Allied Banking Corporation vs. Elizabeth Sia

A bank that has knowledge of the death of a person who maintained a bank deposit account, alone or jointly with another, is legally bound under Section 97 of R.A. No. 8424 to disallow any withdrawal from the deposit account unless the Commissioner of Internal Revenue has certified payment of the taxes imposed thereon; this authority applies even if the decedent was not expressly named as depositor, provided bank records show that the decedent owned the fund or a portion thereof.

Elizabeth Sia maintained two accounts with Orient Commercial Banking Corporation (Orient Bank) in its Gorordo, Cebu City Branch: Account No. 023190001020 in her name and Account No. 023190001031 as a joint "and/or" account with her father, See Sia. Allied Banking Corporation assumed Orient Bank's uninsured deposit liabilities with financial assistance from the Philippine Insurance Deposit Corporation (PDIC). The dispute implicates Section 97 of R.A. No. 8424, the estate tax provision governing a bank's authority to disallow withdrawals from a deposit account upon knowledge of a depositor's death.

Elizabeth Sia maintained two accounts with Orient Commercial Banking Corporation (Orient Bank) in its Gorordo, Cebu City Branch. Account No. 023190001020 was in Elizabeth's name, while Account No. 023190001031 was a joint account with her father, See Sia. At the time of Orient Bank's closure on October 15, 1998, the two accounts had uninsured deposits totaling P5,228,883.71. Allied Banking Corporation was the bank that assumed Orient Bank's uninsured deposit liabilities with financial assistance from the Philippine Insurance Deposit Corporation (PDIC).

On December 13, 1999, See executed a Special Power of Attorney (SPA) constituting Elizabeth as his attorney-in-fact with authority to claim and receive payment from the PDIC in connection with the deposits in Orient Bank Account No. 023190001020, and to execute any deed or instrument to assign or transfer his claim against Orient Bank in favor of Allied Bank. On the same date, Elizabeth and Allied Bank executed a Deed of Assignment to facilitate payment of her and her father's claims. Under the Deed, Elizabeth assigned a portion of their uninsured deposits to Allied Bank amounting to P4,470,825.22, while Allied Bank undertook to pay that amount by paying 20% within one week from signing and the remaining balance in equal annual amortizations over five years. All payments were to be made by crediting Allied Bank Savings Account (SA) No. 0570231382, which Elizabeth opened in Allied Bank's Fuente Osmeña Branch in Cebu City under her name for the purpose of receiving the payments. Allied Bank issued Elizabeth Passbook No. SAL 782654-AB.

On December 14, 2000, Allied Bank received a letter from Atty. Rolando M. Lim, who introduced himself as counsel for the heirs of See, namely Francisco Sia, Victor Espina, Lourdes Yu Carcel, Milagros Yu, and Luisita Solco. Atty. Lim informed Allied Bank that See died on May 4, 2000, attached a copy of See's Death Certificate, and requested that Allied Bank withhold any transaction relating to See's account pending settlement of his estate. Aware that the source of the funds in SA No. 0570231382 were the payments for the uninsured deposits with Orient Bank previously maintained not only by Elizabeth but also by See, Allied Bank acceded to the request.

On January 3, 2001, Elizabeth went to Allied Bank's Fuente Osmeña Branch to make a withdrawal but was unable to withdraw any amount. She returned on January 5, 2001, but was again not allowed to withdraw any amount allegedly because of the claims by her siblings. On January 15, 2001, Allied Bank formally informed Elizabeth of Atty. Lim's December 14, 2000 letter and told her that it temporarily froze SA No. 0570231382 pending settlement of the conflicting claims among See's heirs. On the same date, Allied Bank sent Elizabeth's siblings, through Atty. Lim, a letter informing them that it had received communication from Elizabeth's counsel claiming that Elizabeth was the exclusive owner of the funds in SA No. 0570231382 and should be allowed to withdraw from the same any time. In both letters, Allied Bank stated that Elizabeth and her siblings should settle the matter within ten days.

