Foreign Currency Deposits and Joint Accounts: When Courts Cannot Order Withdrawal

The Supreme Court recently clarified an important limit on the power of courts sitting in estate proceedings: they cannot order the release of funds from a foreign currency deposit account, even to pay estate obligations, without the written consent of the depositors. The ruling in Ching v. Pacioles, Jr. (G.R. No. 214415, October 15, 2018) also explains the rules on joint accounts and what happens when a co-administrator is removed.

The Case

Miguelita Ching Pacioles died leaving real properties, bank deposits, and investments. Her husband, Emilio Pacioles, Jr., filed a petition for settlement of her estate and was appointed administrator. Her brother, Emmanuel Ching, was later appointed co-administrator, but the Court of Appeals nullified that appointment.

Among the estate assets were two dollar accounts with BPI, which were closed and consolidated into a single joint account under the names of Emilio and Miguela (Miguelita's mother) or Emmanuel. When Emilio sought to withdraw funds to pay real property taxes, the intestate court granted his motion and ordered BPI to release ₱430,000 from the account. Emmanuel opposed, arguing the account was covered by the Foreign Currency Deposit Act and that his consent as co-depositor was required.

The Law on Foreign Currency Deposits

Republic Act No. 6426, the Foreign Currency Deposit Act, governs foreign currency deposits in the Philippines. The law declares such deposits to be of an absolutely confidential nature and provides that, except upon the written permission of the depositor, they shall not be examined, inquired into, or looked into by any person or government office, whether judicial, administrative, or legislative. The law further provides that foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency, or administrative body whatsoever.

The Supreme Court held that the intestate court violated this law when it ordered the bank to release funds from the foreign currency deposit account. No court order can compel the release of such funds, regardless of the purpose.

Joint Accounts Require All Depositors' Consent

The Court also addressed the nature of the subject account. A joint account is held by two or more persons who are joint owners or co-owners, with equal shares presumed unless proven otherwise. In an "and" joint account—where the account is held in the names of "A and B"—the depositors are joint creditors of the bank, and the signatures of all depositors are necessary to allow a withdrawal.

The intestate court erred when it deemed Emilio's consent alone sufficient. Since the account was in the names of Emilio and Miguela or Emmanuel, the consent of all named account holders was indispensable.

Effect of Removal as Co-Administrator

The Court recognized, however, that Emmanuel's appointment as co-administrator had been revoked. His right over the funds in the joint account merely emanated from his being a co-administrator. Once removed, he no longer had a right to the funds.

But this did not mean the bank could simply release the money. The Court explained that while banking laws require all depositors' consent, the proper remedy was to have Emmanuel's name removed as an account holder in a proper proceeding before the intestate court. The intestate court retains jurisdiction over the estate until all debts are paid and the remaining estate is delivered to the heirs. The case was remanded for proper proceedings.

Practical Takeaways

• Foreign currency deposits enjoy absolute protection. Under Republic Act No. 6426, these deposits cannot be attached, garnished, or released by court order. Even an estate court cannot compel a bank to release them.
• Joint "and" accounts require all depositors' signatures. A bank cannot honor a withdrawal with only one co-depositor's consent. This protects each co-owner's presumed equal share.
• Estate administrators must follow proper procedure. If a co-administrator is removed, the estate court must first order the removal of that person's name from the joint account before the remaining administrator can access the funds.
• Court orders that violate banking laws are void. A court exceeds its jurisdiction when it orders a bank to release foreign currency deposits, and such orders will be reversed on appeal.
• Removal as administrator does not automatically remove a name from a bank account. Separate proceedings are needed to update the account's records to reflect the administrator's authority.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.