SECOND DIVISION

RIZAL COMMERCIAL BANKING

CORPORATION,
Petitioner,
versus
HI-TRI
DEVELOPMENT
CORPORATION and LUZ
R.
BAKUNAWA,
Respondents.

G.R. No. 192413

Present:
CARPIO, J., Chairperson,
BRION,
PEREZ,
SERENO, and
REYES, JJ.
Promulgated:

June 13, 2012

x--------------------------------------------------x
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 (Hi-Tri) and Luz R. Bakunawa (Bakunawa).
Petitioner seeks to appeal from the 26 November 2009 Decision and 27 May 2010
Resolution of the Court of Appeals (CA),[1] which reversed and set aside the 19
May 2008 Decision and 3 November 2008 Order of the Makati City Regional Trial
Court (RTC) in Civil Case No. 06-244. [2] The case before the RTC involved the
Complaint for Escheat filed by the Republic of the Philippines (Republic) pursuant
to Act No. 3936, as amended by Presidential Decree No. 679 (P.D. 679), against
certain deposits, credits, and unclaimed balances held by the 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) and credited in favor of the Republic.

[3]

The assailed RTC judgments included an unclaimed balance in the amount of

1,019,514.29, maintained by RCBC in its Ermita Business Center branch.
We quote the narration of facts of the CA[4] as follows:
x x x Luz [R.] Bakunawa and her husband Manuel, now deceased
(Spouses Bakunawa) are registered owners of six (6) parcels of land covered by
TCT Nos. 324985 and 324986 of the Quezon City Register of Deeds, and TCT
Nos. 103724, 98827, 98828 and 98829 of the Marikina Register of Deeds. These
lots were sequestered by the Presidential Commission on Good Government
[(PCGG)].
Sometime in 1990, a certain Teresita Millan (Millan), through her
representative, Jerry Montemayor, offered to buy said lots for 6,724,085.71, with
the promise that she will take care of clearing whatever preliminary obstacles
there may[]be to effect a completion of the sale. The Spouses Bakunawa gave to
Millan the Owners Copies of said TCTs and in turn, Millan made a
down[]payment of 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Spouses Bakunawa rescinded the sale and offered to return to Millan her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 1,019,514.29. However, Millan refused to accept back the
1,019,514.29 down[]payment. Consequently, the Spouses Bakunawa, through
their company, the Hi-Tri Development Corporation (Hi-Tri) took out on October
28, 1991, a Managers Check from RCBC-Ermita in the amount of 1,019,514.29,
payable to Millans company Rosmil Realty and Development Corporation
(Rosmil) c/o Teresita Millan and used this as one of their basis for a complaint
against Millan and Montemayor which they filed with the Regional Trial Court of
Quezon City, Branch 99, docketed as Civil Case No. Q-91-10719 [in 1991],
praying that:
1. That the defendants Teresita Mil[l]an and Jerry Montemayor
may be ordered to return to plaintiffs spouses the Owners
Copies of Transfer Certificates of Title Nos. 324985, 324986,
103724, 98827, 98828 and 98829;
2. That the defendant Teresita Mil[l]an be correspondingly
ordered to receive the amount of One Million Nineteen
Thousand Five Hundred Fourteen Pesos and Twenty Nine
Centavos (1,019,514.29);
3. That the defendants be ordered to pay to plaintiffs spouses
moral damages in the amount of 2,000,000.00; and

