United States.
Hence, because it is payable outside of the
1. PDIC v. Citi Bank G.R. No. 170290 (2012)
Facts: Citibank, N.A. (Citibank) and Bank of America, S.T. &
N.A. (BA) are duly organized corporations and existing under
the laws of the United States of America and duly licensed to do
business in the Philippines, with offices in Makati City. Petitioner
Philippine Deposit Insurance Corporation (PDIC) conducted an
examination of the books of account of Citibank and BA in
1977and 1979 respectively. It discovered that Citibank in the
course of its banking business, received from its head office and
other foreign branches a total of P11,923,163,908.00 in dollars
from September 30, 1974 to June 30, 1977 covered by
Certificates of Dollar Time Deposit that were interest-bearing
with corresponding maturity dates. And BA a total of P629,
311,869.10 in dollars, covered by Certificates of Dollar Time
Deposit that were interest-bearing with corresponding maturity
dates and lodged in their books under the account Due to Head
Office/Branches. For failure to report the said amounts as
deposit liabilities that were subject to assessment for insurance,
PDIC sought the remittance of deficiency premium assessments
for dollar deposits.
Citibank and BA each filed a petition for declaratory relief before
the Court of First Instance stating that the money placements
they received from their head office and other foreign branches
were not deposits and did not give rise to insurable deposit
liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC
Charter) and, as a consequence, the deficiency assessments
made by PDIC were improper and erroneous. RTC ruled in favor
of Citibank and BA which reasoned that there was no depositor-
depository relationship between the respondents and their head
office or other branches. Also, the placements were deposits
made outside the Philippines which are excluded under Section
3.05(b) of the PDIC Rules and Regulations and Section 3(f) of
the PDIC Charter likewise excludes from the definition of the
term deposit any obligation of a bank payable at the office of the
bank located outside the Philippines.
PDIC argues that the head offices of Citibank and BA and their
individual foreign branches are separate and independent
entities hence not exempt in Section 3(b) of R.A. No. 3591.
PDIC appealed to the CA which affirmed the ruling of the RTC.
ISSUES:
1. Whether or not the dollar deposits are money placements,
thus, they are not subject to the provisions of Republic Act No.
6426 otherwise known as the Foreign Currency Deposit Act of
the Philippines.
2. Whether or not the Philippine branch of a foreign corporation
has a separate legal personality from its foreign head office for
the purpose of PDIC.
RULING: The court ruled that the funds in question are not
deposits within the definition of the PDIC Charter and are, thus,
excluded from assessment. Pursuant to Section 3(f) of the PDIC
Charter, the term deposit means 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 or which is
evidenced by its certificate of deposit, and trust funds held by
such bank whether retained or deposited in any department of
said bank or deposit in another bank, together with such other
obligations of a bank as the Board of Directors shall find and
shall prescribe by regulations to be deposit liabilities of the
Bank; Provided, that any obligation of a bank which is payable at
the office of the bank located outside of the Philippines shall not
be a deposit for any of the purposes of this Act or included as
part of the total deposits or of the insured deposits. As explained
by the respondents, the transfer of funds, which resulted from
the inter-branch transactions, took place in the books of account
of the respective branches in their head office located in the
Philippines, it is not considered a deposit.
The Court in resolving the controversy in the relationship of the
Philippine branches of Citibank and BA to their respective head
offices and their other foreign branches examined the manner by
which a foreign corporation can establish its presence in the
Philippines. It may choose to incorporate its own subsidiary as a
domestic corporation, in which case such subsidiary would have
its own separate and independent legal personality to conduct
business in the country. In the alternative, it may create a
branch in the Philippines, which would not be a legally
independent unit, and simply obtain a license to do business in
the Philippines. It is apparent that the respondent banks did not
incorporate as a separate domestic corporation to represent its
business interests in the Philippines. Thus, being one and the