Instead of settling with her siblings, Elizabeth filed a complaint for specific performance, breach of contract, and damages. She asserted that despite her compliance with the procedure for withdrawal of funds stated in paragraph 5 of the Terms and Conditions Governing Savings Accounts printed in her Passbook No. SAL 782654-AB, Allied Bank still refused to allow her to make any transaction. Elizabeth alleged that Allied Bank's denial of her withdrawal was malicious and unfounded because it was not supposed to go beyond the depositor's name in its dealings with its depositors; since she was the only one named as depositor of SA No. 0570231382, the refusal had no basis. She prayed that Allied Bank be ordered to release the accumulated savings under SA No. 0570231382 and to pay damages, attorney's fees, and litigation expenses. Allied Bank averred that the temporary freezing was proper because SA No. 0570231382 was opened precisely to receive PDIC payments for the two Orient Bank accounts, of which See was a co-owner/co-depositor, so a portion of the deposits formed part of See's estate upon his death; when See's heirs made a formal claim, the bank acted properly and within its legal rights. Allied Bank further argued that the principal contract was the Deed of Assignment dated December 13, 1999, which showed that See also owned a portion of the fund in SA No. 0570231382.

The RTC and the CA both found that the funds in SA No. 0570231382 came from the settlement for Elizabeth and See's Orient Bank Account Nos. 023190001020 and 023190001031. The Deed of Assignment dated December 13, 1999, executed by Elizabeth and Allied Bank, indicated that SA No. 0570231382 was opened precisely to receive those payments. Elizabeth herself recognized this fact during cross-examination, claiming only that See, before his death, promised to give her his share; the trial and appellate courts made no factual finding on the alleged donation because Elizabeth failed to produce a deed showing it. The RTC also observed that the SPA purportedly executed by See was not reliable because it constituted Elizabeth as attorney-in-fact to claim payment for Orient Bank Account No. 023190001020, which was solely owned by Elizabeth.

• Legal Basis to Freeze: Allied Bank argued that it had legal basis to temporarily freeze SA No. 0570231382, contending that the CA and RTC erred in concluding that the deposits were Elizabeth's exclusive property despite ample evidence showing that her father, See Sia, owned a portion thereof.
• Deed of Assignment as Proof of Co-Ownership: Allied Bank asserted that although Elizabeth was the only one named as depositor of SA No. 0570231382, the Deed of Assignment dated December 13, 1999, clearly showed that the amounts paid by the PDIC and transferred to SA No. 0570231382 pertained not only to Elizabeth but also to her father.
• Good Faith: Allied Bank maintained that it acted legally and in good faith when it temporarily froze the subject account upon receiving notice of See Sia's death.

• Question of Fact: Elizabeth asserted that the issues posed by Allied Bank involved questions of fact, which are improper in a petition for review on certiorari under Rule 45.
• Exclusive Ownership: Elizabeth insisted that the CA correctly ruled that the subject account was exclusively owned by her and that Allied Bank had no legal basis to deny her the enjoyment of the funds thereon.
• Abandoned Heirs' Claims: Elizabeth pointed out that her siblings no longer pursued their claims against the subject account.
• Lack of Proof of Heirship: Elizabeth argued that Allied Bank immediately acceded to Atty. Lim's request without even requiring him to prove that his clients were indeed See's heirs.

• Question of Law: Whether the principal issue—whether Allied Bank's temporary freezing of the subject account was proper—is a question of law cognizable in a petition for review on certiorari under Rule 45.
• Legal Basis to Freeze: Whether the Court of Appeals committed reversible error in ruling that Allied Bank had no legal basis to temporarily freeze SA No. 0570231382.

• Question of Law: Yes. The issue is a pure question of law because the material facts are undisputed and its resolution requires applying Section 97 of R.A. No. 8424 to those facts, without examining the probative value of the evidence.
• Legal Basis to Freeze: Yes. Section 97 of R.A. No. 8424 legally bound Allied Bank to disallow withdrawals from SA No. 0570231382 upon knowledge of See Sia's death, since bank records showed See owned a portion of the funds; no breach of contract or damages could be attributed to the bank.

