Rule 91_Full Text 1 of 18
SECOND DIVISION
G.R. No. 143483 January 31, 2002
REPUBLIC OF THE PHILIPPINES represented by the REGISTER OF
DEEDS OF PASAY CITY, petitioner,
vs.
COURT OF APPEALS (SPECIAL FORMER 3RD DIVISION) AND AMADA
H. SOLANO, assisted by her husband ROMEO SOLANO, respondents.
BELLOSILLO , J.:
This petition for certiorari seeks to nullify two (2) Resolutions of the
Court of Appeals dated 12 November 1998 and 4 May 2000 giving due
course to the petition for annulment of judgment filed by private
respondent Amada H. Solano on 3 February 1997 and denying
petitioner's motion for reconsideration.
For more than three (3) decades (from 1952 to 1985) private respondent
Amada Solano served as the all-around personal domestic helper of the
late Elizabeth Hankins, a widow and a French national. During Ms.
Hankins' lifetime and most especially during the waning years of her life,
respondent Solano was her faithful girl Friday and a constant companion
since no close relative was available to tend to her needs.
In recognition of Solano's faithful and dedicated service, Ms. Hankins
executed in her favor two (2) deeds of donation involving two (2) parcels
of land covered by TCT Nos. 7807 and 7808 of the Registry of Deeds.
Private respondent alleged that she misplaced the deeds of donation and
were nowhere to be found.
While the deeds of donation were missing, the Republic filed a petition
for the escheat of the estate of Elizabeth Hankins before the Regional
Trial Court of Pasay City.1 During the proceedings, a motion for
intervention was filed by Romeo Solano, spouse of private respondent,
and one Gaudencio Regosa, but on 24 June 1987 the motion was denied
by the trial court for the reason that "they miserably failed to show valid
claim or right to the properties in question."2 Since it was established that
there were no known heirs and persons entitled to the properties of
decedent Hankins, the lower court escheated the estate of the decedent in
favor of petitioner Republic of the Philippines.
By virtue of the decision of the trial court, the Registry of Deeds of Pasay
City cancelled TCT Nos. 7807 and 7808 and issued new ones, TCT Nos.
129551 and 129552, both in the name of Pasay City.
In the meantime, private respondent claimed that she accidentally found
the deeds of donation she had been looking for a long time. In view of this
development, respondent Amada Solano filed on 28 January 1997 a
petition before the Court of Appeals for the annulment of the lower
court's decision alleging, among other, that3 -
13.1. The deceased Elizabeth Hankins having donated the
subject properties to the petitioner in 1983 (for TCT No. 7807)
and 1984 (for TCT No. 7808), these properties did not and
could not form part of her estate when she died on September
20, 1985. Consequently, they could not validly be escheated to
the Pasay City Government;
13.2. Even assuming arguendo that the properties could be
subject of escheat proceedings, the decision is still legally
infirm for escheating the properties to an entity, the Pasay City
Government, which is not authorized by law to be the recipient
thereof. The property should have been escheated in favor of
the Republic of the Philippines under Rule 91, Section 1 of the
New Rules of Court x x x x
On 17 March 1997 the Office of the Solicitor General representing public
respondents RTC and the Register of Deeds (herein petitioner) filed an
answer setting forth their affirmative defenses, to wit: (a) lack of
jurisdiction over the nature of the action; and, (b) the cause of action was
barred by the statute of limitations.
