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RepublicofthePhilippines
SUPREMECOURT
Manila

SECONDDIVISION

G.R.No.192413June13,2012

RizalCommercialBankingCorporation,Petitioner,
vs.
HiTriDevelopmentCorporationandLuzR.Bakunawa,Respondents.

DECISION

SERENO,J.:

Before the Court is a Rule 45 Petition for Review on Certiorari filed by petitioner Rizal Commercial Banking
Corporation (RCBC) against respondents HiTri Development Corporation (HiTri) and Luz R. Bakunawa
(Bakunawa).Petitionerseekstoappealfromthe26November2009Decisionand27May2010Resolutionofthe
CourtofAppeals(CA),1whichreversedandsetasidethe19May2008Decisionand3November2008Orderof
the Makati City Regional Trial Court (RTC) in Civil Case No. 06244.2 The case before the RTC involved the
ComplaintforEscheatfiledbytheRepublicofthePhilippines(Republic)pursuanttoActNo.3936,asamended
byPresidentialDecreeNo.679(P.D.679),againstcertaindeposits,credits,andunclaimedbalancesheldbythe
branches of various banks in the Philippines. The trial court declared the amounts, subject of the special
proceedings, escheated to the Republic and ordered them deposited with the Treasurer of the Philippines
(Treasurer)andcreditedinfavoroftheRepublic.3TheassailedRTCjudgmentsincludedanunclaimedbalancein
theamountofP1,019,514.29,maintainedbyRCBCinitsErmitaBusinessCenterbranch.

WequotethenarrationoffactsoftheCA4asfollows:

xxxLuz[R.]BakunawaandherhusbandManuel,nowdeceased("SpousesBakunawa")areregisteredowners
ofsix(6)parcelsoflandcoveredbyTCTNos.324985and324986oftheQuezonCityRegisterofDeeds,and
TCTNos.103724,98827,98828and98829oftheMarikinaRegisterofDeeds.Theselotsweresequesteredby
thePresidentialCommissiononGoodGovernment[(PCGG)].

Sometimein1990,acertainTeresitaMillan("Millan"),throughherrepresentative,JerryMontemayor,offeredto
buy said lots for "P 6,724,085.71", with the promise that she will take care of clearing whatever preliminary
obstaclestheremay[]betoeffecta"completionofthesale".TheSpousesBakunawagavetoMillantheOwners
Copies of said TCTs and in turn, Millan made a down[]payment of "P 1,019,514.29" for the intended purchase.
However, for one reason or another, Millan was not able to clear said obstacles. As a result, the Spouses
Bakunawa rescinded the sale and offered to return to Millan her down[]payment of P 1,019,514.29. However,
MillanrefusedtoacceptbacktheP1,019,514.29down[]payment.Consequently,theSpousesBakunawa,through
theircompany,theHiTriDevelopmentCorporation("HiTri")tookoutonOctober28,1991,aManagersCheck
fromRCBCErmitaintheamountofP1,019,514.29,payabletoMillanscompanyRosmilRealtyandDevelopment
Corporation("Rosmil")c/oTeresitaMillanandusedthisasoneoftheirbasisforacomplaintagainstMillanand
MontemayorwhichtheyfiledwiththeRegionalTrialCourtofQuezonCity,Branch99,docketedasCivilCaseNo.
Q9110719[in1991],prayingthat:

1. That the defendants Teresita Mil[l]an and Jerry Montemayor may be ordered to return to plaintiffs
spousestheOwnersCopiesofTransferCertificatesofTitleNos.324985,324986,103724,98827,98828
and98829

2. That the defendant Teresita Mil[l]an be correspondingly ordered to receive the amount of One Million
NineteenThousandFiveHundredFourteenPesosandTwentyNineCentavos(P1,019,514.29)

3. That the defendants be ordered to pay to plaintiffs spouses moral damages in the amount of P
2,000,000.00and

4.ThatthedefendantsbeorderedtopayplaintiffsattorneysfeesintheamountofP50,000.00.
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Being part and parcel of said complaint, and consistent with their prayer in Civil Case No. Q9110719 that
"Teresita Mil[l]an be correspondingly ordered to receive the amount of One Million Nineteen Thousand Five
HundredFourteenPesosandTwentyNine[Centavos]("P1,019,514.29")["],theSpousesBakunawa,uponadvice
of their counsel, retained custody of RCBC Managers Check No. ER 034469 and refrained from canceling or
negotiatingit.