4. That the defendants be ordered to pay plaintiffs attorneys fees

in the amount of 50,000.00.
Being part and parcel of said complaint, and consistent with their prayer in
Civil Case No. Q-91-10719 that Teresita Mil[l]an be correspondingly ordered to
receive the amount of One Million Nineteen Thousand Five Hundred Fourteen
Pesos and Twenty Nine [Centavos] (1,019,514.29)[], the Spouses Bakunawa,
upon advice of their counsel, retained custody of RCBC Managers Check No. ER
034469 and refrained from canceling or negotiating it.
All throughout the proceedings in Civil Case No. Q-91-10719, especially
during negotiations for a possible settlement of the case, Millan was informed that
the Managers Check was available for her withdrawal, she being the payee.
On January 31, 2003, during the pendency of the abovementioned case
and without the knowledge of [Hi-Tri and Spouses Bakunawa], x x x RCBC
reported the 1,019,514.29-credit existing in favor of Rosmil to the Bureau of
Treasury as among its unclaimed balances as of January 31, 2003. Allegedly, a
copy of the Sworn Statement executed by Florentino N. Mendoza, Manager and
Head of RCBCs Asset Management, Disbursement & Sundry Department
(AMDSD) was posted within the premises of RCBC-Ermita.
On December 14, 2006, x x x Republic, through the [Office of the
Solicitor General (OSG)], filed with the RTC the action below for Escheat [(Civil
Case No. 06-244)].
On April 30, 2008, [Spouses Bakunawa] settled amicably their dispute
with Rosmil and Millan. Instead of only the amount of 1,019,514.29, [Spouses
Bakunawa] agreed to pay Rosmil and Millan the amount of 3,000,000.00,
[which is] inclusive [of] the amount of []1,019,514.29. But during negotiations
and evidently prior to said settlement, [Manuel Bakunawa, through Hi-Tri]
inquired from RCBC-Ermita the availability of the 1,019,514.29 under RCBC
Managers Check No. ER 034469. [Hi-Tri and Spouses Bakunawa] were however
dismayed when they were informed that the amount was already subject of the
escheat proceedings before the RTC.
On April 17, 2008, [Manuel Bakunawa, through Hi-Tri] wrote x x x
RCBC, 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.
Please note that it was our impression that the deposit would be
taken from [Hi-Tris] RCBC bank account once an order to debit is
issued upon the payees presentation of the Managers Check. Since

the payee rejected the negotiated Managers Check, presentation of

the Managers Check was never made.
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
1,019,514.29 continues to form part of the funds in the
Corporations RCBC bank account, since pay-out of said amount
was never ordered. We wish to point out that if there was any
attempt on the part of RCBC to consider the amount indicated in
the Managers Check separate from the Corporations bank account,
RCBC would have issued a statement to that effect, and repeatedly
reminded the Corporation that the deposit would be considered
dormant absent any fund movement. Since the Corporation never
received any statements of account from RCBC to that effect, and
more importantly, never received any single letter from RCBC
noting the absence of fund movement and advising the Corporation
that the deposit would be treated as dormant.
On April 28, 2008, [Manuel Bakunawa] sent another letter to x x x RCBC
reiterating their position as above-quoted.
In a letter dated May 19, 2008, x x x RCBC replied and informed [Hi-Tri
and Spouses Bakunawa] that:
The Banks Ermita BC informed Hi-Tri and/or its principals
regarding the inclusion of Managers Check No. ER034469 in the
escheat proceedings docketed as Civil Case No. 06-244, as well as
the status thereof, between 28 January 2008 and 1 February 2008.
xxx xxx xxx
Contrary to what Hi-Tri hopes for, the funds covered by the
Managers Check No. ER034469 does not form part 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.
xxx xxx xxx
Granting arguendo that the Bank was duty-bound to make good the
check, the Banks obligation to do so prescribed as early as October
2001.
(Emphases, citations, and annotations were omitted.)

The RTC Ruling

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. 06-244 escheated to the Republic.
Among those included in the order of forfeiture was the amount of 1,019,514.29
held by RCBC as allocated funds intended for the payment of the Managers Check
issued in favor of Rosmil. The trial court ordered the deposit of the escheated
balances with the Treasurer and credited in favor of the Republic. Respondents
claim that they were not able to participate in the trial, as they were not informed
of the ongoing escheat proceedings.

Consequently, respondents filed an Omnibus Motion dated 11 June 2008,

seeking the partial reconsideration of the RTC Decision insofar as it escheated the
fund allocated for the payment of the Managers Check. They asked that they be
included as party-defendants or, in the alternative, allowed to intervene in the case
and their motion considered as an answer-in-intervention. 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 was
subject of an ongoing dispute (Civil Case No. Q-91-10719) between them and
Rosmil since 1991, and that they were interested parties to that case.[5]

On 3 November 2008, the RTC issued an Order denying the motion of

respondents. The trial court explained that the Republic had proven compliance
with the requirements of publication and notice, which served as notice to all those
who may be affected and prejudiced by the Complaint for Escheat. The RTC also
found that the motion failed to point out the findings and conclusions that were not
supported by the law or the evidence presented, as required by Rule 37 of the

Rules of Court. Finally, it ruled that the alternative prayer to intervene was filed
out of time.