• Question of Law: Section 1, Rule 45 of the Revised Rules of Civil Procedure limits a petition for review on certiorari to questions of law. A question of law arises when there is doubt as to what the law is on a certain state of facts, while a question of fact arises when the doubt concerns the truth or falsity of alleged facts. The principal issue—whether Allied Bank's temporary freezing of the subject account was proper—involves a pure question of law because the essential and material facts were not in dispute. The trial and appellate courts agreed on the established facts: Elizabeth maintained two Orient Bank accounts, one a joint "and/or" account with her father; Allied Bank assumed Orient Bank's obligations with PDIC assistance; the settlement of the uninsured deposits was credited to a single Allied Bank savings account in Elizabeth's name; SA No. 0570231382 was opened to receive settlement payments for the two Orient Bank accounts; Passbook No. SAL 782654-AB was issued solely under Elizabeth's name; See died on May 4, 2000; Allied Bank received a letter from Elizabeth's siblings through counsel informing it of See's death and requesting that it withhold transactions relating to See's account pending settlement of his estate; and Allied Bank acceded by temporarily freezing SA No. 0570231382, preventing Elizabeth from withdrawing. Allied Bank did not dispute these factual findings; its main argument was that the lower courts failed to consider that, under this factual milieu, it had legal basis to temporarily withhold transactions. The issue could be answered by applying pertinent laws and regulations to the established facts, without reviewing the records or examining the evidence to ascertain whether Allied Bank's act was valid.

• Legal Basis to Freeze: The authority of a bank to temporarily freeze the bank account of a deceased depositor is found in Section 97, R.A. No. 8424, the law governing the factual antecedents. The second paragraph provides that if a bank has knowledge of the death of a person who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the deposit account unless the Commissioner has certified that the taxes imposed thereon have been paid; the administrator or any one heir may, upon authorization by the Commissioner, withdraw an amount not exceeding P20,000 without the certification. The purpose is to ensure payment of estate taxes due on the transfer of the decedent's bank deposits before they could be exhausted or withdrawn by heirs or any person with access to the deposits. For the authority to take effect, the bank needs only two things: (1) a person is maintaining a bank deposit account; and (2) the bank has knowledge of that person's death. The authority applies with equal force to joint accounts, even a joint "and/or" account, because the law makes no distinction; it is the knowledge of the death of a co-depositor that gives the bank the license to withhold any withdrawal, and the authority is not dependent on whether the surviving co-depositor could previously withdraw without the other's knowledge or consent.

Section 97 does not define "person who maintained a bank deposit account" or limit its application only to persons expressly named as depositors. Because Section 97 is under Chapter I, Title III of R.A. No. 8424, which pertains to estate taxes, it must be read in the context of estate taxes. Section 85 of R.A. No. 8424 states that all properties of the decedent at the time of death, whether real or personal, tangible or intangible, wherever situated, shall be included in the gross estate. Reading Section 97 together with Section 85, the "person who maintained a bank deposit account" may reasonably be interpreted to mean the person who owned the fund or a portion of the fund in the deposit account. This covers any person, even one not expressly named as depositor, as long as it is clear that the fund or a portion thereof belongs to him. This is logical because even if the decedent was not named as depositor, as long as the records show he owned or co-owned the account, the deposit or his share forms part of his gross estate, which transmission is subject to estate tax.

Elizabeth claimed that because SA No. 0570231382 bore her name only, Allied Bank had no reason to freeze the account by reason only of her father's death. Under normal circumstances, Allied Bank would have no reason to freeze her account, and a bank is not duty-bound to know to whom the funds in a bank deposit account pertain outside of those named as depositors. A peculiar circumstance, however, justified Allied Bank's action. The RTC and CA both found that the funds in SA No. 0570231382 came from the settlement for Elizabeth and See's Orient Bank Account Nos. 023190001020 and 023190001031. The Deed of Assignment dated December 13, 1999, executed by Elizabeth and Allied Bank, indicated that SA No. 0570231382 was opened precisely to receive those payments. Allied Bank therefore had actual knowledge of the true ownership of the deposits. Elizabeth herself recognized this during cross-examination, claiming only that See promised before his death to give her his share; no factual finding of donation was made because she failed to produce a deed showing it. Allied Bank could not be faulted for considering See as one of the depositors of SA No. 0570231382. Although Elizabeth was the only one expressly named as depositor, the Deed of Assignment indicated that the subject savings account was essentially a joint account between her and her father. See's mistake in authorizing Elizabeth to claim payment for Orient Bank Account No. 023190001020, her individual account, instead of Orient Bank No. 023190001031 did not controvert this; the settlement payments for Orient Bank No. 023190001031 were one of the sources of the deposits in SA No. 0570231382, making See a co-owner and effectively a co-depositor.

