Thereafter, Union Bank filed in the Regional Trial court (RTC) of Makati a petition for the
examination of Account No. 111-01854-8. Judgment on the arbitration case was held in abeyance
pending the resolution of said petition.
Upon motion of private respondent, the RTC dismissed Union Banks petition. The RTC held
that:
The case of the herein petitioner does not fall under any of the foregoing exceptions to warrant a
disclosure of or inquiry into the ledgers/books of account of Allied Checking Account No. 11101854-8. Needless to say, the complaint filed by herein petitioner against Allied Banking
Corporation before the Philippine Clearing House Corporation (PCHC) Arbitration Committee
and docketed therein as Arbicom Case No. 91-068 (Annex A, petition) is not one for bribery or
dereliction of duty of public officials much less is there any showing that the subject matter
thereof is the money deposited in the account in question. Petitioners complaint primarily hinges
on the alleged deliberate violation by Allied Bank Corporation of the provisions of the PCHC
Rule Book, Sec. 25[.]3, and as principal reliefs, it seeks for [sic] the recovery of amounts of
money as a consequence of an alleged under-coding of check amount to P1,000,000.00 and
damage[s] by way of loss of interest income.[3]
The Court of Appeals affirmed the dismissal of the petition, ruling that the case was not one
where the money deposited is the subject matter of the litigation.
Petitioner collecting bank itself in its complaint filed before the PCHC, Arbicom Case No. 91068, clearly stated that its cause of action against defendant arose from defendants deliberate
violation of the provisions of the PCHC Rule Book, Sec. 25.3, specifically on Under-Encoding
of check amounting to P1,000,000.00 drawn upon defendants Tondo Branch which was
deposited with plaintiff herein on May 20, 1990, xxx which was erroneously encoded at
P1,000.00 which defendant as the receiving bank thereof, never called nor notified the plaintiff
of the error committed thus causing actual losses to plaintiff in the principal amount of
P999,000.00 exclusive of opportunity losses and interest.
Furthermore, a reading of petitioner collecting banks complaint in the Arbicom case shows that
its thrust is directed against respondent drawee banks alleged failure to inform the former of the
under-encoding when Sec. 25.3 of the PCHC Rule Book is clear that it is receiving banks
(respondent drawee bank herein) duty and obligation to notify the erring bank (petitioner
collecting bank herein) of any such under-encoding of any check amount submitted for clearing
within the member banks of the PCHC not later than 10:00 a.m. of the following clearing day
and prays that respondent drawee bank be held liable to petitioner collecting bank for penalties in
view of the latters violation of the notification requirement.
Prescinding from the above, we see no cogent reason to depart from the time-honored general
banking rule that all deposits of whatever nature with banks are considered of absolutely

confidential nature and may not be examined, inquired or looked into by any person, government
official, bureau or office and corollary, that it is unlawful for any official or employee of a bank
to disclose to any person any information concerning deposits.
Nowhere in petitioner collecting banks complaint filed before the PCHC does it mention of the
amount it seeks to recover from Account No. 0111-018548 itself, but speaks of P999,000.00 only
as an incident of its alleged opportunity losses and interest as a result of its own employees
admitted error in encoding the check.
The money deposited in Account No. 0111-018548 is not the subject matter of the litigation in
the Arbicom case for as clearly stated by petitioner itself, it is the alleged violation by respondent
of the rules and regulations of the PCHC.[4]
Union Bank is now before this Court insisting that the money deposited in Account No.
0111-01854-8 is the subject matter of the litigation Petitioner cites the case of Mathay vs.
Consolidated Bank and Trust Company,[5] where we defined subject matter of the action, thus:
xxx By the phrase subject matter of the action is meant the physical facts, the things real or
personal, the money, lands, chattels, and the like, in relation to which the suit is prosecuted, and
not the delict or wrong committed by the defendant.
Petitioner contends that the Court of Appeals confuses the cause of action with the subject of the
action. In Yusingco vs. Ong Hing Lian,[6] petitioner points out, this Court distinguished the two
concepts.
xxx The cause of action is the legal wrong threatened or committed, while the object of the
action is to prevent or redress the wrong by obtaining some legal relief; but the subject of the
action is neither of these since it is not the wrong or the relief demanded, the subject of the action
is the matter or thing with respect to which the controversy has arisen, concerning which the
wrong has been done, and this ordinarily is the property, or the contract and its subject matter, or
the thing in dispute.
The argument is well taken. We note with approval the difference between the subjects of
the action from the cause of action. We also find petitioners definition of the phrase subject
matter of the action is consistent with the term subject matter of the litigation, as the latter is used
in the Bank Deposits Secrecy Act.
In Mellon Bank, N.A. vs. Magsino,[7] where the petitioner bank inadvertently caused the
transfer of the amount of US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned
the examination of the bank accounts where part of the money was subsequently caused to be
deposited:
Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the
money deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is
aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an
inquiry into the whereabouts of the illegally acquired amount extends to whatever is concealed

