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RIZAL COMMERCIAL BANKING CORPORATION v. HI-TRI DEVELOPMENT CORPORATION

FACTS:

The case involves a Rule 45 Petition for Review on Certiorari filed by Rizal Commercial Banking Corporation (RCBC) against Hi-Tri Development Corporation (Hi-Tri) and Luz R. Bakunawa. The case originated from a Complaint for Escheat filed by the Republic of the Philippines against various banks, including RCBC, seeking the escheat of certain deposits, credits, and unclaimed balances. The trial court declared the amounts escheated to the Republic and ordered RCBC to deposit the unclaimed balance amounting to P1,019,514.29 with the Treasurer of the Philippines.

The dispute in this case revolves around a manager's check issued by RCBC in favor of Rosmil Corporation. The manager's check was never presented for payment by the payee, and therefore remained part of RCBC's bank account. RCBC considered the funds covered by the manager's check as subject to the escheat proceedings initiated by the Office of the Solicitor General and/or Bureau of Treasury.

During the pendency of the escheat proceedings, the Spouses Bakunawa settled their dispute with Millan and Rosmil Realty and Development Corporation. However, they were informed that the amount of P1,019,514.29 was already subject to the escheat proceedings.

The trial court declared the deposits, credits, and unclaimed balances subject to the escheat case, and ordered their deposit with the Treasurer in favor of the Republic. The respondents, Hi-Tri and Spouses Bakunawa, filed an Omnibus Motion seeking partial reconsideration of the decision, arguing that the funds were subject to an ongoing dispute between them and Rosmil since 1991.

The main issues in the case are whether the trial court's decision and order were void for failure to send separate notices to the respondents by personal service, whether RCBC had the obligation to notify the respondents immediately before filing its Sworn Statement, and whether the allocated funds may be subject to escheat in favor of the Republic.

Petitioner, a bank, challenges the judgments of the Court of Appeals (CA) which ruled that notice by personal service upon respondents is a jurisdictional requirement in escheat proceedings. Petitioner argues that respondents were not the owners of the unclaimed balances and therefore not entitled to notice from the RTC Clerk of Court. It bases its claim on the belief that the funds represented by the Manager's Check were transferred to the credit of the payee or holder upon its issuance. The relevant provision of Act No. 3936, as amended, on the rule on service of processes is quoted, which states that the Solicitor General shall initiate an action in the Court of First Instance where the bank is located, joining as parties the bank, creditors or depositors. The service of process in this action shall be made by delivering a copy of the complaint and summons to the president, cashier, or managing officer of each party involved.

ISSUES:

  1. Whether or not personal service upon the respondents is a jurisdictional requirement in escheat proceedings.

  2. Whether or not the funds allocated for the payment of the Manager's Check may be escheated in favor of the Republic.

  3. Whether RCBC was required to send prior notices to respondents about the escheat proceedings.

  4. Whether RCBC is liable for failing to send a separate notice to the payee of the Manager's Check.

  5. Whether the funds allocated for the payment of the Manager's Check reverted to the credit of the respondents after the approval and execution of the Compromise Agreement.

  6. Whether the retention of custody of the Manager's Check by the respondents constitutes a valid delivery.

RULING:

  1. The issuance of individual notices upon the respondents is not a jurisdictional requirement in escheat proceedings. Escheat proceedings are actions in rem, and jurisdiction is secured by the power of the court over the res. Thus, personal service on depositors or claimants is not necessary for the court to have jurisdiction. Failure to effect personal service does not render the decision and order of the trial court void.

  2. The funds allocated for the payment of the Manager's Check may be escheated in favor of the Republic.

  3. Yes, RCBC was required to send prior notices to respondents about the escheat proceedings. The law outlines a detailed system for notifying depositors of unclaimed balances, and banks are obligated to communicate with owners of dormant accounts. The purpose of this initial notice is for the bank to determine whether an inactive account has indeed been unclaimed, abandoned, forgotten, or left without an owner.

  4. RCBC is liable for failing to send a separate notice to the payee of the Manager's Check. Even though the funds represented by the Manager's Check were deemed transferred to the payee upon issuance of the check, RCBC still had an obligation to record the payee's address and send them the required notice.

  5. No, the funds did not revert to the credit of the respondents. The issuance of the Manager's Check does not operate as an assignment of the funds in the bank to the credit of the respondents. The bank becomes liable only after it accepts or certifies the check. Since the Manager's Check was never presented for payment to the bank and the funds were never debited from the account, the allocated deposit remained part of the account of the party who procured the Manager's Check.

  6. No, the retention of custody of the Manager's Check by the respondents does not constitute a valid delivery. Since the instrument remained undelivered and was never negotiated or presented for payment, there was no delivery or presentment to the bank for payment. As a result, the assigned fund is deemed to remain part of the account of the party who procured the Manager's Check.

PRINCIPLES:

  • In escheat proceedings, the court acquires jurisdiction over the res and not over the person.

  • Publication of summons and notice in a newspaper of general circulation in the locality is sufficient notice to all persons interested in the unclaimed balances.

  • A judgment of escheat is conclusive upon persons notified by advertisement.

  • Escheat proceedings refer to the judicial process in which the state claims abandoned, left vacant, or unclaimed property without a legal claimant.

  • Escheat is not a proceeding to penalize depositors but a way for the state to compel the surrender of unclaimed deposit balances.

  • Banks and similar institutions are obligated to communicate with owners of dormant accounts before filing a sworn statement for escheat proceedings.

  • The purpose of initial notice is for the bank to determine if an inactive account has been abandoned or left without an owner.

  • If a bank complies with the provisions of the law and unclaimed balances are escheated, the bank will not be liable to any person for the same.

  • If a bank fails to comply with the legally outlined procedure to the prejudice of the depositor, it may not raise the defense provided under the law.

  • The issuance of an ordinary check does not operate as an assignment of any part of the funds in the bank to the credit of the drawer. The bank becomes liable only after it accepts or certifies the check.

  • Manager's or cashier's checks are bills of exchange drawn by the bank's manager or cashier, in the name of the bank, against the bank itself. The check becomes the primary obligation of the issuing bank and constitutes its written promise to pay upon demand.

  • The mere issuance of a manager's check does not automatically transfer funds to the account of the payee. If the procurer retains custody of the instrument, fails to tender it to the intended payee, or fails to make an effective delivery, the check remains undelivered and the funds remain with the party who procured the check.

  • Delivery of a negotiable instrument is necessary to give effect to a contract. Delivery may be conditional or for a special purpose, but for the purpose of transferring the property in the instrument, delivery must be made by or under the authority of the party making, drawing, accepting, or endorsing the instrument. Valid delivery can be presumed if the instrument is in the hands of a holder in due course.