PDIC vs Citibank

Facts:

• In 1977, PDIC examined the books of account of Citibank and it found

out that in the course of their business (head office and other foreign
branches included) it received a total of P11,923,908.00 in dollars.
Such figure was not reported to PDIC as deposit liabilities hence it
assessed Citibank for a deficiency amounting to P1,595,081.96.

• 2 years after, PDIC examined the accounts of Bank of America and

found out that they did not report the same as deposit liabilities. As a
result, Citibank and BA filed a petition for declaratory relief with the
RTC of Rizal and pointed out that the money placements they received
from the head office and foreign branches are not considered as
deposits hence they are not covered by insurable deposit liabilities.

• After trial, RTC rendered a decision in favor of the banks and held that
they were not deposits and thus not covered by insurable deposit
liabilities. PDIC appealed the matter with CA however it only affirmed
the decision o the lower court and held that the money placements
were received as part of the bank’s internal dealings by Citibank and
BA as agents of their respective head offices thus no depositor-
depositary relationship is present.

• Hence, this petition.

Issue:

Whether or not the subject dollar deposits are covered by Deposit Insurance

Ruling:

Negative. It is not covered.

The Supreme Court held that a branch has no separate legal personality. In
here, it was argued by PDIC that the head offices of Citibank and BA and
their individual foreign branches are separate and independent entities while
Citibank and BA argues that the money placements are not deposits since a
bank cannot deposit with itself.
A foreign corporation establishes its presence in the Philippines through
either incorporating its own subsidiary as a domestic corporation or create
branches in the Philippines. In the former, the subsidiary would have its own
separate and independent legal personality while in the latter, the branch is
deemed as an extension of the principal's personality.

In this case, Citibank and BA established its presence through the latter
option, thus being one and same entity, the funds placed in the branches
should not be treated as deposits made by 3rd parties which are subject by
deposit insurance.

Sub issue:

Another argument raised by PDIC is that the funds are considered as dollar
deposits and not money placements since under the law, money placement
is defined as a deposit which is received with authority to invest.

This contention is without merit.

PDIC does not dispute the veracity of the internal transactions of Citibank
and BA which gave rise to the issuance of the certificates of time deposit for
the funds the subject of the dispute neither does it question the finings of the
RTC and CA that the money placements were made and were payable
outside of the Philippines thus making fall under the exclusions to deposit
liabilities.

PDIC also fails to impugn the truth of the testimony of the fiscal agent of
PDIC. Therefore, the determination of facts of lower courts shall be accepted
at face value.

As explained by the banks, 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 US. Hence, because it is payable
outside of the PH, it is not considered a deposit pursuant to Section 3f of the
PDIC law.