All throughout the proceedings in Civil Case No. Q9110719, especially during negotiations for a possible
settlementofthecase,MillanwasinformedthattheManagersCheckwasavailableforherwithdrawal,shebeing
thepayee.

OnJanuary31,2003,duringthependencyoftheabovementionedcaseandwithouttheknowledgeof[HiTriand
SpousesBakunawa],xxxRCBCreportedthe"P1,019,514.29creditexistinginfavorofRosmil"totheBureauof
Treasuryasamongits"unclaimedbalances"asofJanuary31,2003.Allegedly,acopyoftheSwornStatement
executedbyFlorentinoN.Mendoza,ManagerandHeadofRCBCsAssetManagement,Disbursement&Sundry
Department("AMDSD")waspostedwithinthepremisesofRCBCErmita.

OnDecember14,2006,xxxRepublic,throughthe[OfficeoftheSolicitorGeneral(OSG)],filedwiththeRTCthe
actionbelowforEscheat[(CivilCaseNo.06244)].

OnApril30,2008,[SpousesBakunawa]settledamicablytheirdisputewithRosmilandMillan.Insteadofonlythe
amount of "P 1,019,514.29", [Spouses Bakunawa] agreed to pay Rosmil and Millan the amount of "P
3,000,000.00", [which is] inclusive [of] the amount of ["]P 1,019,514.29". But during negotiations and evidently
prior to said settlement, [Manuel Bakunawa, through HiTri] inquired from RCBCErmita the availability of the P
1,019,514.29 under RCBC Managers Check No. ER 034469. [HiTri and Spouses Bakunawa] were however
dismayedwhentheywereinformedthattheamountwasalreadysubjectoftheescheatproceedingsbeforethe
RTC.

OnApril17,2008,[ManuelBakunawa,throughHiTri]wrotexxxRCBC,viz:

"We understand that the deposit corresponding to the amount of Php 1,019,514.29 stated in the Managers
Check is currently the subject of escheat proceedings pending before Branch 150 of the Makati Regional Trial
Court.

Pleasenotethatitwasourimpressionthatthedepositwouldbetakenfrom[HiTris]RCBCbankaccountoncean
order to debit is issued upon the payees presentation of the Managers Check. Since the payee rejected the
negotiatedManagersCheck,presentationoftheManagersCheckwasnevermade.

Consequently, the deposit that was supposed to be allocated for the payment of the Managers Check was
supposed to remain part of the Corporation[s] RCBC bank account, which, thereafter, continued to be actively
maintained and operated. For this reason, We hereby demand your confirmation that the amount of Php
1,019,514.29continuestoformpartofthefundsintheCorporationsRCBCbankaccount,sincepayoutofsaid
amountwasneverordered.WewishtopointoutthatiftherewasanyattemptonthepartofRCBCtoconsider
theamountindicatedintheManagersCheckseparatefromtheCorporationsbankaccount,RCBCwouldhave
issuedastatementtothateffect,andrepeatedlyremindedtheCorporationthatthedepositwouldbeconsidered
dormant absent any fund movement. Since the Corporation never received any statements of account from
RCBCtothateffect,andmoreimportantly,neverreceivedanysingleletterfromRCBCnotingtheabsenceoffund
movementandadvisingtheCorporationthatthedepositwouldbetreatedasdormant."

On April 28, 2008, [Manuel Bakunawa] sent another letter to x x x RCBC reiterating their position as above
quoted.

InaletterdatedMay19,2008,xxxRCBCrepliedandinformed[HiTriandSpousesBakunawa]that:

"The Banks Ermita BC informed HiTri and/or its principals regarding the inclusion of Managers Check No.
ER034469intheescheatproceedingsdocketedasCivilCaseNo.06244,aswellasthestatusthereof,between
28January2008and1February2008.

xxxxxxxxx

ContrarytowhatHiTrihopesfor,thefundscoveredbytheManagersCheckNo.ER034469doesnotformpart
of the Banks own account. By simple operation of law, the funds covered by the managers check in issue
became a deposit/credit susceptible for inclusion in the escheat case initiated by the OSG and/or Bureau of
Treasury.

xxxxxxxxx

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Granting arguendo that the Bank was dutybound to make good the check, the Banks obligation to do so
prescribedasearlyasOctober2001."

