DOJ Opinion No. 131, s. 1985

DOJ OPINION NO. 131 , s. 1985 2nd Indorsement October 8, 1985 Respectfully returned to the Honorable, the Minister of Finance, Manila, the within request for opinion on whether or not foreign currency deposits with various banks which remain unclaimed for ten years or more are within the purview of Section 1 of Act 3936, (An Act Requiring Banks, Trust Companies, Savings and Mortgage Banks, Mutual Building and Loan Associations, and Banking Institutions of Every Kind to Transfer Unclaimed Balances Held by Them to the Insular Treasury, and for other Purposes), as amended by P.D. No. 679. The query is raised in view of the submission by the Philippine National Bank (PNB), Escoda Branch, of a list of dormant accounts to the Treasurer of the Philippines for escheat proceedings for the year 1985. The list included thirty-two dollar savings accounts with an aggregate balance of US$618.76 (12,226.69) which were alleged to have been inadvertently included in the list. PNB now requests the Bureau of Treasury that the said amount be reverted to them, maintaining that foreign currency deposits are not subject to escheat proceedings under Central Bank Circular No. 960 and in the light of Section 8 of Republic Act No. 6426, as amended, (which refers to Secrecy of Foreign Currency Deposits) as interpreted by Central Bank Senior Deputy Governor Gabriel C. Singson in his memorandum dated December 20, 1983. The Central Bank has taken the position that escheat is of the same nature as attachment or garnishment, in that all the proceedings involve the taking of property by virtue of a court order or process. The Bureau of Treasury on the other hand believes otherwise, contending that R.A. No. 6426 does not mention exemption from Act. 3936, as amended, which is special law providing for the state's right of succession in the absence of legal heirs. The acting Treasurer also points out that escheat cannot be deemed of the same nature as attachment or garnishment, which are merely provisional remedies intended for the protection of the creditor. prcd The subject query is answered in the negative. Section 2 of Act No. 3936, as amended by P.D. 679, reads as follows: "SECTION 2. "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 be used as the National Assembly may direct." On the other hand, Section 8 of Republic Act No. 6426 (Foreign Currency Deposit Act of the Philippines), as amended, provides as follows: "SECTION 8. Secrecy of Foreign Currency Deposits. A foreign currency deposit authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private. Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever." xxx xxx xxx" The legislative history of R.A. 6426 will show that it was enacted to grant absolute confidentiality to foreign currency deposits in order to encourage the inflow of foreign currency into the Philippine banking system and boost our international resources for the benefit of our "starving economy" (See Explanatory Note, Cong. Rec. February 11, 1971 p. 73, et. seq.). Section 8 of R.A. 6426 originally provided that the secrecy of the deposits under the Act shall be governed in accordance with the provisions of R.A. 1405 (An Act Prohibiting Disclosure or Inquiry into Bank Deposits). R.A. 1405 prohibits any examination or inquiry of bank deposits except (1) upon permission of the depositor, or (2) in cases of impeachment, or (3) upon order of a competent court in cases of bribery or dereliction of duty of public officials or (4) in cases where the money deposited or invested is the subject matter of litigation (Section 2). Said Section 8 was subsequently amended by P.D. 1035 exempting depository banks in respect to their foreign currency transactions authorized under the act from the provisions of R.A. 2566 (Usury Law), as amended, and R.A. 529 (Uniform Currency Law), as amended. Still later, P.D. 1246 was enacted to make absolute the protective cloak of confidentiality over such foreign deposits and to better encourage the inflow of foreign currency deposits so that said institution can properly channel the same to loans and investments in the Philippines (3rd and 4th whereas clause of P.D. 1246). Under the amendment, instead of the four exceptions from the prohibition from examination or inquiry of bank deposits provided by R.A. 1405, a provision was inserted limiting examination or inquiry into foreign currency deposits only upon permission of the depositor and further exempting said deposits from attachment, garnishment, or any other order or process of any court legislative body, government agency or any administrative body whatsoever. The aforementioned legislative antecedents indicate the clear intent of the legislator to provide incentive for foreign currency depositors by "making absolute the protective cloak of confidentiality" (See 4th whereas of P.D. 1246) over such deposits. For this reason it is believed that the absolute confidentiality accorded by R.A. 6426, as amended, would be violated by the institution of escheat proceedings against foreign currency depositors with dormant accounts. Section 3 of Act of 3936 mandates the Solicitor General whenever he is informed of such unclaimed balances to file escheat proceedings in the name of the People of the Republic of the Philippines joining as parties the bank, or depository and all creditors or depositors and also requires the publication of the summons as well as the notice to all persons, other than those named as defendants therein, claiming any interest in any unclaimed balance mentioned in the complaint. Accordingly, formal escheat proceedings may not be instituted without breaching the absolute confidential character of the deposits since the names of the foreign currency depositors with dormant accounts will have to be disclosed. prcd In view of the foregoing, it is our view that foreign currency deposits which remain unclaimed for 10 years or more may not be the subject of escheat proceedings pursuant to the provisions of Act 3936, as amended. (SGD.) ESTELITO P. MENDOZA Minister of Justice