The CA Ruling

On 26 November 2009, the CA issued its assailed Decision reversing the 19

May 2008 Decision and 3 November 2008 Order of the RTC. According to the
appellate court,[6] RCBC failed to prove that the latter had communicated with the
purchaser of the Managers Check (Hi-Tri and/or Spouses Bakunawa) or the
designated payee (Rosmil) immediately before the bank filed its Sworn Statement
on the dormant accounts held therein. The CA ruled that the banks failure to notify
respondents deprived them of an opportunity to intervene in the escheat
proceedings and to present evidence to substantiate their claim, in violation of their
right to due process. Furthermore, the CA pronounced that the Makati City RTC
Clerk of Court failed to issue individual notices directed to all persons claiming
interest in the unclaimed balances, as well as to require them to appear after
publication and show cause why the unclaimed balances should not be deposited
with the Treasurer of the Philippines. It explained that the jurisdictional
requirement of individual notice by personal service was distinct from the
requirement of notice by publication. Consequently, the CA held that the Decision
and Order of the RTC were void for want of jurisdiction.

Issue

After a perusal of the arguments presented by the parties, we cull the main
issues as follows:

I.

Whether the Decision and Order of the RTC were void for failure to
send separate notices to respondents by personal service

II.

Whether petitioner had the obligation to notify respondents

immediately before it filed its Sworn Statement with the Treasurer

III.

Whether or not the allocated funds may be escheated in favor of the

Republic

Discussion

Petitioner bank assails[7] the CA judgments insofar as they ruled that notice
by personal service upon respondents is a jurisdictional requirement in escheat
proceedings. Petitioner contends that respondents were not the owners of the
unclaimed balances and were thus not entitled to notice from the RTC Clerk of
Court. It hinges its claim on the theory that the funds represented by the Managers
Check were deemed transferred to the credit of the payee or holder upon its
issuance.

We quote the pertinent provision of Act No. 3936, as amended, on the rule
on service of processes, to wit:
Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed
balances, he shall commence an action or actions in the name of the People of
the Republic of the Philippinesin the Court of First Instance of the province or
city where the bank, building and loan association or trust corporation is
located, in which shall be joined as parties the bank, building and loan
association or trust corporation and all such creditors or depositors. 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 complaint and summons to
the president, cashier, or managing officer of each defendant bank, building
and loan association or trust corporation and by publication of a copy of such
summons in a newspaper of general circulation, either in English, in Filipino, or

in a local dialect, published in the locality where the bank, building and loan
association or trust corporation is situated, if there be any, and in case there is
none, in the City of Manila, at such time as the court may order. Upon the trial,
the court must hear all parties who have appeared therein, and if 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 Government of the Republic of the Philippines and commanding
said bank, building and loan association or trust corporation to forthwith deposit
the same with the Treasurer of the Philippines to credit of the Government of the
Republic of the Philippines to be used as the National Assembly may direct.
At the time of issuing summons in the action above provided for, the clerk of
court shall also issue a notice signed 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, if there are
several, of such summons, and show cause, if they have any, why the
unclaimed balances involved in said action should not be deposited with the
Treasurer of the Philippines as in this Act provided and notifying them that if
they do not appear and show cause, the Government of the Republic of the
Philippines will apply to the court for the relief demanded in the
complaint. A copy of said notice shall be attached to, and published with the copy
of, said summons required to be published as above, and at the end of the copy of
such notice so published, there shall be a statement of the date of publication, or
first publication, if there are several, of said summons and notice. Any person
interested may appear in said action and become a party thereto. 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 shall have full and
complete jurisdiction in the Republic of the Philippines over the said
unclaimed balances and over the persons having or claiming any interest in
the said unclaimed balances, or any of them, and shall have full and complete
jurisdiction to hear and determine the issues herein, and render the
appropriate judgment thereon. (Emphasis supplied.)