(Emphases,citations,andannotationswereomitted.)

TheRTCRuling

The escheat proceedings before the Makati City RTC continued. On 19 May 2008, the trial court rendered its
assailed Decision declaring the deposits, credits, and unclaimed balances subject of Civil Case No. 06244
escheated to the Republic. Among those included in the order of forfeiture was the amount of P 1,019,514.29
heldbyRCBCasallocatedfundsintendedforthepaymentoftheManagersCheckissuedinfavorofRosmil.The
trialcourtorderedthedepositoftheescheatedbalanceswiththeTreasurerandcreditedinfavoroftheRepublic.
Respondents claim that they were not able to participate in the trial, as they were not informed of the ongoing
escheatproceedings.

Consequently,respondentsfiledanOmnibusMotiondated11June2008,seekingthepartialreconsiderationof
theRTCDecisioninsofarasitescheatedthefundallocatedforthepaymentoftheManagersCheck.Theyasked
thattheybeincludedaspartydefendantsor,inthealternative,allowedtointerveneinthecaseandtheirmotion
considered as an answerinintervention. Respondents argued that they had meritorious grounds to ask
reconsideration of the Decision or, alternatively, to seek intervention in the case. They alleged that the deposit
wassubjectofanongoingdispute(CivilCaseNo.Q9110719)betweenthemandRosmilsince1991,andthat
theywereinterestedpartiestothatcase.5

On3November2008,theRTCissuedanOrderdenyingthemotionofrespondents.Thetrialcourtexplainedthat
theRepublichadprovencompliancewiththerequirementsofpublicationandnotice,whichservedasnoticetoall
those who may be affected and prejudiced by the Complaint for Escheat. The RTC also found that the motion
failedtopointoutthefindingsandconclusionsthatwerenotsupportedbythelawortheevidencepresented,as
requiredbyRule37oftheRulesofCourt.Finally,itruledthatthealternativeprayertointervenewasfiledoutof
time.

TheCARuling

On26November2009,theCAissueditsassailedDecisionreversingthe19May2008Decisionand3November
2008OrderoftheRTC.Accordingtotheappellatecourt,6RCBCfailedtoprovethatthelatterhadcommunicated
withthepurchaseroftheManagersCheck(HiTriand/orSpousesBakunawa)orthedesignatedpayee(Rosmil)
immediatelybeforethebankfileditsSwornStatementonthedormantaccountsheldtherein.TheCAruledthat
thebanksfailuretonotifyrespondentsdeprivedthemofanopportunitytointerveneintheescheatproceedings
andtopresentevidencetosubstantiatetheirclaim,inviolationoftheirrighttodueprocess.Furthermore,theCA
pronounced that the Makati City RTC Clerk of Court failed to issue individual notices directed to all persons
claiminginterestintheunclaimedbalances,aswellastorequirethemtoappearafterpublicationandshowcause
whytheunclaimedbalancesshouldnotbedepositedwiththeTreasurerofthePhilippines.Itexplainedthatthe
jurisdictional requirement of individual notice by personal service was distinct from the requirement of notice by
publication.Consequently,theCAheldthattheDecisionandOrderoftheRTCwerevoidforwantofjurisdiction.

Issue

Afteraperusaloftheargumentspresentedbytheparties,wecullthemainissuesasfollows:

I.WhethertheDecisionandOrderoftheRTCwerevoidforfailuretosendseparatenoticestorespondents
bypersonalservice

II.WhetherpetitionerhadtheobligationtonotifyrespondentsimmediatelybeforeitfileditsSworn
StatementwiththeTreasurer

III.WhetherornottheallocatedfundsmaybeescheatedinfavoroftheRepublic

Discussion

Petitionerbankassails7theCAjudgmentsinsofarastheyruledthatnoticebypersonalserviceuponrespondents
isajurisdictionalrequirementinescheatproceedings.Petitionercontendsthatrespondentswerenottheowners
oftheunclaimedbalancesandwerethusnotentitledtonoticefromtheRTCClerkofCourt.Ithingesitsclaimon
the theory that the funds represented by the Managers Check were deemed transferred to the credit of the
payeeorholderuponitsissuance.