same entity, the funds placed by the respondents in their
respective branches in the Philippines should not be treated as
deposits made by third parties subject to deposit insurance
under the PDIC Charter.
2. PDIC v. CA G.R. No. 118917 (1997)
FACTS: On September 22, 1983, plaintiffs-appellees invested in
money market placements with the Premiere Financing
Corporation (PFC) in the sum of P10,000.00 each for which they
were issued by the PFC corresponding promissory notes and
checks. On the same date (September 22, 1983), John Francis
Cotaoco, for and in behalf of plaintiffs-appellees, went to the PFC
to encash the promissory notes and checks, but the PFC referred
him to the Regent Saving Bank (RSB). Instead of paying the
promissory notes and checks, the RSB, upon agreement of
Cotaoco, issued the subject 13 certificates of time deposit with
Nos. 09648 to 09660, inclusive, each stating, among others,
that the same certifies that the bearer thereof has deposited
with the RSB the sum of P10,000.00; that the certificate shall
bear 14% interest per annum; that the certificate is insured up
toP15,000.00 with the PDIC; and that the maturity date thereof
is on November 3, 1983 (Exhs. “B”, “B-1” to “B-12”).
On the aforesaid maturity dated (November 3, 1983), Cotaoco
went to the RSB to encash the said certificates. Thereat, RSB
Executive Vice President Jose M. Damian requested Cotaoco for
a deferment or an extension of a few days to enable the RSB to
raise the amount to pay for the same (Exh. “D”). Cotaoco
agreed. Despite said extension, the RSB still failed to pay the
value of the certificates. Instead, RSB advised Cotaoco to file a
claim with the PDIC.
Meanwhile, on June 15, 1984, the Monetary Board of the Central
Bank issued Resolution No. 788 (Exh. ‘2’, Records, p. 159)
suspending the operations of the RSB. Eventually, the records
of RSB were secured and its deposit liabilities were eventually
determined. On December 7, 1984, the Monetary Board issued
Resolution No. 1496 (Exh. ‘1’) liquidating the RSB.
Subsequently, a masterlist or inventory of the RSB assets and
liabilities was prepared. However, the certificates of time
deposit of plaintiffs-appellees were not included in the list on the
ground that the certificates were not funded by the PFC or duly
recorded as liabilities of RSB.
On September 4, 1984, plaintiffs-appellees filed with the PDIC
their respective claims for the amount of the certificates (Exhs.
“C”, “C-1”, to “C-12”). Sabina Yu, James Ngkaion, Elaine
Ngkaion and Jeffrey Ngkaion, who have similar claims on their
certificates of time deposit with the RSB, likewise filed their
claims with the PDIC. To their dismay, PDIC refused the
aforesaid claims on the ground that the Traders Royal Bank
Check No. 299255 dated September 22, 1983 for the amount of
P125,846.07 (Exh. “B”) issued by PFC for the aforementioned
certificates was returned by the drawee bank for having been
drawn against insufficient funds; and said check was not
replaced by the PFC, resulting in the cancellation of the
certificates as indebtedness or liabilities of RSB.
Consequently, on March 31, 1987, private respondents filed an
action for collection against PDIC, RSB and the Central Bank.

On September 14, 1987, the trial court, declared the Central

Bank in default for failing to file an answer.

On May 29, 1989, the trial court rendered its decision ordering
the defendants therein to pay plaintiffs, jointly and severally, the
amount corresponding to the latter’s certificates of time deposit.

Both PDIC and RSB appealed.

ISSUE: Whether or not PDIC can be held liable for value of the
certificates of time deposit held by the petitioners.

RULING: NO. Whenever an insured bank shall have been closed

on account of insolvency,

payment of the insured deposits in such bank shall be made by

the Corporation as soon as possible. The term “deposit” 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 or which is evidence by passbook, check
and/or certificate of deposit printed or issued in accordance with
Central Bank rules and regulations and other applicable laws,
together with such other obligations of a bank which, consistent
with banking usage and practices, the Board of Directors shall
determine and prescribe by regulations to be deposit liabilities of
the Bank. These pieces of evidence convincingly show that the
subject CTDs were indeed issued without RSB receiving any
money therefor. No deposit, as defined in Section 3 (f) of R.A.
No. 3591, therefore came into existence. Accordingly, petitioner
PDIC cannot be held liable for value of the certificates of time
deposit held by private respondents.