by being held or recorded in the name of persons other than the one responsible for the illegal
acquisition.
Clearly, Mellon Bank involved a case where the money deposited was the subject matter of
the litigation since the money so deposited was the very thing in dispute. This, however, is not
the case here.
Petitioners theory is that private respondent Allied Bank should have informed petitioner of
the under-encoding pursuant to the provisions of Section 25.3.1 of the PCHC Handbook, which
states:
25.3.1. The Receiving Bank should inform the erring Bank about the under-encoding of amount
not later than 10:00 A.M. of the following clearing day.
Failing in that duty, petitioner holds private respondent directly liable for the
P999, 000.00 and other damages. It does not appear that petitioner is seeking reimbursement
from the account of the drawer. This much is evident in petitioners complaint before the
Arbicom.
Plaintiffs cause of action against defendant arose from defendants deliberate violation of the
provisions of the PCHC Rule Book, Sec. 25.3, specifically on Under-Encoding of check
amounting to P1,000,000.00 drawn upon defendants Tondo Branch which was deposited with
plaintiff herein sometime on May 20, 1990. From the check amount of P1,000,000.00, it was
instead erroneously encoded at P1,000.00 which defendant as the receiving bank thereof, never
called nor notified the plaintiff of the error committed thus causing actual losses to plaintiff in
the principal amount of P999,000.00 exclusive of opportunity losses and interest thereon
whatsoever. xxx[8]
Petitioner even requested private respondents Branch Manager for reimbursement from private
respondents account through the automatic debiting system.
2.7. On May 6, 1991, plaintiffs Senior Vice-President, Ms. ERLINDA V. VALENTON wrote
defendants Tondo Branch Manager, Mr. RODOLFO JOSE on the incident and requested
assistance in facilitating correction of the erroneous coding with request for reimbursement thru
the industrys automatic debiting of defendants account.[9]
Further, petitioner rejected private respondents proposal that the drawer issue postdated checks in
favor of petitioner since the identity and credit standing of the depositor were unknown to
petitioner.
2.9. On May 23, 1991, defendants Branch Manager, the same Mr. Rodolfo Jose wrote plaintiffs
Ms. Erlinda Valenton again insisting on the execution of the Quitclaim and Release in favor of
defendant as the Branch has endeavored to negotiate with its client for the collection of such
amount. Upon a reading of the terms of the Quitclaim and Release being proposed by defendant,
the unmistakable fact lies that again defendant attempts for the second time to take advantage of
plaintiffs plight by indicating that the terms of the payment of the principal amount of

