The Rule on ‘Unclaimed Balances Act’ (Escheat of Deposits)

March 22, 2026

SUBJECT: The Rule on ‘Unclaimed Balances Act’ (Escheat of Deposits)

I. Introduction

This memorandum provides an exhaustive analysis of the Philippine legal framework governing the escheat of unclaimed deposits and other balances held by banking institutions, commonly referred to as the rule on unclaimed balances. The primary statute is Act No. 3936, otherwise known as the “Unclaimed Balances Act,” as amended. The doctrine of escheat is a prerogative of the state, based on the principle of dominium eminens (eminent domain), whereby property with no rightful owner or claimant reverts to the state. This memo will outline the governing law, the conditions for escheat, the prescribed procedures, the rights and obligations of banks, and the current legal and practical landscape surrounding unclaimed balances.

II. Governing Law and Sources

The principal law is Act No. 3936, enacted on November 28, 1932, and amended by Commonwealth Act No. 319. This law is supplemented by the Rules of Court, specifically the rules on escheat proceedings under Rule 91. Relevant provisions of the New Civil Code on prescription and the General Banking Law of 2000 (Republic Act No. 8791) also provide context. The Bangko Sentral ng Pilipinas (BSP) issues circulars and regulations that operationalize these laws for supervised financial institutions.

III. Definition of Unclaimed Balances

Under Section 1 of Act No. 3936, “unclaimed balances” are specifically defined as credits or deposits of money, bullion, security, or other evidence of indebtedness held by any banking institution. These are considered unclaimed if they have remained dormant for a period of ten (10) years or more. A deposit becomes dormant when there has been no single transaction (e.g., deposit, withdrawal, interest posting) or any act of ownership, and the owner has not corresponded in writing with the bank concerning the balance for the said period. The law also encompasses any increments, such as interest or dividends, accruing thereon.

IV. Conditions for Escheat

For the state to initiate escheat proceedings, the following conditions must concur, as derived from Act No. 3936 and Rule 91:

The balance must be held by a banking institution as defined by law.

The balance must be “unclaimed” as defined, having been dormant for at least ten (10) years.

There must be no rightful owner or claimant to the balance.

The prescriptive period for the owner to reclaim the property must have lapsed. The law itself establishes the ten-year dormancy period, after which the escheat proceeding can be initiated.

The proceeding must be filed in the proper Regional Trial Court (RTC) having jurisdiction over the bank holding the balance.

V. Procedure for Escheat under Act No. 3936 and Rule 91

The escheat of unclaimed balances is a judicial process. The Republic of the Philippines, represented by the Solicitor General, is the proper party to file the petition. The procedure is as follows:

Filing of Petition: A verified petition is filed in the name of the Republic with the RTC. It must allege the existence of the unclaimed balances, the names and last known addresses of the persons entitled thereto (if known), and a prayer that said balances be escheated to the state.

Publication and Notice: The court will order a notice of the petition to be published once a week for three (3) consecutive weeks in a newspaper of general circulation. The notice will require all interested persons to appear and show cause why the petition should not be granted.

Hearing and Judgment: If no person appears to claim the balances, the court will proceed to hear the petition. If the court finds the petition sufficient in form and substance and that the balances are indeed subject to escheat, it will render judgment declaring the balances escheated to the state.

Turnover and Custody: Upon finality of the judgment, the banking institution is ordered to deliver the balances to the Treasurer of the Philippines or their authorized representative. The funds are then deposited in the National Treasury to the credit of the General Fund.

Subsequent Claim: Even after escheat, a rightful owner may file a claim with the Commission on Audit (COA) pursuant to Commonwealth Act No. 319, provided the claim is filed within five (5) years from the date of the escheat judgment. Payment is made from the General Fund upon approval by COA.

VI. Obligations of Banking Institutions

Banking institutions have affirmative duties under the law:

Record-Keeping: They must maintain permanent records of all unclaimed balances.

