8/19/2019 Foreign Currency Deposit Case Digest 1

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PDIC V CITIBANK ET.AL.

Topic: Foreign Currency Deposit

PHILIPPINE DEPOSIT INSURANCE CORPORATION

vs.

CITIBANK, N.A. and BANK OF AERICA, S.T. ! N.A.,

".R. No. #$%&'%, Ap(i) ##, &%#&

Pon*n+*: Associate Justice Jose Catral Mendoza

Cas* Di*s+ -: Mervic Al A. Tuble

Fac+s: Citibank, N.A. (Citibank)  and ank o! A"erica, #.T. $ N.A. (BA)  are duly organized

corporations and e%isting under t&e la's o! t&e (nited #tates o! A"erica and duly licensed to do

 business in t&e )&ilippines, 'it& o!!ices in Makati City. )etitioner )&ilippine Deposit *nsuranceCorporation (PDIC) conducted an e%a"ination o! t&e books o! account o! Citibank and A in

+--and +- respectively. *t discovered t&at Citibank in t&e course o! its banking business,

received !ro" its &ead o!!ice and ot&er !oreign branc&es a total o! )++,/,+0/,12.11 in dollars

!ro" #epte"ber /1, +-3 to June /1, +-- covered by Certi!icates o! Dollar Ti"e Deposit t&at

'ere interest4bearing 'it& corresponding "aturity dates. And A a total o! )0, /++,20.+1 in

dollars, covered by Certi!icates o! Dollar Ti"e Deposit t&at 'ere interest4bearing 'it&

corresponding "aturity dates and lodged in t&eir books under t&e account Due to 5ead

6!!ice7ranc&es. For !ailure to report t&e said a"ounts as deposit liabilities t&at 'ere sub8ect to

assess"ent !or insurance, )D*C soug&t t&e re"ittance o! de!iciency pre"iu" assess"ents !or

dollar deposits.

Citibank and A eac& !iled a petition !or declaratory relie! be!ore t&e Court o! First

*nstance stating t&at t&e "oney place"ents t&ey received !ro" t&eir &ead o!!ice and ot&er !oreign

 branc&es 'ere not deposits and did not give rise to insurable deposit liabilities under #ections /

and 3 o! 9.A. No. /+ (the PDIC Charter) and, as a conse;uence, t&e de!iciency assess"ents

"ade by )D*C 'ere i"proper and erroneous. 9TC ruled in !avor o! Citibank and A '&ic&

reasoned t&at t&ere 'as no depositor4depository relations&ip bet'een t&e respondents and t&eir

&ead o!!ice or ot&er branc&es. Also, t&e place"ents 'ere deposits "ade outside t&e )&ilippines

'&ic& are e%cluded under #ection /.1t&e )D*C C&arter like'ise e%cludes !ro" t&e de!inition o! t&e ter" deposit any obligation o! a

 bank payable at t&e o!!ice o! t&e bank located outside t&e )&ilippines.

)D*C argues t&at t&e &ead o!!ices o! Citibank and A and t&eir individual !oreign

 branc&es are separate and independent entities &ence not e%e"pt in #ection /

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)D*C appealed to t&e CA '&ic& a!!ir"ed t&e ruling o! t&e 9TC.

Iss/*s:

+.= >&et&er or not t&e dollar deposits are "oney place"ents, t&us, t&ey are not sub8ect to t&e

 provisions o! 9epublic Act No. 030 ot&er'ise kno'n as t&e Foreign Currency Deposit

Act o! t&e )&ilippines..= >&et&er or not t&e )&ilippine branc& o! a !oreign corporation &as a separate legal

 personality !ro" its !oreign &ead o!!ice !or t&e purpose o! )D*C.

R/)in: T&e court ruled t&at t&e !unds in ;uestion are not deposits 'it&in t&e de!inition o! t&e

)D*C C&arter and are, t&us, e%cluded !ro" assess"ent. )ursuant to #ection /

C&arter, t&e ter" deposit "eans unpaid balance o! "oney or its e;uivalent received by a bank in

t&e usual course o! business and !or '&ic& it &as given or is obliged to give credit to a

co""ercial, c&ecking, savings, ti"e or t&ri!t account or '&ic& is evidenced by its certi!icate o!

deposit, and trust !unds &eld by suc& bank '&et&er retained or deposited in any depart"ent o!said bank or deposit in anot&er bank, toget&er 'it& suc& ot&er obligations o! a bank as t&e oard

o! Directors s&all !ind and s&all prescribe by regulations to be deposit liabilities o! t&e

ank? 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 e%plained by t&e respondents, t&e trans!er

o! !unds, '&ic& resulted !ro" t&e inter4branc& transactions, took place in t&e books o! account o! 

t&e respective branc&es in t&eir &ead o!!ice located in t&e (nited #tates. 5ence, because it is

 payable outside o! t&e )&ilippines, it is not considered a deposit.

T&e Court in resolving t&e controversy in t&e relations&ip o! t&e )&ilippine branc&es o! Citibank and A to t&eir respective &ead o!!ices and t&eir ot&er !oreign branc&es e%a"ined t&e

"anner by '&ic& a !oreign corporation can establis& its presence in t&e )&ilippines. *t "ay

c&oose to incorporate its o'n subsidiary as a do"estic corporation, in '&ic& case suc&

subsidiary 'ould &ave its o'n separate and independent legal personality to conduct business in

t&e country. *n t&e alternative, it "ay create a branc& in t&e )&ilippines, '&ic& 'ould not be a

legally independent unit, and si"ply obtain a license to do business in t&e )&ilippines. *t is

apparent t&at t&e respondent banks did not incorporate as a separate do"estic corporation to

represent its business interests in t&e )&ilippines. T&us, being one and t&e sa"e entity, t&e !unds

 placed by t&e respondents in t&eir respective branc&es in t&e )&ilippines s&ould not be treated as

deposits "ade by t&ird parties sub8ect to deposit insurance under t&e )D*C C&arter.