WequotethepertinentprovisionofActNo.3936,asamended,ontheruleonserviceofprocesses,towit:

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Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he shall commence an
actionoractionsinthenameofthePeopleoftheRepublicofthePhilippinesintheCourtofFirstInstanceofthe
province or city where the bank, building and loan association or trust corporation is located, in which shall be
joinedaspartiesthebank,buildingandloanassociationortrustcorporationandallsuchcreditorsordepositors.
All or any of such creditors or depositors or banks, building and loan association or trust corporations may be
included in one action. Service of process in such action or actions shall be made by delivery of a copy of the
complaintandsummonstothepresident,cashier,ormanagingofficerofeachdefendantbank,buildingandloan
association or trust corporation and by publication of a copy of such summons in a newspaper of general
circulation,eitherinEnglish,inFilipino,orinalocaldialect,publishedinthelocalitywherethebank,buildingand
loanassociationortrustcorporationissituated,iftherebeany,andincasethereisnone,intheCityofManila,at
suchtimeasthecourtmayorder.Uponthetrial,thecourtmusthearallpartieswhohaveappearedtherein,andif
it be determined that such unclaimed balances in any defendant bank, building and loan association or trust
corporation are unclaimed as hereinbefore stated, then the court shall render judgment in favor of the
Government of the Republic of the Philippines, declaring that said unclaimed balances have escheated to the
GovernmentoftheRepublicofthePhilippinesandcommandingsaidbank,buildingandloanassociationortrust
corporationtoforthwithdepositthesamewiththeTreasurerofthePhilippinestocreditoftheGovernmentofthe
RepublicofthePhilippinestobeusedastheNationalAssemblymaydirect.

Atthetimeofissuingsummonsintheactionaboveprovidedfor,theclerkofcourtshallalsoissueanoticesigned
by him, giving the title and number of said action, and referring to the complaint therein, and directed to all
persons, other than those named as defendants therein, claiming any interest in any unclaimed balance
mentioned in said complaint, and requiring them to appear within sixty days after the publication or first
publication,ifthereareseveral,ofsuchsummons,andshowcause,iftheyhaveany,whytheunclaimedbalances
involvedinsaidactionshouldnotbedepositedwiththeTreasurerofthePhilippinesasinthisActprovidedand
notifyingthemthatiftheydonotappearandshowcause,theGovernmentoftheRepublicofthePhilippineswill
apply to the court for the relief demanded in the complaint. A copy of said notice shall be attached to, and
publishedwiththecopyof,saidsummonsrequiredtobepublishedasabove,andattheendofthecopyofsuch
noticesopublished,thereshallbeastatementofthedateofpublication,orfirstpublication,ifthereareseveral,
ofsaidsummonsandnotice.Anypersoninterestedmayappearinsaidactionandbecomeapartythereto.Upon
the publication or the completion of the publication, if there are several, of the summons and notice, and the
service of the summons on the defendant banks, building and loan associations or trust corporations, the court
shallhavefullandcompletejurisdictionintheRepublicofthePhilippinesoverthesaidunclaimedbalancesand
overthepersonshavingorclaiminganyinterestinthesaidunclaimedbalances,oranyofthem,andshallhave
full and complete jurisdiction to hear and determine the issues herein, and render the appropriate judgment
thereon.(Emphasissupplied.)

Hence,insofarasbanksareconcerned,serviceofprocessesismadebydeliveryofacopyofthecomplaintand
summons upon the president, cashier, or managing officer of the defendant bank.8 On the other hand, as to
depositorsorotherclaimantsoftheunclaimedbalances,serviceismadebypublicationofacopyofthesummons
in a newspaper of general circulation in the locality where the institution is situated.9 A notice about the
forthcomingescheatproceedingsmustalsobeissuedandpublished,directingandrequiringallpersonswhomay
claim any interest in the unclaimed balances to appear before the court and show cause why the dormant
accountsshouldnotbedepositedwiththeTreasurer.