Finding no cogent reason to justify the dismissal of the petition for
annulment, the Court of Appeals issued on 12 November 1998 the first of
its assailed Resolutions giving due course to the petition for annulment of
judgment and setting the date for trial on the merits. In upholding the
theory of respondent Solano, the Appeals Court ruled that -
Herein petitioner invokes lack of jurisdiction over the subject
matter on the part of respondent RTC to entertain the escheat
proceedings x x x because the parcels of land have been earlier
donated to herein petitioner in 1983 and 1984 prior to the
death of said Hankins; and therefore, respondent court could
not have ordered the escheat of said properties in favor of the
Republic of the Philippines, assign them to respondent Pasay
City government, order the cancellation of the old titles in the
name of Hankins and order the properties registered in the
name of respondent Pasay City x x x x The 1997 Rules of Civil
Procedure specifically laid down the grounds of annulment
filed before this Court, to wit: extrinsic fraud and lack of
jurisdiction. Jurisdiction over the subject matter is conferred
by law and this jurisdiction is determined by the allegations of
the complaint. It is axiomatic that the averments of the
complaint determine the nature of the action and consequently
the jurisdiction of the courts. Thus whether or not the
properties in question are no longer part of the estate of the
deceased Hankins at the time of her death; and, whether or not
the alleged donations are valid are issues in the present
petition for annulment which can be resolved only after a full
blown trial x x x x
It is for the same reason that respondent’s espousal of the
statute of limitations against herein petition for annulment
cannot prosper at this stage of the proceedings. Indeed, Section
4, Rule 91 of the Revised Rules of Court expressly provides that
a person entitled to the estate must file his claim with the court
a quo within five (5) years from the date of said judgment.
However, it is clear to this Court that herein petitioner is not
claiming anything from the estate of the deceased at the time of
her death on September 20, 1985; rather she is claiming that
the subject parcels of land should not have been included as
part of the estate of the said decedent as she is the owner
thereof by virtue of the deeds of donation in her favor.
In effect, herein petitioner, who alleges to be in possession of
the premises in question, is claiming ownership of the
properties in question and the consequent reconveyance
thereof in her favor which cause of action prescribes ten (10)
years after the issuance of title in favor of respondent Pasay
City on August 7, 1990. Herein petition was seasonably filed on
February 3, 1997 under Article 1144, to wit:
Art. 1144. The following actions must be brought
within ten years from the time the right of action
accrues: (1) Upon a written contract; (2) Upon an
obligation created by law; (3) Upon a judgment.
And Article 1456, to wit:
Art. 1456. If property is acquired through mistake or
fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the
benefit of the person from whom the property
comes.4
In its Resolution of 4 May 2000 the Court of Appeals denied the motion
for reconsideration filed by public respondents Register of Deeds of Pasay
City and the Presiding judge of the lower court and set the trial on the
merits for June 15 and 16, 2000.
 Rule 91_Full Text 2 of 18

In its effort to nullify the Resolutions herein before mentioned, petitioner claims to be the lessee thereof under a contract legally entered
points out that the Court of Appeals committed grave abuse of discretion with the former (underscoring supplied).
amounting to lack or excess of jurisdiction (a) in denying petitioner's
affirmative defenses set forth in its answer and motion for
In the instant petition, the escheat judgment was handed down by the
reconsideration, and in setting the case for trial and reception of
lower court as early as 27 June 1989 but it was only on 28 January 1997,
evidence; and, (b) in giving due course to private respondent's petition
more or less seven (7) years after, when private respondent decided to
for annulment of decision despite the palpable setting-in of the 5-year
contest the escheat judgment in the guise of a petition for annulment of
statute of limitations within which to file claims before the court a quo set
judgment before the Court of Appeals. Obviously, private respondent's
forth in Rule 91 of the Revised Rules of Court and Art. 1014 of the Civil
belated assertion of her right over the escheated properties militates
Code.
against recovery.

