SECOND DIVISION

[G.R. No. L-16106. December 30, 1961.]

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE NATIONAL

BANK, ET AL., defendants, THE FIRST NATIONAL CITY BANK OF NEW
YORK, defendant-appellee.

Solicitor General for plaintiff-appellant.

Picazo, Lichauco & Agcaoili for defendant-appellant.

SYLLABUS

1. WORDS AND PHRASES; "CREDIT". The term "credit" in its usual meaning is a sum credited on the
books of a company to a person who appears to be entitled to it. It presupposes a creditor-debtor
relationship, and may be said to imply ability, by reason of property or estates to make a promised
payment (In Re Ford, 14 F. 2nd 848, 849). It is the correlative debt or indebtedness, and that which is
due to any person as distinguished from that which he asks.
2. ID.; "A DEMAND DRAFT". A demand draft is a bill of exchange payable on demand (Arnd vs.
Aylesworth, 145 Iowa 185; Ward vs. City Trust Company, 102 N.Y.S. 50; Bank of Republic vs. Republic
State Bank, 42 S.W. 2nd, 27). Considered as a bill of exchange, a draft is said to be, like the former, an
open letter of request from, and an order by, one person on another to pay a sum of money therein
mentioned to a third person, on demand or at a future time therein specified (13 Words and Phrases,
371.) As a matter of fact, the term "draft" is often used, and is the common term, for all bills of
exchange. And the words "draft" and "bill of exchange" are used indiscriminately (Ennis vs. Coshoctan
National Bank, 108 S. R., 811; Hinneman vs. Rosenback, 39 N.C. 98: 100, 101; Wilson vs. Buchenau, 43
Supp. 272, 275.
3. ID.; "A BILL OF EXCHANGE" A bill of exchange within the meaning of our Negotiable Instrument
Law (Act No. 2031) does not operate as an assignment of funds in the hands of the drawee who is not
liable in the instrument until he accepts it.
4. NEGOTIABLE INSTRUMENT; BILL OF EXCHANGE; PRESENTMENT ESSENTIAL. With regard to
drafts of bills of exchange there is need that they be presented either for acceptance or for payment
within a reasonable time after their issuance or after their last negotiation thereof as the case may be
(section 71 Act 2031). Failure to make such presentment will discharge the drawer from liability or to the
extent of the loss caused by the delay (section 186, Act 2031).
5 WORDS AND PHRASES; "CASHIER'S OR MANAGER'S CHECK". A bank which issued it
and constitutes its written promise to pay upon demand.
6. ID.; TELEGRAPHIC PAYMENT ORDER, NATURE OF. Being a transaction for the establishment of
a telegraphic or cable transfer the agreement to remit creates a contractual obligation and has been
termed a purchase and sale transactions (9 CJS. 368). The purchaser of a telegraphic transfer upon
making payment completes the transaction insofar as he is concerned though insofar as the remitting
bank is concerned the contract is executory until the credit is established.

DECISION

BAUTISTA ANGELO, J p:

The Republic of the Philippines filed on September 25, 1957 before the Court of First
Instance of Manila a complaint for escheat of certain unclaimed bank deposits balances under the
provisions of Act No. 3936 against several banks, among them the First National City Bank of New
York. It is alleged that pursuant to Section 2 of said Act defendant banks forwarded to the
Treasurer of the Philippines a statement under oath of their respective managing officials of all the
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 period of 10 years or more. Wherefore, it is prayed that
said credits and deposits be escheated to the Republic of the Philippines by ordering defendant
banks to deposit them to its credit with the Treasurer of the Philippines.