Reporting: While Act No. 3936 does not specify a periodic reporting requirement to a government agency, the BSP, through its supervisory powers, may require banks to report dormant accounts. Banks are, however, directly obligated to provide information to the Solicitor General to facilitate the escheat petition.

Compliance with Court Orders: They must comply with court orders for publication and, ultimately, the turnover of funds upon final judgment.

Liability: Banks are relieved of any liability to the original depositor upon compliance with the final escheat order and delivery of the funds. Failure to deliver escheated funds may result in liability.

VII. Comparative Analysis: Unclaimed Balances vs. Other Unclaimed Property

The escheat of bank deposits under Act No. 3936 is a specific regime. Other types of unclaimed property are governed by different rules, particularly concerning the dormancy period and the administering agency.

Aspect	Unclaimed Bank Balances (Act No. 3936)	Unclaimed Shares of Stock (Rule 91)	Unclaimed Wages/Other Property (Civil Code)
Governing Law	Act No. 3936, as amended; Rule 91.	Corporation Code; Rule 91.	New Civil Code (Arts. 1140-1141).
Dormancy Period	Ten (10) years.	Five (5) years from date of dividend declaration or date for redemption.	Generally, the prescriptive period for personal actions (6-10 years).
Subject Property	Deposits, credits, securities held by banking institutions.	Unclaimed dividends, distribution of assets, shares for redemption.	Any personal property, including wages, not claimed by owner.
Initiating Party	Republic of the Philippines (via Solicitor General).	Corporation or stockholder; ultimately the Republic.	Owner or finder; may lead to acquisitive prescription by a possessor.
Custodian After Escheat	National Treasury (General Fund).	Treasurer of the Philippines (for escheated shares).	Becomes property of the possessor in good faith after prescription.
Claim After Escheat	Filed with Commission on Audit within 5 years.	Rule 91 allows claims under certain conditions.	Extinguished after prescriptive period.

VIII. Current Issues and Practical Considerations

Low Incidence of Judicial Escheat: Actual judicial escheat proceedings under Act No. 3936 are rarely initiated due to the procedural burden and cost. This results in vast sums remaining in bank records as dormant accounts indefinitely.

Absence of an Administrative Mechanism: Unlike some jurisdictions, the Philippines lacks a comprehensive, administrative unclaimed property law that requires annual reporting and remittance, which would be more efficient.

BSP Initiatives: The BSP has encouraged banks to proactively reunite dormant accounts with owners. BSP Circular No. 472 (2005) required banks to submit data on dormant accounts, but a centralized registry or forced remittance system is not yet established.

Prescription vs. Escheat: A bank may raise the defense of extinctive prescription (e.g., 10 years for a written contract) in a suit by a depositor to recover a dormant account. This operates independently of the escheat law but achieves a similar result of barring the claim, with the bank retaining the funds unless escheat is separately pursued.

Constitutional Issue: The escheat of unclaimed balances has been upheld as a valid exercise of state power, not an impairment of contractual obligations.

IX. Recommendations

For Banks: Maintain rigorous records of dormant accounts. Establish clear internal policies for identifying and managing unclaimed balances. Consider proactive outreach to account holders before accounts become dormant.
For the Legislature: Consider enacting a modern, comprehensive Unclaimed Property Act that establishes an administrative escheat process with mandatory reporting and remittance to a central agency (e.g., the Treasurer of the Philippines), shorter dormancy periods, and a robust public database to facilitate owner claims, similar to models in other countries.
For Claimants: Individuals believing they have an unclaimed balance should first contact the bank directly. If the account has been escheated, a claim must be filed with the Commission on Audit within the five-year statutory period.

X. Conclusion

The rule on unclaimed balances under Act No. 3936 provides a judicial mechanism for the escheat of bank deposits dormant for over ten years. While the legal framework is established, its practical application is limited. The procedure is cumbersome, leading to underutilization. The law exists alongside the general rules on prescription, creating a complex landscape for both banks and potential claimants. A legislative update to create a more proactive, administrative unclaimed property system would better serve the policy of reuniting lost property with owners while efficiently securing for the state that which is truly abandoned.

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