Accordingly, the CA committed reversible error when it ruled that the issuance of individual notices upon
respondents was a jurisdictional requirement, and that failure to effect personal service on them rendered the
Decision and the Order of the RTC void for want of jurisdiction. Escheat proceedings are actions in rem,10
whereby an action is brought against the thing itself instead of the person.11 Thus, an action may be instituted
andcarriedtojudgmentwithoutpersonalserviceuponthedepositorsorotherclaimants.12Jurisdictionissecured
bythepowerofthecourtovertheres.13Consequently,ajudgmentofescheatisconclusiveuponpersonsnotified
byadvertisement,aspublicationisconsideredageneralandconstructivenoticetoallpersonsinterested.14

Nevertheless,wefindsufficientgroundstoaffirmtheCAontheexclusionofthefundsallocatedforthepayment
oftheManagersCheckintheescheatproceedings.

Escheat proceedings refer to the judicial process in which the state, by virtue of its sovereignty, steps in and
claims abandoned, left vacant, or unclaimed property, without there being an interested person having a legal
claimthereto.15Inthecaseofdormantaccounts,thestateinquiresintothestatus,custody,andownershipofthe
unclaimed balance to determine whether the inactivity was brought about by the fact of death or absence of or
abandonmentbythedepositor.16Ifaftertheproceedingsthepropertyremainswithoutalawfulownerinterested
to claim it, the property shall be reverted to the state "to forestall an open invitation to selfservice by the first
comers."17 However, if interested parties have come forward and lain claim to the property, the courts shall
determinewhetherthecreditordepositshouldpasstotheclaimantsorbeforfeitedinfavorofthestate.18 We
emphasizethatescheatisnotaproceedingtopenalizedepositorsforfailingtodeposittoorwithdrawfromtheir

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accounts.Itisaproceedingwherebythestatecompelsthesurrendertoitofunclaimeddepositbalanceswhen
thereissubstantialgroundforabeliefthattheyhavebeenabandoned,forgotten,orwithoutanowner.19

ActNo.3936,asamended,outlinestheproperproceduretobefollowedbybanksandothersimilarinstitutionsin
filingaswornstatementwiththeTreasurerconcerningdormantaccounts:

Sec.2.ImmediatelyafterthetakingeffectofthisActandwithinthemonthofJanuaryofeveryoddyear,allbanks,
building and loan associations, and trust corporations shall forward to the Treasurer of the Philippines a
statement,underoath,oftheirrespectivemanagingofficers,ofallcreditsanddepositsheldbytheminfavorof
personsknowntobedead,orwhohavenotmadefurtherdepositsorwithdrawalsduringtheprecedingtenyears
ormore,arrangedinalphabeticalorderaccordingtothenamesofcreditorsanddepositors,andshowing:

(a)Thenamesandlastknownplaceofresidenceorpostofficeaddressesofthepersonsinwhosefavor
suchunclaimedbalancesstand

(b)Theamountandthedateoftheoutstandingunclaimedbalanceandwhetherthesameisinmoneyorin
security,andifthelatter,thenatureofthesame

(c) The date when the person in whose favor the unclaimed balance stands died, if known, or the date
whenhemadehislastdepositorwithdrawaland

(d)Theinterestdueonsuchunclaimedbalance,ifany,andtheamountthereof.

Acopyoftheaboveswornstatementshallbepostedinaconspicuousplaceinthepremisesofthebank,building
and loan association, or trust corporation concerned for at least sixty days from the date of filing thereof:
Provided,Thatimmediatelybeforefilingtheaboveswornstatement,thebank,buildingandloanassociation,and
trust corporation shall communicate with the person in whose favor the unclaimed balance stands at his last
knownplaceofresidenceorpostofficeaddress.

It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to time the
existenceofunclaimedbalancesheldbybanks,buildingandloanassociations,andtrustcorporations.(Emphasis
supplied.)

As seen in the aforequoted provision, the law sets a detailed system for notifying depositors of unclaimed
balances. This notification is meant to inform them that their deposit could be escheated if left unclaimed.
Accordingly, before filing a sworn statement, banks and other similar institutions are under obligation to
communicate with owners of dormant accounts. The purpose of this initial notice is for a bank to determine
whether an inactive account has indeed been unclaimed, abandoned, forgotten, or left without an owner. If the
depositorsimplydoesnotwishtotouchthefundsinthemeantime,butstillassertsownershipanddominionover
thedormantaccount,thenthebankisnolongerobligatedtoincludetheaccountinitsswornstatement.20Itisnot
theintentofthelawtoforcedepositorsintounnecessarylitigationanddefenseoftheirrights,asthestateisonly
interestedinescheatingbalancesthathavebeenabandonedandleftwithoutanowner.

