Aside from deposit splitting, read more on deposits: ON INSURED DEPOSITS
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Splitting of deposits occurs whenever a deposit account is broken down and transferred into two or more accounts
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In deposit splitting, there is a presumption that the transferees have no beneficial ownership
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The grant of deposit insurance to an account found to have originated from another deposit is not automaticIn determining such amount, all deposits are added together
MDIC stands for Maximum Deposit Insurance Coverage which was already discussed in a previous article on insured deposits.
For a better understanding, let us take the case of Carlito B. Linsangan vs. Philippine Deposit Insurance Corporation, G.R. No. 228807, February 11, 2019.
In this case, Carlito filed a claim for payment of deposit insurance for his account which had a balance of P400,000.00 at the time of the closure of Cooperative Rural Bank of Bulacan, Inc. on May 23, 2013. Upon investigation, Philippine Deposit Insurance Corporation (PDIC) found that the account of Carlito originated from the account of “Cornelio Linsangan or Ligaya Linsangan” (source account) with an opening balance of P1,531,993.42. On December 13, 2012, the source account was closed and its balance of P1,544.081.48 was transferred and distributed to four accounts.
PDIC then conducted a tracing of relationship for the purpose of determining the beneficial ownership of accounts and discovered that Carlito is not a qualified relative of Cornelio and Ligaya. PDIC found out that Cornelio and Ligaya are the beneficial owners of the subject deposits.
Carlito responded that Cornelio and Ligaya are not the beneficial owner of deposits. Is he correct?
The law says:
No.
Cornelio and Ligaya are the beneficial owners of the deposit accounts. Among the determination of beneficial ownership of legitimate deposits is where a deposit account with an outstanding balance of more than the MDIC is broken up and transferred to one or more accounts. In such a case, the PDIC recognizes the transferor as the beneficial owner of the resulting deposit accounts entitled to deposit insurance unless the transferee can prove that the transfer was made in accordance with the conditions set forth by law.
Carlito further argued that his case does not fall under Deposit Splitting. Is he correct?
The law says:
No.
The elements of Deposit Splitting are the following:
a. Existence of source account/s in a bank with a balance or aggregate balance of more than the MDIC;
b. There is a break up and transfer of said account/s into two or more existing or new accounts in the name of another person/s or entity/entities;
c. The transferee/s have no Beneficial Ownership over the transferred funds; and
d. Transfer occurred within 120 days immediately preceding or during a bank-declared bank holiday, or immediately preceding bank closure
If all of the above are present, PDIC shall deem that there exists Deposit Splitting for the purpose of availing the MDIC.
Furthermore, in deposit splitting, there is presumption that the transferees have no beneficial ownership considering that the source account, which exceeded the MDIC, was split into two or more accounts within 120 days immediately preceding bank closure.
On the other hand, in cases where the transfer into two or more accounts occurred before the 120-day period, the PDIC does not discount the possibility that there may have been a transfer for valid consideration, but in the absence of transfer documents found in the records of the bank at the time of closure, the presumption arises that the source account remained with the transferor. Consequently, even if the transfer into different accounts was not made within 120 days immediately preceding bank closure, the grant of deposit insurance to an account found to have originated from another deposit is not automatic as the transferee still has to prove that the transfer was for a valid consideration through documents kept in the custody of the bank.
In Carlito’s case, the Supreme Court said that even assuming that Cornelio donated the amount in the savings account of Carlito, not one document evidencing the alleged donation is in the custody or possession of the bank upon takeover by PDIC. PDIC properly relied on the records of the bank which showed that Cornelio’s accounts remained in his name and for his account.
As a consequence, Carlito’s account was consolidated with the other legitimate deposits of Cornelio and Ligaya for purposes of computing the insurable deposit. PDIC is correct in considering the source account holders Cornelio and Ligaya as the real owners of the four resulting accounts. Thus, they were only entitled to the maximum deposit insurance of P500,000.00.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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