P999,000.00 is by way of several personal postdated checks up to March 21, 1992 from a person
whose identity is not even disclosed to plaintiff.
To an ordinary person aggrieved already by having been taken advantage of for 620 days more or
less, the proposal of defendant could not be acceptable for the reason that aside from the interest
lost already for the use of its money by another party, no assurance is made as to the actual
collection thereof from a party whose credit standing, the recipient is not at all aware of.[10]
Petitioner also believed that it had no privity with the depositor:
2.12. Plaintiff then replied to defendants letter by requesting that in lieu of the post-dated checks
from defendants client with whom plaintiff has no privity whatsoever, if the defendant could
tender the full payment of the amount of P999,000.00 in defendants own Managers check and
that plaintiff is willing to forego its further claims for interest and losses for a period of 620 days,
more or less.[11]
The following argument adduced by petitioner in the Arbicom case leaves no doubt that
petitioner is holding private respondent itself liable for the discrepancy:
Defendant by its acceptance thru the clearing exchange of the check deposit from its
client cannot be said to be free from any liability for the unpaid portion of the check amount
considering that defendant as the drawee bank, is remiss in its duty of verifying possible
technicalities on the face of the check.
Since the provisions of the PCHC Rule Book has so imposed upon the defendant being the
Receiving Bank of a discrepant check item to give that timely notification and defendant failing
to comply with such requirement, then it can be said that defendant is guilty of negligence. He
who is guilty of negligence in the performance of its [sic] duty is liable for damages. (Art. 1170,
New Civil Code.)
Art. 1172 of the Civil Code provides that:
Responsibility arising from negligence in the performance of every kind of obligation is also
demandable, but such liability may be regulated by the courts, according to the circumstances.[]
[12]

Petitioner points to its prayer in its complaint to show that it sought reimbursement from the
drawers account. The prayer, however, does not specifically state that it was seeking recovery of
the amount from the depositors account. Petitioner merely asked that judgment be rendered in
favor of plaintiff against defendant sentencing it to pay plaintiff: 1. The sum of NINE
HUNDRED NINETY-NINE THOUSAND PESOS (P999,000.00).[13]
On the other hand, the petition before this court reveals that the true purpose for the
examination is to aid petitioner in proving the extent of Allied Banks liability:
Hence, the amount actually debited from the subject account becomes very material and germane
to petitioners claim for reimbursement as it is only upon examination of subject account can it be

proved that indeed a discrepancy in the amount credited to petitioner was committed, thereby,
rendering respondent Allied Bank liable to petitioner for the deficiency. The money deposited in
aforesaid account is undeniably the subject matter of the litigation since the issue in the Arbicom
case is whether respondent Bank should be held liable to petitioner for reimbursement of the
amount of money constituting the difference between the amount of the check and the amount
credited to petitioner, that is, P999,000.00, which has remained deposited in aforesaid account.
On top of the allegations in the complaint, which can be verified only by examining the subject
bank account, the defense of respondent Allied Bank that the reimbursement cannot be made
since clients account is not sufficiently funded at the time petitioner sent its Charge Slip, bolsters
petitioners contention that the money in subject account is the very subject matter of the pending
Arbicom case.
Indeed, to prove the allegations in its Complaint before the PCHC Arbitration Committee, and to
rebut private respondents defense on the matter, petitioner needs to determine:
1. how long respondent Allied Bank had willfully or negligently allowed the difference of
P999,000.00 to be maintained in the subject account without remitting the same to petitioner;
2. whether indeed the subject account was no longer sufficiently funded when petitioner sent its
charge slip for reimbursement to respondent bank on May 7, 1991; and
3. whether or not respondent Allied Banks actuations in refusing to immediately reimburse the
discrepancy was attended by good or bad faith.
In other words, only a disclosure of the pertinent details and information relating to the
transactions involving subject account will enable petitioner to prove its allegations in the
pending Arbicom case. xxx[14]
In short, petitioner is fishing for information so it can determine the culpability of private
respondent and the amount of damages it can recover from the latter. It does not seek recovery of
the very money contained in the deposit. The subject matter of the dispute may be the amount of
P999,000.00 that petitioner seeks from private respondent as a result of the latters alleged failure
to inform the former of the discrepancy; but it is not the P999,000.00 deposited in the drawers
account. By the terms of R.A. No. 1405, the money deposited itself should be the subject matter
of the litigation.
That petitioner feels a need for such information in order to establish its case against private
respondent does not, by itself, warrant the examination of the bank deposits. The necessity of the
inquiry or the lack thereof, is immaterial since the case does not come under any of the
exceptions allowed by the Bank Deposits Secrecy Act.
WHEREFORE, the petition is DENIED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

RA 3936
UNCLAIMED BALANCES LAW

ELEMENTS OF UNCLAIMED BALANCES :