In its answer the First National City Bank of New York claims that, while it admits that various savings
deposits, pre-war inactive accounts, and sundry accounts contained in its report submitted to the
Treasurer of the Philippines pursuant to Act No. 3936, totalling more than P100,000.00, which
remained dormant for 10 years or more, are subject to escheat, however it has inadvertently included in
said report certain items amounting to P18,589.89 which, properly speaking, are not credits or deposits
within the contemplation of Act No. 3936. Hence, it prayed that said items be not included in the claim
of plaintiff.
After hearing the court a quo rendered judgment holding that cashier's or manager's checks and
demand drafts as those which defendant wants excluded from the complaint come within the purview
of Act No. 3936, but not the telegraphic transfer payment orders which are of different category.
Consequently, the complaint was dismissed with regard to the latter. But, after a motion to reconsider
was filed by defendant, the court a quo changed its view and held that even said demand drafts do not
come within the purview of said Act and so amended its decision accordingly. Plaintiff has appealed.
Section 1, Act No. 3936, provides:
"SECTION 1. 'Unclaimed balances' within the meaning of this Act shall
include credits or deposits of money, bullion, security or other evidence of
indebtedness of any kind, and interest thereon with banks, as hereinafter
defined, in favor of any person unheard from for a period of ten years or more.
Such unclaimed balances, together with the increase and proceeds thereof,
shall be deposited with the Insular Treasurer to the credit of the Government of
the Philippine Islands to be used as the Philippine Legislature may direct."
It would appear that the terms "unclaimed balances" that are subject to escheat include credits or
deposits of money, or other evidence of indebtedness of any kind, with banks, in favor of any person
unheard from for a period of 10 years or more. And as correctly stated by the trial court, the term
"credit" in its usual meaning is a sum credited on the books of a company to a person who appears to be
entitled to it. It presupposes a creditor-debtor relationship, and may be said to imply ability, by reason
of property or estates, to make a promised payment (In Re Ford, 14 F. 2d 848, 849). It is the correlative
to debt or indebtedness, and that which is due to any person, as distinguished from that which he owes
(Mountain Motor Car Co. vs. Solof, 124 S.E., 824, 825; Eric vs. Walsh, 61 Atl. 2d 1, 4, See also Libby vs.
Hopkins, 104 U.S. 303, 309; Prudential Insurance Co. of America vs. Nelson, 101 F. 2d, 441, 443; Barnes
vs. Treat, 7 Mass. 271, 274). The same is true with the term "deposits" in banks where the relationship
created between the depositor and the bank is that of creditor and debtor (Article 1980, Civil Code;
Gullas vs. National Bank, 62 Phil. 519; Gopoco Grocery, et al. vs. Pacific Coast Biscuit Co., et al., 65 Phil.
443).
The question that now arise are: Do demand drafts and telegraphic orders come within the meaning of
the term "credits" or "deposits" employed in the law? Can their import be considered as a sum credited
on the books of the bank to a person who appears to be entitled to it? Do they create a creditor-debtor
relationship between the drawee and the payee?
The answer to these questions require a digression on the legal meaning of said banking terminologies.
To begin with, we may say that a demand draft is a bill of exchange payable on demand (Arnd vs.
Aylesworth, 145 Iowa 185; Ward vs. City Trust Company, 102 N.Y.S. 50; Bank of Republic vs. Republic
State Bank, 42 S. W. 2d, 27). Considered as a bill of exchange, a draft is said to be, like the former, an
open letter of request from, and an order by, one person on another to pay a sum of money therein
mentioned to a third person, on demand or at a future time therein specified (13 Words and Phrases,
371). As a matter of fact, the term "draft" is often used, and is the common term, for all bills of
exchange. And the words "draft" and "bill of exchange" are used indiscriminately (Ennis vs. Coshoctan
Nat. Bank, 108 S.E., 811, Hinnemann vs. Rosenback, 39 N.Y. 98, 100, 101; Wilson vs. Buchenau, 43 Supp.
272, 275).
On the other hand, a bill of exchange within the meaning of our Negotiable Instrument Law (Act No.
2031) does not operate as an assignment of funds in the hands of the drawee who is not liable on the
instrument until he accepts it. This is the clear import of Section 127. It says: "A bill of exchange of itself
does not operate as an assignment of the funds in the hands of the drawee available for the payment
thereon and the drawee is not liable on the bill unless and until he accepts the same." In other words, in
order that a drawee may be liable on the draft and then become obligated to the payee it is necessary
that he first accepts the same. In fact, our law requires that with regard to drafts or bills of exchange
there is need that they be presented either for acceptance or for payment within a reasonable time
after their issuance or after their last negotiation thereof as the case may be (Section 71, Act 2031).
Failure to make such presentment will discharge the drawer from liability or to the extent of the loss
caused by the delay (Section 186, Ibid.)
Since it is admitted that the demand drafts herein involved have not been presented either for
acceptance or for payment, the inevitable consequence is that the appellee bank never had any chance
of accepting or rejecting them. Verily, appellee bank never became a debtor of the payee concerned
and as such the aforesaid drafts cannot be considered as credits subject to escheat within the meaning
of the law.
But a demand draft is very different from a cashier's or manager's check, contrary to appellant's
pretense, for it has been held that the latter is a primary obligation of the bank which issues it and
constitutes its written promise to pay upon demand. Thus, a cashier's check has been clearly
characterized In Re Bank of the United States, 277 N.Y.S. 96, 100, as follows:
"A cashier's check issued by a bank, however, is not an ordinary draft.
The latter is a bill of exchange payable on demand. It is an order upon a third
 party purporting to be drawn upon a deposit of funds. Drinkall v. Movious State
Bank, 11 N.D. 10, 88 N.W. 724, 57 L.R.A. 341, 95 Am. St. Rep. 693; State v. Tyler
County State Bank (Tex. Com. App.) 277 S.W. 625, 42 A.L.R. 1347. A cashier's
check is of a very different character. It is the primary obligation of the bank
which issues it (Nissenbaum v. State, 38 Ga. App. 253, 143 S.E. 776) and
constitutes its written promise to pay upon demand (Steinmetz v. Schultz, 59
S.D. 603, 241 N.W. 734) . . ."