Allied Bank was not obliged to demand from Atty. Lim further proof that his clients were really See's heirs. Section 97 provides that as long as the bank has knowledge of a depositor's death, it can exercise the authority to temporarily withhold withdrawal; an adverse claim by the depositor's heirs is not even required. In sum, Allied Bank was legally bound to temporarily withhold any withdrawal from SA No. 0570231382 after it was informed of See's death. No breach of contract could be attributed to it, and there was no reason to adjudge it liable for damages. The principal issue was only whether Allied Bank had legal basis and acted in good faith when it temporarily froze the account; whether the funds pertained exclusively to Elizabeth or a portion belonged to her father's estate was not the issue, and the disquisitions were not final judgments as regards title or ownership over the funds in SA No. 0570231382.

• Section 97, R.A. No. 8424 — Freezing Deposits Upon Death of Depositor — A bank that has knowledge of the death of a person who maintained a bank deposit account, alone or jointly with another, shall not allow any withdrawal from the deposit account unless the Commissioner of Internal Revenue has certified that the taxes imposed thereon have been paid. The administrator of the estate or any one heir may, upon authorization by the Commissioner, withdraw an amount not exceeding P20,000 without the certification. The purpose is to ensure payment of estate taxes due on the transfer of the decedent's bank deposits before they are exhausted or withdrawn. The authority applies with equal force to joint accounts, including a joint "and/or" account, and is not dependent on whether the surviving co-depositor could previously withdraw without the other's knowledge or consent. The bank needs only two things: (1) a person is maintaining a bank deposit account; and (2) the bank has knowledge of that person's death. In this case, Allied Bank had knowledge of See Sia's death and records showed See owned a portion of the funds in SA No. 0570231382, so the freeze was legally justified.
• "Person Who Maintained a Bank Deposit Account" — Owner or Co-Owner, Not Merely Named Depositor — Section 97 does not define "person who maintained a bank deposit account" or limit its application to persons expressly named as depositors. Read together with Section 85 of R.A. No. 8424, which includes all properties of the decedent in the gross estate, the phrase reasonably means the person who owned the fund or a portion of the fund in the deposit account. It covers any person, even one not expressly named as depositor, as long as it is clear that the fund or a portion thereof belongs to him. Applied here, although Elizabeth was the only named depositor of SA No. 0570231382, the Deed of Assignment and bank records showed See was a co-owner and effectively a co-depositor, so his death triggered the bank's authority to freeze.
• Question of Law vs. Question of Fact under Rule 45 — A question of law arises when there is doubt as to what the law is on a certain state of facts; a question of fact arises when the doubt concerns the truth or falsity of alleged facts. An issue is a pure question of law when it can be resolved without examining the probative value of the evidence or the truth or falsehood of admitted facts. If the issue invites review of the evidence, as when facts are disputed, it is a question of fact. Here, the material facts were undisputed, and the issue whether Allied Bank's temporary freezing was proper could be resolved by applying Section 97 of R.A. No. 8424 to those facts; it was therefore a question of law cognizable under Rule 45.
• No Breach of Contract When Bank Acts Pursuant to Statutory Duty — A bank that temporarily freezes a deposit account because Section 97 of R.A. No. 8424 legally requires it to disallow withdrawals upon knowledge of a depositor's death does not breach its contract with the depositor. Because Allied Bank was legally bound to withhold withdrawals from SA No. 0570231382 after being informed of See Sia's death, no breach of contract could be attributed to it and no damages could be awarded.