Petitioner argues that the lower court had jurisdiction when it escheated
A judgment in escheat proceedings when rendered by a court of
the properties in question in favor of the city government and the filing of
competent jurisdiction is conclusive against all persons with actual or
a petition for annulment of judgment on the ground of subsequent
constructive notice, but not against those who are not parties or privies
discovery of the deeds of donation did not divest the lower court of its
thereto. As held in Hamilton v. Brown,8 "a judgment of escheat was held
jurisdiction on the matter. It further contends that Rule 47 of the 1997
conclusive upon persons notified by advertisement to all persons
Rules of Civil Procedure only provides for two (2) grounds for the
interested. Absolute lack on the part of petitioners of any dishonest intent
annulment of judgment, namely: extrinsic fraud and lack of jurisdiction.
to deprive the appellee of any right, or in any way injure him, constitutes
As such the discovery of the deeds of donation seven (7) years after the
due process of law, proper notice having been observed." With the lapse
finality of the escheat proceedings is an extraneous matter which is
of the 5-year period therefore, private respondent has irretrievably lost
clearly not an instance of extrinsic fraud nor a ground to oust the lower
her right to claim and the supposed "discovery of the deeds of donation"
court of its jurisdiction.
is not enough justification to nullify the escheat judgment which has long
attained finality.
Petitioner also insists that notwithstanding the execution of the deeds of
donation in favor of private respondent, the 5-year statute of limitations
In the mind of this Court the subject properties were owned by the
within which to file claims before the court a quo as set forth in Rule 91 of
decedent during the time that the escheat proceedings were being
the Revised Rules of Court has set in.
conducted and the lower court was not divested of its jurisdiction to
escheat them in favor of Pasay City notwithstanding an allegation that
The present controversy revolves around the nature of the parcels of land they had been previously donated. We recall that a motion for
purportedly donated to private respondent which will ultimately intervention was earlier denied by the escheat court for failure to show
determine whether the lower court had jurisdiction to declare the same "valid claim or right to the properties in question."9 Where a person
escheated in favor of the state. comes into an escheat proceeding as a claimant, the burden is on such
intervenor to establish his title to the property and his right to
intervene. A fortiori, the certificates of title covering the subject
We rule for the petitioner. Escheat is a proceeding, unlike that of
properties were in the name of the decedent indicating that no transfer of
succession or assignment, whereby the state, by virtue of its sovereignty,
ownership involving the disputed properties was ever made by the
steps in and claims the real or personal property of a person who dies
deceased during her lifetime. In the absence therefore of any clear and
intestate leaving no heir. In the absence of a lawful owner, a property is
convincing proof showing that the subject lands had been conveyed by
claimed by the state to forestall an open "invitation to self-service by the
Hankins to private respondent Solano, the same still remained, at least
first comers."5 Since escheat is one of the incidents of sovereignty, the
before the escheat, part of the estate of the decedent and the lower court
state may, and usually does, prescribe the conditions and limits the time
was right not to assume otherwise. The Court of Appeals therefore cannot
within which a claim to such property may be made. The procedure by
perfunctorily presuppose that the subject properties were no longer part
which the escheated property may be recovered is generally prescribed
of the decedent's estate at the time the lower court handed down its
by statue, and a time limit is imposed within which such action must be
decision on the strength of a belated allegation that the same had
brought.
previously been disposed of by the owner. It is settled that courts decide
only after a close scrutiny of every piece of evidence and analyze each
In this jurisdiction, a claimant to an escheated property must file his claim case with deliberate precision and unadulterated thoroughness, the
"within five (5) years from the date of such judgment, such person shall judgment not being diluted by speculations, conjectures and
have possession of and title to the same, or if sold, the municipality or city unsubstantiated assertions.
shall be accountable to him for the proceeds, after deducting the estate;
but a claim not made shall be barred forever."6 The 5-year period is not a
WHEREFORE, the petition is GRANTED. The assailed Resolution of the
device capriciously conjured by the state to defraud any claimant; on the
Court of Appeals dated 12 November 1998 giving due course to the
contrary, it is decidedly prescribed to encourage would-be claimants to
petition for annulment of judgment, and its Resolution dated 4 May 2000
be punctilious in asserting their claims, otherwise they may lose them
denying petitioner's motion for reconsideration, are SET ASIDE. The
forever in a final judgment.
decision of the RTC-Br. 114, Pasay City, dated 27 June 1989,
is REINSTATED.
