G.R. No. 170290; April 11, 2012
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, vs. CITIBANK, N.A. and BANK OF AMERICA, S.T. & N.A., Respondents.

FACTS

The Philippine Deposit Insurance Corporation (PDIC) examined the books of respondent foreign banks, Citibank and Bank of America. It discovered that from 1974 to 1978, the banks’ Philippine branches received substantial dollar funds from their respective head offices and foreign branches, evidenced by Certificates of Dollar Time Deposit. These funds were not reported by the banks as deposit liabilities for insurance assessment. Consequently, PDIC issued deficiency assessments against them.
Believing a dispute was inevitable, the banks separately filed petitions for declaratory relief. They sought a judicial declaration that these inter-office fund transfers were not “deposits” creating insurable liabilities under the PDIC Charter. The Regional Trial Court ruled in favor of the banks, a decision affirmed by the Court of Appeals. Both courts held the placements were internal bank dealings, not third-party deposits assessable for insurance.

ISSUE

Whether the dollar funds placed by the head offices and foreign branches into the Philippine branches of Citibank and Bank of America constitute assessable deposits for insurance purposes under the PDIC Charter.

RULING

The Supreme Court DENIED the petition and AFFIRMED the lower courts’ rulings. The funds are not assessable deposits. The legal logic rests on the nature of the transaction and the explicit exclusions in the governing law. First, a deposit requires a depositor-depository relationship between two distinct entities. A bank’s head office and its branch are not separate legal persons; the branch is merely an extension of the bank. Therefore, a transfer of funds from a head office to its own branch is an internal bookkeeping entry, not a deposit creating a creditor-debtor relationship.
Second, this conclusion is fortified by the PDIC Charter itself. Section 3(f) of Republic Act No. 3591 explicitly excludes from the definition of an insured “deposit” any obligation of a bank “payable at an office of the bank located outside of the Philippines.” The Certificates of Dollar Time Deposit in question were issued by and payable at the head offices located abroad. Thus, by statutory definition, they are excluded from insurance coverage. The Court also noted that the practice of the U.S. Federal Deposit Insurance Corporation, after which the PDIC is patterned, is to treat such inter-branch accounts as non-assessable. The purpose of deposit insurance is to protect the public, not a bank’s own internal accounts.