• "If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid; Provided, however, That the administrator of the estate or any one (1) of the heirs of the decedent may, upon authorization by the Commissioner, withdraw an amount not exceeding Twenty thousand pesos (P20,000) without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors." — This is the second paragraph of Section 97, R.A. No. 8424, the controlling provision that authorized and bound Allied Bank to disallow withdrawals upon knowledge of See Sia's death.
• "Reading Section 97 together with Section 85, the Court opines that the "person who maintained a bank deposit account" could reasonably be interpreted to mean the person who owned the fund or a portion of the fund in the said bank deposit account. This interpretation would cover any person, even those not expressly named as the depositor, as long as it is clear that the fund in the bank deposit or a portion thereof belongs to him." — This passage states the ratio decidendi on why See Sia, though not named as depositor of SA No. 0570231382, could be considered a co-depositor whose death triggered the freeze.
• "The authority applies with equal force to joint accounts even to a joint "and/or" account as the law did not make any distinction. After all, it is the knowledge of the death of a co-depositor which gives the bank the license to withhold any withdrawal from the bank account. The authority is not dependent on whether the surviving co-depositor could previously withdraw from the joint deposit even without the knowledge or consent of the other." — This defines the scope of the bank's authority under Section 97 and explains why the joint "and/or" nature of the Orient Bank account did not defeat the freeze.
• "In sum, the Court holds that Allied Bank, was actually legally bound to temporarily withhold any withdrawal from SA No. 0570231382 after it was informed of See's death. As such, no breach of contract could be attributed to it. Obviously, there is also no reason to adjudge the bank liable for damages." — This is the dispositive legal conclusion that Allied Bank did not breach its contract and was not liable for damages.

• Cebu Shipyard & Engineering Works, Inc. vs. William Lines, Inc., 366 Phil. 439, 452 (1999) — Cited for the general rule that a petition for review on certiorari under Rule 45 shall raise only questions of law and that the Court is not a trier of facts.
• Far Eastern Surety and Insurance Co., Inc. vs. People, 721 Phil. 760, 737 (2013) — Cited for the definition of a question of law as doubt as to what the law is on a certain state of facts.
• Heirs of Cabigas vs. Limbaco, 670 Phil. 274, 285 (2011) — Cited for the definition of a question of fact as doubt or controversy arising as to the truth or falsity of alleged facts.
• Tongonan Holdings and Development Corp. vs. Escaño, 672 Phil. 747, 756 (2011) — Cited for the rule that if the issue invites review of the evidence presented, as when facts are disputed, the question posed is one of fact.
• Philippine International Trading Corporation vs. Commission on Audit, 635 Phil. 448, 454 (2010) — Cited for the rule in statutory construction that a statute's clauses and phrases must not be taken as detached and isolated expressions; the whole and every part must be considered to produce a harmonious whole.

• Section 1, Rule 45, Revised Rules of Civil Procedure — Provides that a petition for review on certiorari filed before the Supreme Court shall raise only questions of law. Applied to hold that the principal issue—whether Allied Bank's temporary freezing was proper—was a question of law cognizable under Rule 45.
• Section 97, R.A. No. 8424 (Tax Reform Act of 1997) — Provides that if a bank has knowledge of the death of a person who maintained a bank deposit account alone or jointly with another, it shall not allow any withdrawal from the deposit account unless the Commissioner has certified that the taxes imposed thereon have been paid, subject to the P20,000 exception for an administrator or heir upon authorization by the Commissioner. Applied to hold that Allied Bank was legally bound to freeze SA No. 0570231382 upon knowledge of See Sia's death.
• Section 85, R.A. No. 8424 — Provides that all properties of the decedent at the time of death, whether real or personal, tangible or intangible, wherever situated, shall be included in the gross estate. Read together with Section 97 to interpret "person who maintained a bank deposit account" as including an owner or co-owner of the fund, even if not expressly named as depositor.
• Section 27, R.A. No. 10963 — Noted in the decision as having amended Section 97; the Court applied Section 97 of R.A. No. 8424 as the law governing the factual antecedents of the case.

Carpio (Chairperson), Caguioa, Lazaro-Javier, and Zalameda, JJ., concur.