Incidentally, the question may be asked: Does herein private respondent,
not being an heir but allegedly a donee, have the personality to be a
SO ORDERED.
claimant within the purview of Sec. 4, Rule 91, of the Revised Rules of
Court? In this regard, we agree with the Solicitor General that the case
of Municipal Council of San Pedro, Laguna v. Colegio de San Jose, Inc.,7 is
applicable at least insofar as it concerns the Court's discussion on who is
an "interested party" in an escheat proceeding -

In a special proceeding for escheat under sections 750 and 751

the petitioner is not the sole and exclusive interested
party. Any person alleging to have a direct right or interest in
the property sought to be escheated is likewise an interested
party and may appear and oppose the petition for escheat. In
the present case, the Colegio de San Jose, Inc. and Carlos Young
appeared alleging to have a material interest in the Hacienda
de San Pedro Tunasan; the former because it claims to be the
exclusive owner of the hacienda, and the latter because he

FIRST DIVISION
G.R. No. L-44347 September 29, 1988
VICENTE TAN, petitioner,
vs.
CITY OF DAVAO, respondent.
Occeña Law Office for petitioner.
The City Legal Officer for respondent.
GRIÑO-AQUINO, J.:
This 26-year old case involves what is probably now a valuable lot in the
City of Davao whose owner left for China with her entire family in 1923
and never returned. Like all such estates facing escheat proceedings, it is
fair game for poseurs and fakers claiming to be the missing heir of the
deceased owner.
The spouses Cornelia Pizarro and Baltazar Garcia, during their lifetime,
were residents of Davao City. As they were childless, they adopted a
three-year old girl whom they named Dominga Garcia and brought up as
their own. At the age of nineteen years, Dominga Garcia married a
Chinaman, Tan Seng alias Seng Yap, with whom she had three children,
named Vicente, who was born in 1916, Mariano who was born in 1918,
and Luis who was born in 1921. In 1923, Dominga Garcia and her three
children emigrated to Canton, China. In less than a year, Tan Seng
followed his family to his country of origin.
According to the petitioner, Dominga Garcia died intestate in 1955
(Extra-judicial Settlement of the Estate of Dominga Garcia dated May 27,
1966, p. 8, Rollo). She left in the Philippines a 1,966-square-meter lot on
Claveria Street, Townsite of Davao, District of Davao, registered in her
name under T.C.T. No. 296 (T-2774) of the Registry of Deeds of Davao
City. Since her departure for China with her family, neither she, nor her
husband, nor any of their children has returned to the Philippines to
claim the lot.
Dominga's adoptive parent, Cornelia Pizarro, died in May 1936. In 1948,
her nephew, Ramon Pizarro, occupied a part of Dominga's property and
collected the rentals from the owners of other houses occupying the land.
Another nephew of Cornelia, Segundo Reyes, in a burst of civic spirit,
informed the Solicitor General about the property. The City Fiscal and NBI
agents, Antonio Gonzaga and Felix Valencia, investigated Segundo Reyes,
Ramon Pizarro and Aurelio Pizarro regarding the whereabouts of
Dominga Garcia, Tan Seng, and their children.
During the investigation, Ramon Pizarro alleged that Vicenta Tan,
daughter of Dominga, was married and living in Bacolod City, but he did
not know her exact address. Aurelio Pizarro, on the other hand,
controverted that statement because as far as he knew, Vicenta Tan left
for China with her mother and brothers in 1923.
On September 12,1962, the City of Davao filed a petition in the Court of
First Instance of Davao, Branch I (Special Civil Case No. 1220) to declare
Dominga Garcia's land escheated in its favor. It alleged that Dominga
Garcia and her children are presumed to be dead and since Dominga
Garcia left no heir person by law entitled to inherit her estate, the same
should be escheated pursuant to Rule 92 of the Rules of Court (pp. 1-5,
Record on Appeal).