Hence, insofar as banks are concerned, service of processes is made by

delivery of a copy of the complaint and summons upon the president, cashier, or
managing officer of the defendant bank.[8] On the other hand, as to depositors or
other claimants of the unclaimed balances, service is made by publication of a

copy of the summons in a newspaper of general circulation in the locality where

the institution is situated.[9] A notice about the forthcoming escheat proceedings
must also be issued and published, directing and requiring all persons who may
claim any interest in the unclaimed balances to appear before the court and show
cause why the dormant accounts should not be deposited with the Treasurer.

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 and carried to judgment without personal
service upon the depositors or other claimants.[12] Jurisdiction is secured by the
power of the court over the res.[13] Consequently, a judgment of escheat is
conclusive upon persons notified by advertisement, as publication is considered a
general and constructive notice to all persons interested.[14]

Nevertheless, we find sufficient grounds to affirm the CA on the exclusion

of the funds allocated for the payment of the Managers Check in the escheat
proceedings.

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 claim thereto.
[15]
In the case of dormant accounts, the state inquires into the status, custody, and
ownership of the unclaimed balance to determine whether the inactivity was
brought about by the fact of death or absence of or abandonment by the depositor.
[16]
If after the proceedings the property remains without a lawful owner interested
to claim it, the property shall be reverted to the state to forestall an open invitation

to self-service by the first comers.[17] However, if interested parties have come

forward and lain claim to the property, the courts shall determine whether the credit
or deposit should pass to the claimants or be forfeited in favor of the state. [18] We
emphasize that escheat is not a proceeding to penalize depositors for failing to
deposit to or withdraw from their accounts. It is a proceeding whereby the state
compels the surrender to it of unclaimed deposit balances when there is substantial
ground for a belief that they have been abandoned, forgotten, or without an owner.
[19]

Act No. 3936, as amended, outlines the proper procedure to be followed by

banks and other similar institutions in filing a sworn statement with the Treasurer
concerning dormant accounts:
Sec. 2. Immediately after the taking effect of this Act and within the month of
January of every odd year, all banks, building and loan associations, and trust
corporations shall forward to the Treasurer of the Philippines a statement,
under oath, of their respective managing officers, of all credits and deposits held
by them in favor of persons known to be dead, or who have not made further
deposits or withdrawals during the preceding ten years or more, arranged in
alphabetical order according to the names of creditors and depositors,
and showing:
(a) The names and last known place of residence or post office addresses of the
persons in whose favor such unclaimed balances stand;

(b) The amount and the date of the outstanding unclaimed balance and whether
the same is in money or in security, and if the latter, the nature of the same;

(c) The date when the person in whose favor the unclaimed balance stands died,
if known, or the date when he made his last deposit or withdrawal; and

(d) The interest due on such unclaimed balance, if any, and the amount thereof.
A copy of the above sworn statement shall be posted in a conspicuous place in
the premises of the bank, building and loan association, or trust corporation
concerned for at least sixty days from the date of filing thereof: Provided,
That immediately before filing the above sworn statement, the bank, building
and loan association, and trust corporation shall communicate with the person
in whose favor the unclaimed balance stands at his last known place of
residence or post office address.
It shall be the duty of the Treasurer of the Philippines to inform the Solicitor
General from time to time the existence of unclaimed balances held by banks,
building and loan associations, and trust corporations. (Emphasis supplied.)

As seen in the afore-quoted 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 depositor simply
does not wish to touch the funds in the meantime, but still asserts ownership and
dominion over the dormant account, then the bank is no longer obligated to include
the account in its sworn statement. [20] It is not the intent of the law to force
depositors into unnecessary litigation and defense of their rights, as the state is
only interested in escheating balances that have been abandoned and left without
an owner.
In case the bank complies with the provisions of the law and the unclaimed
balances are eventually escheated to the Republic, the bank shall not thereafter be
liable to any person for the same and any action which may be brought by any
person against in any bank xxx for unclaimed balances so deposited xxx shall be
defended by the Solicitor General without cost to such bank.[21] Otherwise, should
it fail to comply with the legally outlined procedure to the prejudice of the

depositor, the bank may not raise the defense provided under Section 5 of Act No.
3936, as amended.