1. Include credits or deposits of:
a. Money
b. Bullion
c. Security
d. Other evidence of indebtedness

2. The credit or deposit must be with the bank, building and loan association, or trust
corporation, and
3. The credit or deposit is in favor of a person:
a. Known to be dead, or
b. Who has not made further deposits or withdrawals during the preceding 10 years
or more
Such unclaimed balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the Government of the
Republic of the Philippines, and to be used as the National Assembly may direct after
following the reclassification and procedures provided by law.
NOTE: Demand drafts cannot be escheated, but TELEGRAPHIC NOTES can be escheated.
LEGAL CONSEQUENCE: the unclaimed balances may be subject of escheat proceedings, after
proper publication and the depositors still do not lay claim to them.
JURISPRUDENCE:
RP vs CA
FACTS: The Republic of the Philippines filed a complaint for escheat against several banks. The
respective managers of the banks submitted to the Treasurer of the RP separate statements
prepared under oath which listed all deposits and credits held by them in favor of depositors and
creditors either known to be dead, have not been heard from, of have not made deposits or
withdrawals for ten years or more. RP prayed that the publication of the list of unclaimed
balances be dispensed with. It asserted that the only requirement under the UBL is the
publication of summons and notice to all persons and that to publish the names and list of
unclaimed balances would only result in additional and unnecessary expenses to the government.
ISSUE: Whether or not the publication of the names and list of unclaimed balances ius
necessary.
HELD: YES. The publication of the list of unclaimed balances is intended to safeguard the right
of the depositor, their heirs and successors to due process. How would other persons who may
have 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 the said list are not published? Such
other persons may be heirs of the bank depositors named in the list. The fact that the government
is in a tight financial situation is not a justification for the Court to dispense with the elementary
rule of due process.

MALACAANG
Manila

PRESIDENTIAL DECREE No. 679 April 2, 1975

AMENDING ACT NUMBERED THIRTY NINE HUNDRED AND THIRTY SIX, AN ACT
REQUIRING BANKS, TRUST CORPORATIONS, AND BUILDING AND LOAN
ASSOCIATIONS, TO TRANSFER UNCLAIMED BALANCES HELD BY THEM TO
THE TREASURER OF THE PHILIPPINES AND FOR OTHER PURPOSES.
WHEREAS, Act No. 3936 requires the publication of a sworn statement of unclaimed balances
in banks once a week of three consecutive weeks in at least two newspapers of general
circulation in the locality where the banks are situated, if there be any, and if there is none, in the
City of Manila, one in English and one in Spanish, the cost of which shall be paid by the Bureau
of Treasury, which shall be reimbursed out of the escheated funds;
WHEREAS, the law also provides for the publication of summons and a notice upon the
commencement of the prescribed judicial proceedings for the escheat of unclaimed balances;
WHEREAS, past experience has shown that the cost of publication required by law, the increase
of which has been substantial the past few years, is more than the aggregate amount of the
unclaimed balances to be escheated, the average amount of which is small;
WHEREAS, there is a felt need to simplify the procedure for the escheat of unclaimed balances
for the purpose of reducing the expenses therefore;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of
the powers in me vested by the Constitution, do hereby decree and order:
Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended to read as follows:
"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall include credits or deposits
of money, bullion, security or other evidence of indebtedness of any kind, and interest thereon
with banks, buildings and loan associations, and trust corporations, as hereinafter defined, in
favor of any person known to be dead or who has not made further deposits or withdrawals
during the preceding ten years or more. Such unclaimed balances, together with the increase and
proceeds thereof, shall be deposited with the Treasurer of the Philippines to the credit of the
Government of the Republic of the Philippines to be used as the National Assembly may direct.
"Banks", "building and loan associations" and "trust corporations", within the meaning of this
Act, shall refer to institutions defined under Section two, thirty-nine and fifty-six, respectively, of
Republic Act Numbered Three Hundred Thirty Seven, otherwise known as the General Banking
Act, as amended, whether organized under special charters or not.
"Sec. 2. Immediately after the taking effect of this Act and within the month of January of every
odd year, all banks, building and loan associations, and trust corporations shall forward to the
Treasurer of the Philippines a statement, under oath, of their respective managing officers, of all