The following definitions cited by appellant also confirm this view:

"A cashier's check is a check of the bank's cashier on his or another
bank. It is in effect a bill of exchange drawn by a bank on itself and accepted in
advance by the act of its issuance" (10 C. J. S. 409).
"A cashier's check issued on request of a depositor is the substantial
equivalent of a certified check and the deposit represented by the checks
passes to the credit of the checkholder, who is thereafter a depositor to that
amount" (Lummus Cotton Gin Co. v. Walker 70 So. 754, 756, 195 Ala. 552).
"A 'cashier's check', being merely a bill of exchange drawn by a bank on
itself, and accepted in advance by the act of its issuance, is not subject to
countermand by the payee after indorsement, and has the same legal effects
as a certificate of deposit or a certified check" (Walker v. Sellers, 77 So. 715, 201
Ala. 189).
A demand draft is not therefore of the same category as a cashier's check which should come within the
purview of the law.
The case, however, is different with regard to a telegraphic payment order. It is said that as the
transaction is for the establishment of a telegraphic or cable transfer, the agreement to remit creates a
contractual obligation and has been termed a purchase and sale transaction (9 C.J.S. 368). The
purchaser of a telegraphic transfer upon making payment completes the transaction insofar as he is
concerned, though insofar as the remitting bank is concerned the contract is executory until the credit
is established (Ibid.). We agree with the following comment of the Solicitor General: "This is so because
the drawer bank was already paid the value of the telegraphic transfer payment order. In the particular
cases under consideration it appears in the books of the defendant bank that the amounts represented
by the telegraphic payment orders appear in the names of the respective payees. If the latter choose to
demand payment of their telegraphic transfers at the time the same was (were) received by the
defendant bank, there could be no question that this bank would have to pay them. Now, the question
is, if the payees decide to have their money remain for sometime in the defendant bank, can the latter
maintain that the ownership of said telegraphic payment orders is now with the drawer bank? The
latter was already paid the value of the telegraphic payment orders otherwise it would not have
transmitted the same to the defendant bank. Hence, it is absurd to say that the drawer banks are still
the owners of said telegraphic payment orders."
WHEREFORE, the decision of the trial court is hereby modified in the sense that the items specifically
referred to and listed under paragraph 3 of appellee bank's answer representing telegraphic transfer
payment orders should be escheated in favor of the Republic of the Philippines. No costs.
Reyes, J.B.L., Barrera, Paredes, Dizon, and De Leon, JJ., concur.
Bengzon, C.J., Padilla, Labrador and Concepcion, JJ., took no part
||| (Republic v. Philippine National Bank, G.R. No. L-16106, [December 30, 1961], 113 PHIL 828-834)