Incasethebankcomplieswiththeprovisionsofthelawandtheunclaimedbalancesareeventuallyescheatedto
the Republic, the bank "shall not thereafter be liable to any person for the same and any action which may be
broughtbyanypersonagainstinanybankxxxforunclaimedbalancessodepositedxxxshallbedefendedbythe
Solicitor General without cost to such bank."21 Otherwise, should it fail to comply with the legally outlined
proceduretotheprejudiceofthedepositor,thebankmaynotraisethedefenseprovidedunderSection5ofAct
No.3936,asamended.

Petitioner asserts22 that the CA committed a reversible error when it required RCBC to send prior notices to
respondents about the forthcoming escheat proceedings involving the funds allocated for the payment of the
ManagersCheck.Itexplainsthat,pursuanttothelaw,onlythose"whosefavorsuchunclaimedbalancesstand"
areentitledtoreceivenotices.Petitionerarguesthat,sincethefundsrepresentedbytheManagersCheckwere
deemedtransferredtothecreditofthepayeeuponissuanceofthecheck,theproperpartyentitledtothenotices
was the payee Rosmil and not respondents. Petitioner then contends that, in any event, it is not liable for
failingtosendaseparatenoticetothepayee,becauseitdidnothavetheaddressofRosmil.Petitioneraversthat
itwasnotunderanyobligationtorecordtheaddressofthepayeeofaManagersCheck.

Incontrast,respondentsHiTriandBakunawaallege23thattheyhavealegalinterestinthefundallocatedforthe
payment of the Managers Check. They reason that, since the funds were part of the Compromise Agreement
betweenrespondentsandRosmilinaseparatecivilcase,theapprovalandeventualexecutionoftheagreement
effectively reverted the fund to the credit of respondents. Respondents further posit that their ownership of the
fundswasevidencedbytheircontinuedcustodyoftheManagersCheck.

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Anordinarycheckreferstoabillofexchangedrawnbyadepositor(drawer)onabank(drawee),24 requesting
thelattertopayapersonnamedtherein(payee)ortotheorderofthepayeeortothebearer,anamedsumof
money.25Theissuanceofthecheckdoesnotofitselfoperateasanassignmentofanypartofthefundsinthe
bank to the credit of the drawer.26 Here, the bank becomes liable only after it accepts or certifies the check.27
After the check is accepted for payment, the bank would then debit the amount to be paid to the holder of the
checkfromtheaccountofthedepositordrawer.

Therearechecksofaspecialtypecalledmanagersorcashierschecks.Thesearebillsofexchangedrawnby
the banks manager or cashier, in the name of the bank, against the bank itself.28 Typically, a managers or a
cashiers check is procured from the bank by allocating a particular amount of funds to be debited from the
depositorsaccountorbydirectlypayingordepositingtothebankthevalueofthechecktobedrawn.Sincethe
bank issues the check in its name, with itself as the drawee, the check is deemed accepted in advance.29
Ordinarily,thecheckbecomestheprimaryobligationoftheissuingbankandconstitutesitswrittenpromisetopay
upondemand.30

Nevertheless,themereissuanceofamanagerscheckdoesnotipsofactoworkasanautomatictransferoffunds
to the account of the payee. In case the procurer of the managers or cashiers check retains custody of the
instrument,doesnottenderittotheintendedpayee,orfailstomakeaneffectivedelivery,wefindthefollowing
provisiononundeliveredinstrumentsundertheNegotiableInstrumentsLawapplicable:31

Sec.16.Deliverywheneffectualwhenpresumed.Everycontractonanegotiableinstrumentisincompleteand
revocableuntildeliveryoftheinstrumentforthepurposeofgivingeffectthereto.Asbetweenimmediateparties
andasregardsaremotepartyotherthanaholderinduecourse,thedelivery,inordertobeeffectual,mustbe
madeeitherbyorundertheauthorityofthepartymaking,drawing,accepting,orindorsing,asthecasemaybe
and,insuchcase,thedeliverymaybeshowntohavebeenconditional,orforaspecialpurposeonly,andnotfor
thepurposeoftransferringthepropertyintheinstrument.Butwheretheinstrumentisinthehandsofaholderin
due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively
presumed.Andwheretheinstrumentisnolongerinthepossessionofapartywhosesignatureappearsthereon,
avalidandintentionaldeliverybyhimispresumeduntilthecontraryisproved.(Emphasissupplied.)

