Dormant Accounts

- Deposit accounts may be classified as active or dormant.

- Dormant accounts are those with no deposit or withdrawal transactions for a

period of time:
o Current or checking accounts – no transaction for a period of 1 year;
o Savings accounts – no transaction for a period of 2 years

- Banks are required to exert all efforts to prevent deposit accounts from
becoming dormant by giving a 60-day notice to a depositor of the potential
dormancy of his/her account. The notice shall contain the following
information:
a. Effect of dormancy of the account;
b. Advise on how to re-activate the account;
c. Reminder that the account may be included in the list of unclaimed
balances that can be a subject of escheat proceedings

- Dormancy fee may be imposed on a dormant account 5 years after the last
activity therein, subject to the following conditions:
a. Balance falls below the minimum average daily balance (ADB), if there
is any;
b. Monthly dormancy fee shall not exceed P30.00; and
c. Compliance with the notice requirement to the depositor.

Deceased Depositor

- Under the TRAIN Law (new rule), a bank may allow any withdrawal from the
bank account of the deceased depositor without the need for a BIR
clearance or certificate of payment of estate tax provided that there will be
a deduction of 6% final withholding tax from the deposit account.

- For joint account, the final withholding tax shall be based on the share of the
decedent (deceased depositor) in the joint bank deposits.

- If the account is a joint account with a survivorship agreement, the 6%

final withholding tax should not be applied because the share of the deceased
depositor transfers to the living/surviving depositor.

Survivorship Agreements

- A survivorship agreement is an aleatory contract supported by consideration

where the joint depositors agree to permit either of them to withdraw the
 whole deposit during their lifetime and transferring the balance to the survivor
upon the death of one of them.
- The Supreme Court held that survivorship agreement is per se not
contrary to law. However, it may be violative of the law if it be shown that
such agreement is a mere cloak to hide an inofficious donation, to transfer
property in fraud of creditors, or to defeat the legitime of a forced heir. In such
instance, the agreement may be assailed or annulled upon such grounds. 1

Closure of Account

- Bank can expressly reserve the right to close an account even without prior
notice whenever certain identified events occur, e.g. if a checking account of
a depositor always have returned checks.

- The Supreme Court has recognized the right of the bank to close the account
of the depositor who mishandled his/her bank account. 2

Hold-Out of Deposit

- If there is a stipulation or provision like this in the agreement between the

depositor and the bank, the bank is authorized to withhold the amount
deposited as security for any and all obligations of the depositor to the bank.

- The Supreme Court held that the hold-out provision applies only if there is a
valid and existing obligation arising from any sources of obligation under
Article 1157 of the New Civil Code. Otherwise, there is no legal basis to apply
the hold-out provision.3

UNCLAIMED BALANCES

- Deposits that have become dormant for a period of 10 years may be

escheated in favor of the government.

- Under the Act No. 3936 or the Unclaimed Balances Law (UBL), unclaimed
balances include credit or deposits of money, bullion, security or other
evidence of indebtedness of any kind, and interest thereon with banks,
buildings and loan association, and trust corporations, in favor of any person
known to be dead or who has not made further deposits or withdrawals during
the preceding 10 years or more.

- Requirements provided under the law:

1
Vitug vs. Court of Appeals, GR No. 82027, March 29, 1990.
2
Far East Bank vs. Pacilan Jr., GR No. 157314, July 29, 2005.
3
Metrobank vs. Rosales, GR No. 183204, January 13, 2014.
 a. There is a credit or deposit of money, or other evidence of
indebtedness of any kinds with banks;
b. Such credit, deposit or evidence of indebtedness has a balance;
c. The balance has been unclaimed for a period of 10 years or more;
d. Notice should be given to the depositor to his/her last known address;
e. After due notice to the depositor, a sworn statement shall be made by
the bank and filed with the National Treasurer stating the list of
depositors with unclaimed balances;
f. There must be publication of a list of unclaimed balances;
g. The escheat proceedings shall be commenced by filing of the petition
by the State through the Solicitor General.

- Indispensable requirement under the UBL is the prior notice given to the
depositor before filing a sworn statement with the National Treasurer. As per
the Supreme Court, the purpose of this initial notice is for the bank to
determine whether an inactive account has indeed been unclaimed,
abandoned, forgotten, or left without an owner. If the depositor simply does
not wish to touch the funds in the meantime, but still asserts ownership and
dominion over the dormant account, then the bank is no longer obligated to
include the account in its sworn statement. 4
 If the complies with this requirement and the unclaimed balances are
eventually escheated to the State, the bank shall not be liable for the
same and any action which may be brought by any person against
any bank.

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

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

- There is no automatic transfer of the unclaimed balances from the bank to the
Government. Escheat proceedings must be initiated before the unclaimed
balances will be turned over to the Government.

- The rules on escheats is found under Rule 91 of the Rules of Court. Escheat
is a special proceeding5 whereby real or personal properties in the
Philippines of a deceased person who has left no will or legal heirs become
the properties of the State.

- There must be service of summons to the following:

a. Bank – by delivery of a copy of the petition and summons upon the
president, cashier, or managing officer of the bank;
b. Depositors or other claimants of the unclaimed balances – by
publication of a copy of the summons in a newspaper of general
circulation.

4
RCBC vs. Hi-Tri Development Corp., GR No. 192413, June 13, 2012.
5
Sec. 2, Rule 1 of the Rules of Court provides that a special proceeding is a remedy by which a party seeks to
establish a status, a right, or a particular fact.
  A notice about the forthcoming escheat proceedings (notice of
hearing) must also be issued and published, directing and requiring
all persons who may claim any interest in the unclaimed balances to
appear before the court and show cause why the dormant accounts
should not be deposited with the National Treasurer.

- Escheat proceedings are actions in rem, whereby an action is brought

against the thing itself instead of the person.

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