credits and deposits held by them in favor of persons known to be dead, or who have not made
further deposits or withdrawals during the preceding ten years or more, arranged in alphabetical
order according to the names of creditors and depositors, and showing:
"(a) The names and last known place of residence or post office addresses of the persons in
whose favor such unclaimed balances stand;
"(b) The amount and the date of the outstanding unclaimed balance and whether the same is in
money or in security, and if the latter, the nature of the same;
"(c) The date when the person in whose favor the unclaimed balance stands died, if known, or
the date when he made his last deposit or withdrawal; and
"(d) The interest due on such unclaimed balance, if any, and the amount thereof.
"A copy of the above sworn statement shall be posted in a conspicuous place in the premises of
the bank, building and loan association, or trust corporation concerned for at least sixty days
from the date of filing thereof: Provided, That immediately before filing the above sworn
statement, the bank, building and loan association, and trust corporation shall communicate with
the person in whose favor the unclaimed balance stands at his last known place of residence or
post office address.
"It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time
to time the existence of unclaimed balances held by banks, building and loan associations, and
trust corporations.
"Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he shall
commence an action or actions in the name of the People of the Republic of the Philippines in
the Court of First Instance of the province or city where the bank, building and loan association
or trust corporation is located, in which shall be joined as parties the bank, building and loan
association or trust corporation and all such creditors or depositors. All or any of such creditors
or depositors or banks, building and loan association or trust corporations may be included in one
action. Service of process in such action or actions shall be made by delivery of a copy of the
complaint and summons to the president, cashier, or managing officer of each defendant bank,
building and loan association or trust corporation and by publication of a copy of such summons
in a newspaper of general circulation, either in English, in Filipino, or in a local dialect,
published in the locality where the bank, building and loan association or trust corporation is
situated, if there be any, and in case there is none, in the City of Manila, at such time as the court
may order. Upon the trial, the court must hear all parties who have appeared therein, and if it be
determined that such unclaimed balances in any defendant bank, building and loan association or
trust corporation are unclaimed as hereinbefore stated, then the court shall render judgment in
favor of the Government of the Republic of the Philippines, declaring that said unclaimed
balances have escheated to the Government of the Republic of the Philippines and commanding

said bank, building and loan association or trust corporation to forthwith deposit the same with
the Treasurer of the Philippines to credit of the Government of the Republic of the Philippines to
be used as the National Assembly may direct.
"At the time of issuing summons in the action above provided for, the clerk of court shall also
issue a notice signed by him, giving the title and number of said action, and referring to the
complaint therein, and directed to all persons, other than those named as defendants therein,
claiming any interest in any unclaimed balance mentioned in said complaint, and requiring them
to appear within sixty days after the publication or first publication, if there are several, of such
summons, and show cause, if they have any, why the unclaimed balances involved in said action
should not be deposited with the Treasurer of the Philippines as in this Act provided and
notifying them that if they do not appear and show cause, the Government of the Republic of the
Philippines will apply to the court for the relief demanded in the complaint. A copy of said notice
shall be attached to, and published with the copy of, said summons required to be published as
above, and at the end of the copy of such notice so published, there shall be a statement of the
date of publication, or first publication, if there
are several, of said summons and notice. Any person interested may appear in said action and
become a party thereto. Upon the publication or the completion of the publication, if there are
several, of the summons and notice, and the service of the summons on the defendant banks,
building and loan associations or trust corporations, the court shall have full and complete
jurisdiction in the Republic of the Philippines over the said unclaimed balances and over the
persons having or claiming any interest in the said unclaimed balances, or any of them, and shall
have full and complete jurisdiction to hear and determine the issues herein, and render the
appropriate judgment thereon.
"Sec. 4. If the president, cashier or managing officer of the bank, building and loan association,
or trust corporation neglects or refuses to make and file the sworn statement required by this
action, such bank, building and loan association, or trust corporation shall pay to the Government
the sum of five hundred pesos a month for each month or fraction thereof during which such
default shall continue.
"Sec. 5. Any bank, building and loan association or trust corporation which shall make any
deposit with the Treasurer of the Philippines in conformity with the provisions of this Act shall
not thereafter be liable to any person for the same and any action which may be brought by any
person against in any bank, building and loan association, or trust corporation for unclaimed
balances so deposited with the Treasurer of the Philippines shall be defended by the Solicitor
General without cost to such bank, building and loan association or trust corporation."
Section 2. This Decree shall take effect immediately.
DONE in the City of Manila, this 2nd day of April, in the year of Our Lord, nineteen hundred
and seventy-five.