PetitioneracknowledgesthattheManagersCheckwasprocuredbyrespondents,andthattheamounttobepaid
forthecheckwouldbesourcedfromthedepositaccountofHiTri.32WhenRosmildidnotaccepttheManagers
Check offered by respondents, the latter retained custody of the instrument instead of cancelling it. As the
Managers Check neither went to the hands of Rosmil nor was it further negotiated to other persons, the
instrument remained undelivered. Petitioner does not dispute the fact that respondents retained custody of the
instrument.33

Sincetherewasnodelivery,presentmentofthechecktothebankforpaymentdidnotoccur.Anordertodebit
the account of respondents was never made. In fact, petitioner confirms that the Managers Check was never
negotiatedorpresentedforpaymenttoitsErmitaBranch,andthattheallocatedfundisstillheldbythebank.34
Asaresult,theassignedfundisdeemedtoremainpartoftheaccountofHiTri,whichprocuredtheManagers
Check. The doctrine that the deposit represented by a managers check automatically passes to the payee is
inapplicable,becausetheinstrumentalthoughacceptedinadvanceremainsundelivered.Hence,respondents
should have been informed that the deposit had been left inactive for more than 10 years, and that it may be
subjectedtoescheatproceedingsifleftunclaimed. 1 w p h i1

AfteracarefulreviewoftheRTCrecords,wefindthatitisnolongernecessarytoremandthecaseforhearingto
determinewhethertheclaimofrespondentswasvalid.Therewasnocontentionthattheyweretheprocurersof
theManagersCheck.Itisundisputedthattherewasnoeffectivedeliveryofthecheck,renderingtheinstrument
incomplete.Inaddition,wehavealreadysettledthatrespondentsretainedownershipofthefunds.Asitisobvious
from their foregoing actions that they have not abandoned their claim over the fund, we rule that the allocated
deposit, subject of the Managers Check, should be excluded from the escheat proceedings. We reiterate our
pronouncement that the objective of escheat proceedings is state forfeiture of unclaimed balances. We further
notethatthereisnothingintherecordsthatwouldshowthattheOSGappealedtheassailedCAjudgments.We
take this failure to appeal as an indication of disinterest in pursuing the escheat proceedings in favor of the
Republic.

WHEREFOREthePetitionisDENIED.The26November2009Decisionand27May2010ResolutionoftheCourt
ofAppealsinCAG.R.SPNo.107261areherebyAFFIRMED.

SOORDERED.

MARIALOURDESP.A.SERENO
AssociateJustice

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WECONCUR:

ANTONIOT.CARPIO
SeniorAssociateJustice
Chairperson

ARTUROD.BRION JOSEPORTUGALPEREZ
AssociateJustice AssociateJustice

BIENVENIDOL.REYES
AssociateJustice

CERTIFICATION

Icertifythattheconclusionsintheabovehadbeenreachedinconsultationbeforethecasewasassignedtothe
writeroftheopinionoftheCourtsDivision.

ANTONIOT.CARPIO
SeniorAssociateJustice
(PerSection12,R.A.No.296,TheJudiciaryActof1948,asamended)

Footnotes

1 The Decision and Resolution in CAG.R. SP No. 107261 were penned by CA Associate Justice Vicente
S.E.VelosoandconcurredinbyAssociateJusticesAndresB.Reyes,Jr.andMarleneGonzalesSison.
2TheDecisionandOrderinCivilCaseNo.06244(forEscheat)waspennedbyJudgeElmoM.Alameda.

3 CA Decision at 12 (HiTri Development Corporation v. Republic of the Philippines, CAG.R. SP No.

107261, 26 November 2009), rollo, pp. 6162 RTC Decision at the 18th to the 19th pp. (unpaged)
(RepublicofthePhilippinesv.AlliedBankingCorporation,CivilCaseNo.06244,19May2008),rollo,pp.
210211.
4CADecisionat27,supra,rollo,pp.6267.