Petitioner asserts[22] 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 Managers Check.
It explains that, pursuant to the law, only those whose favor such unclaimed
balances stand are entitled to receive notices. Petitioner argues that, since the funds
represented by the Managers Check were deemed transferred to the credit of the
payee upon issuance of the check, the proper party entitled to the notices was the
payee Rosmil and not respondents. Petitioner then contends that, in any event, it is
not liable for failing to send a separate notice to the payee, because it did not have
the address of Rosmil. Petitioner avers that it was not under any obligation to
record the address of the payee of a Managers Check.

In contrast, respondents Hi-Tri and Bakunawa allege[23] that they have a legal
interest in the fund allocated for the payment of the Managers Check. They reason
that, since the funds were part of the Compromise Agreement between respondents
and Rosmil in a separate civil case, the approval and eventual execution of the
agreement effectively reverted the fund to the credit of respondents. Respondents
further posit that their ownership of the funds was evidenced by their continued
custody of the Managers Check.

An ordinary check refers to a bill of exchange drawn by a depositor (drawer)

on a bank (drawee),[24] requesting the latter to pay a person named therein (payee)
or to the order of the payee or to the bearer, a named sum of money. [25] The
issuance of the check does not of itself operate as an assignment of any part of the
funds in the 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 check from the
account of the depositor-drawer.

There are checks of a special type called managers or cashiers checks. These
are bills of exchange drawn by 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 depositors account or by directly paying or depositing to the bank the
value of the check to be drawn. Since the bank issues the check in its name, with
itself as the drawee, the check is deemed accepted in advance. [29] Ordinarily, the
check becomes the primary obligation of the issuing bank and constitutes its
written promise to pay upon demand.[30]

Nevertheless, the mere issuance of a managers check does not ipso

facto work as an automatic transfer of funds to the account of the payee. In case the
procurer of the managers or cashiers check retains custody of the instrument, does
not tender it to the intended payee, or fails to make an effective delivery, we find
the following provision on undelivered instruments under the Negotiable
Instruments Law applicable:[31]
Sec. 16. Delivery; when effectual; when presumed. Every contract on a
negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. As between immediate
parties and as regards a remote party other than a holder in due course,
the delivery, in order to be effectual, must be made either by or under the
authority of the party making, drawing, accepting, or indorsing, as the case
may be; and, in such case, the delivery may be shown to have been conditional, or
for a special purpose only, and not for the purpose of transferring the property in
the instrument. But where the instrument is in the hands of a holder in due course,
a valid delivery thereof by all parties prior to him so as to make them liable to him
is conclusively presumed. And where the instrument is no longer in the possession
of a party whose signature appears thereon, a valid and intentional delivery by
him is presumed until the contrary is proved. (Emphasis supplied.)

Petitioner acknowledges that the Managers Check was procured by respondents,

and that the amount to be paid for the check would be sourced from the deposit
account of Hi-Tri.[32] When Rosmil did not accept the Managers 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]

Since there was no delivery, presentment of the check to the bank for
payment did not occur. An order to debit the account of respondents was never
made. In fact, petitioner confirms that the Managers Check was never negotiated or
presented for payment to its Ermita Branch, and that the allocated fund is still held
by the bank.[34] As a result, the assigned fund is deemed to remain part of the
account of Hi-Tri, which procured the Managers Check. The doctrine that the
deposit represented by a managers check automatically passes to the payee is
inapplicable, because the instrument although accepted in advance remains
undelivered. Hence, respondents should have been informed that the deposit had
been left inactive for more than 10 years, and that it may be subjected to escheat
proceedings if left unclaimed.

After a careful review of the RTC records, we find that it is no longer

necessary to remand the case for hearing to determine whether the claim of
respondents was valid. There was no contention that they were the procurers of the
Managers Check. It is undisputed that there was no effective delivery of the check,
rendering the instrument incomplete. In addition, we have already settled that
respondents retained ownership of the funds. As it is obvious 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 note that there is

nothing in the records that would show that the OSG appealed the assailed CA
judgments. We take this failure to appeal as an indication of disinterest in pursuing
the escheat proceedings in favor of the Republic.

WHEREFORE the Petition is DENIED. The 26 November 2009 Decision

and 27 May 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 107261
are hereby AFFIRMED.

SO ORDERED.