Case: Rizal Commercial Banking Corporation v. Hi-Tri G.R. No.

192413
Development Corporation and Luz R. Bakunawa
Date: June 13, 2012 Ponente: J. Sereno
TOPIC IN SYLLABUS: Law on Secrecy of Bank Deposits (RA 1045, as amended); Exceptions
SUMMARY: The Bakunawas owned several parcels of land. Millan sought to buy the said parcel of land and deposited
P1,019,514.29 as downpayment. The sale was rescinded and the Bakunawas obtained a Manager’s Check from the RCBC
representing P1,019,514.29 to give back the downpayment previously made by Millan. The properties were then
escheated without RCBC informing the Bakunawa’s that the funds covered by the Manager’s Check was included in the
escheat proceedings. The Bakunawa’s contend that it should have been excluded because they were not given notice of
the proceedings in violation of the Due Process Clause. The SC held that notice was not necessary but the funds covered
by the check in the instant case should be excluded because the bank did not inquire into the status of the dormant funds
(i.e. is the owner still alive, why has the funds not been withdrawn, etc) which is necessary before said funds may be
escheated in favor of the republic.

PROCEDURAL ANTECEDENTS: Complaint for Escheat filed by the Republic of the Philippines. RTC: granted. CA:
Reversed. SC: affirmed the CA.

FACTS:
 Sometime around 1990, Luz Bakunawa and her husband Manuel owned six (6) parcels of land. They were then
approached by a certain Teresita Millan who offered to buy the lots with the promise that she will take care of
clearing the obstacles in order that the sale may be completed. The TCTs were then given to Millan with the latter
making a downpayment of P1,019,514.29.
 Millan failed to fulfil her promise, prompting the Bakunawas’ to rescind the sale and give back her downpayment.
In 1991, They obtained a Manager’s Check, through their company Hi-Tri Development from the RCBC
amounting to P1,019,514.29, representing the downpayment of Millan. Millan refused to accept the Manager’s
Check, hence the Bakunawas sued them before the RTC. The RTC ordered that the sale be rescinded and the
TCTs be returned to the Bakunawas in consideration of the return of the downpayment to Millan. The Manager’s
Check remained dormant during this entire period.
 In 2006, the Republic filed a Complaint for the Escheat of the parcels of land in favor of the Republic. The
amount covered by the Manager’s Check was covered by the Escheat proceedigns.
 In 2008, the Bakunawas and Millan settled. The Bakunawas asked RCBC about the status of the Check and was
informed that it was already subject of the escheat proceedings. RCBC told the Bakunawas that when the bank
furnished the Treasurer of the Philippines of a Sworn Statement detailing the deposits, balances, etc. of the
Bakunawas in RCBC, it included the amount covered by the outstanding Manager’s check.
 RTC in the Escheat proceedings declared that the deposits, balances, etc. subject of the case between the
Bakunawas and Millan be escheated to the Republic.
 CA reversed on the ground that RCBC’s failure to notify the Bakunawas of the Escheat proceedings deprived
them of an opportunity to intervene and to present evidence to substantiate their claim, in violation of their right
to due process. 

ISSUES:
1. WON the RTC decision declaring the escheat of the parcels of land to the Republic was void for violating
the due process rights of the Respondents? NO.
2. WON the Bank had the obligation to notify the Respondents before furnishing the Treasurer of the
Philippines the deposits, balances, etc. in RCBC? NO.
3. WON the amount covered by the Manager’s check may be escheated in favor of the Republic? NO.

PETITIONER’S ARGUMENT:
1. Respondents were not entitled to notice because they were not the owners of the amount covered by the
Manager’s Check because the funds represented by the Managers Check were deemed transferred to the credit of
the payee or holder upon its issuance.
2. 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.
3.
Ryan Malit CASE 106
RESPONDENT’S ARGUMENT:
1. Their due process rights were violated because 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.

HELD:
1. [Due process and Notice (Issue 1 and 2)] Notice was given. Due process was not violated. 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. 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. 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.

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, whereby
an action is brought against the thing itself instead of the person. Thus, an action may be instituted and
carried to judgment without personal service upon the depositors or other claimants. Jurisdiction is secured
by the power of the court over the res. 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.

2. [Exclusion of the Funds covered by the Manager’s Check] The funds must be excluded. 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. 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. No proceeding was undertaken by the Bank to communicate with the owner of the funds,
contrary to Section 2, par. d of Act 3936 which states: “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.
3.
4. 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.
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. 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.
Ryan Malit CASE 106
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. 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.

Ryan Malit CASE 106