SAMPLE CASE

EN BANC
G.R. No. L-16106

December 30, 1961

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

-versusPHILIPPINE NATIONAL BANK, ET AL., defendants,
THE FIRST NATIONAL CITY BANK OF NEW YORK, defendant-appellee.
Office of the Solicitor General for plaintiff-appellant.
Picazo, Lichauco and Agcaoili for defendant-appellee.
BAUTISTA ANGELO, J.:
The Republic of the Philippines filed on September 25, 1957 before the Court of First Instance of
Manila a complaint for escheat of certain unclaimed bank deposits balances under the provisions
of Act No. 3936 against several banks, among them the First National City Bank of New York. It
is alleged that pursuant to Section 2 of said Act defendant banks forwarded to the Treasurer of
the Philippines a statement under oath of their respective managing officials of all the credits and
deposits held by them in favor of persons known to be dead or who have not made further
deposits or withdrawals during the period of 10 years or more. Wherefore, it is prayed that said
credits and deposits be escheated to the Republic of the Philippines by ordering defendant banks
to deposit them to its credit with the Treasurer of the Philippines.
In its answer the First National City Bank of New York claims that, while it admits that various
savings deposits, pre-war inactive accounts, and sundry accounts contained in its report
submitted to the Treasurer of the Philippines pursuant to Act No. 3936, totaling more than
P100,000.00, which remained dormant for 10 years or more, are subject to escheat however, it
has inadvertently included in 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.
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 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).
The questions that now arise are: Do demand draft and telegraphic orders come within the
meaning of the term "credits" or "deposits" employed in the law? 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? Do they
create a creditor-debtor relationship between drawee and the payee?
The answers to these questions require a digression the legal meaning of said banking
terminologies.
To begin with, we may say that a demand draft is a bill of exchange payable on demand (Arnd
vs. Aylesworth, 145 Iowa 185; Ward vs. City Trust Company, 102 N.Y.S. 50; Bank of Republic
vs. Republic State Bank, 42 S.W. 2d, 27). 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
specified (13 Words and Phrases, 371). 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 (Ennis vs. Coshoctan Nat. Bank, 108 S.E., 811; Hinnemann vs. Rosenback,
39 N.Y. 98, 100, 101; Wilson vs. Bechenau, 48 Supp. 272, 275).

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 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)....
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 endorsement, 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 or cable transfer the agreement to remit
creates a contractual obligation has been termed a purchase and sale transaction (9 C.J.S. 368).
The purchaser of a telegraphic transfer upon making payment completes the transaction insofar
as he is concerned, though insofar as the remitting bank is concerned the contract is executory
until the credit is established (Ibid.) We agree with the following comment the Solicitor General:
"This is so 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 remain for sometime in the defendant bank, can the latter maintain that the
ownership of said telegraphic payment orders is now with the drawer bank? The latter was
already paid the value of the telegraphic payment orders otherwise it would not have transmitted
the same to the defendant bank. Hence, it is absurd to say that the drawer banks are still the
owners of said telegraphic payment orders."
WHEREFORE, the decision of the trial court is hereby modified in the sense that the items
specifically referred to and listed under paragraph 3 of appellee bank's answer representing
telegraphic transfer payment orders should be escheated in favor of the Republic of the
Philippines. No costs.
Reyes, J.B.L., Barrera, Paredes, Dizon and De Leon, JJ., concur.
Bengzon, C.J., Padilla, Labrador and Concepcion, JJ., took no part.
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