5OmnibusMotionat37(RepublicofthePhilippinesv.AlliedBankingCorporation,CivilCaseNo.06244,
decidedon19May2008),rollo,pp.217221.SeealsoRTCJudgment(Bakunawav.Milan,CivilCaseNo.
Q9110719,17June2008),rollo,pp.287289.
6CADecisionat1416,supranote3,rollo,pp.7476.

7PetitionforReviewonCertiorariofRCBCat4149,rollo,pp.4351.

8ActNo.3936,asamendedbyP.D.679,Sec.3seealsoSecuritySavingsBankv.StateofCalifornia,263
U.S.282(1923).

9Id.

10Republicv.CourtofFirstInstance,247APhil.85(1988).

11SeeRamosv.Ramos,G.R.No.144294,11March2003,399SCRA43.

12SeeGreyv.DelaCruz,17Phil.49(1910).

13Id.

14Id.(citingHamiltonv.Brown,161U.S.256(1896)).

15BlacksLawDictionary545(6thed.1990)ActNo.3936,asamendedbyP.D.679,Secs.1and3.See
generallyRepublicv.CourtofAppeals,426Phil.177(2002)andRothv.Delano,338U.S.226(1949).
16 See Act No. 3936, as amended by P.D. 679, Sec. 1 and Security Savings Bank v. State of California,
supranote8.SeegenerallyRothv.Delano,supra.

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17Republicv.CourtofAppeals,supranote15,at183184.

18SeegenerallyRothv.Delano,supranote15.

19 See also Anderson National Bank v. Luckett, 321 U.S. 233 (1944), cited in American Express Travel
RelatedServicesCo.,Inc.v.Kentucky,641F.3d685(6thCirc.2011)(U.S.).
20SeegenerallySecuritySavingsBankv.StateofCalifornia,supranote8.

21ActNo.3936,asamendedbyP.D.679(1975),Sec.5.

22PetitionforReviewonCertiorariofRCBCat4149,rollo,pp.4351.

23CommentofRespondentsat78,rollo,pp.651652.

24ActNo.2031(1911),otherwiseknownastheNegotiableInstrumentsLaw,Sec.185.

25Moranv.CourtofAppeals,G.R.No.105836,7March1994,230SCRA799.

26ActNo.2031(1911),otherwiseknownastheNegotiableInstrumentsLaw,Sec.189.

27Id.atSec.127.

28 Bank of the Philippine Islands v. Roxas, G.R. No. 157833, 15 October 2007, 536 SCRA 168
InternationalCorporateBankv.Gueco,404Phil.353(2001).
29InternationalCorporateBankv.Gueco,supra.

30Id.Republicv.PhilippineNationalBank,113Phil.828(1961).Amanagersoracashierscheckmaybe
treatedasapromissorynoteandisthesubstantialequivalentofacertifiedcheck(Id.EquitablePCIBank
v. Ong, 533 Phil. 415 (2006) New Pacific Timber & Supply Co., Inc. v. Seneris, 189 Phil. 517 (1980)).
Certificationsignifiesthattheinstrumentwasdrawnuponsufficientfundsthatfundshavebeensetapartor
assignedforthesatisfactionofthecheckinfavorofthepayeeandthatthefundsshallbesoappliedwhen
thecheckispresentedforpayment(Id.).Here,thedepositrepresentedbythecheckistransferredfromthe
credit of the maker to that of the payee or holder (Id.). Thus, to all intents and purposes, the payee or
holderbecomesthedepositorofthedraweebank,withrightsanddutiesofoneinthatsituation(Id.).
31ActNo.2031(1911).SeealsoMalloyv.Smith,265Md.460,290A.2d486,57A.L.R.3d1076(Md.Ct.
App.1972)(U.S.)(citingPikevilleNat.Bank&TrustCo.v.Shirley,281Ky.150,135S.W.2d426(KyCt.App.
1939)(U.S.))
32PetitionforReviewonCertiorariofRCBCat2729,rollo,pp.2931.

33Id.at53,rollo,p.55.

34LetterofRCBCtoHiTriat2,PetitionforReviewonCertiorariofRCBC,Annex"N,"rollo,p.180.

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