The court set the petition for hearing and directed the City to cause (as it
did ) the publication of its petition in the 'Mindanao Times," a newspaper
of general circulation in the city and province of Davao, and in the Official
Gazette, once a week for six (6) consecutive weeks (pp. 6-8, Record on
Appeal).
Rule 91_Full Text 3 of 18
Ramon Pizarro opposed the escheat petition on the ground that courts
are not authorized to declare that a person is presumed to be dead and
that Dominga Garcia's being in Red China is not a sufficient ground to
deprive her of her property by escheat proceedings (pp. 8-9, Record on
Appeal).
On June 15, 1966, Pizarro filed a motion to dismiss the escheat petition
(pp. 13-15, Record on Appeal), but he withdrew his motion three days
later (p. 15, Record on Appeal).
Numerous incidents delayed the trial of the case, among them: (1) the
court's order denying the oppositor's motion to dismiss the escheat
petition, which reached the Court of Appeals and the Supreme Court (L-
38423); (2) the court's order requiring Pizarro to render an accounting
which also reached the Court of Appeals and Supreme Court (L-38642);
and (3) the court's order for receivership which reached the Court of
Appeals and the Supreme Court (L-39224).
At the trial, the petitioner's evidence on the Identity of the land; the fact
that the registered owner, Dominga Garcia, and her children and husband
had left for China in 1923; that she died intestate in 1955; and that none
of her heirs is found in the Philippines, were not seriously disputed.
The controversy centers on whether Dominga's daughter, Vicenta Tan, is
alive in China or in Hongkong, as alleged by Pizarro who tried to prove it
through: (1) supposed pictures of the missing heir (Exhs. 1, 2, and 3); (2)
an Extrajudicial Settlement and Adjudication of Dominga's Estate (Exh.
19, pp. 8-9, Rollo) allegedly executed by Vicenta in Hongkong on May 27,
1966; and (3) a Special Power of Attorney (Exh. 20) that she supposedly
signed (thumbmarked) in favor of Pizarro on the same date also in
Hongkong (pp. 53-56, Rollo).
Pizarro testified that his aunt Cornelia Pizarro gave him the papers
pertaining to the land and told him to take care of it before she died in
1936.
On cross-examination, he alleged that in 1960 he met Vicenta on Claveria
Street, that she told him to take care of her property because she would
come again later; that they met again in Hongkong in 1966; and he
recognized her from her pictures
(Exhs. 1, 2, and 3).
On still another occasion, Pizarro testified that the title of the land was
given to him by Dominga Garcia when she and her husband returned to
Davao before the war and borrowed money from him for their trip to
China.
Pizarro's witness, a septuagenarian Arsenio Suazo, who claimed to be a
distant relative of Cornelia Pizarro and Dominga Garcia, testified that the
last time he saw Vicenta was when she was 5 years old. He Identified her
as the woman with buck teeth in the pictures (Exhs. 1, 2 and 3) because
he remembered that, even as a 5-year-old, "her teeth were not in good
form and were somewhat protruding."
Another witness, Ramon Regino, a nephew of Pizarro, calculated that
Vicenta was 7 years old when he last saw her. He testified that the
pictures (Exhs. 1, 2, and 3) bore a similarity to Vicenta whose face, he
recalled, was "somewhat long."
The trial court found Suazos testimony "not credible" or "improbable" for
it was impossible for him to Identify the woman in the picture as Vicenta
on the basis only of his recollection that she had protruding teeth as a
child, because, the court argued, "it is a matter of common knowledge ...
that the teeth of children of five years of age are temporary, and are
replaced by permanent teeth at the age of seven or eight years."
(p. 185, Record on Appeal.)
The court also found Regino's testimony "Incredible, patently incredible"
(p. 185, Record on Appeal).

Neither did the trial court believe Pizarro's allegation that the pictures,
Exhibits 1, 2, and 3, were those of Vicenta Tan. The court observed that
the woman in the picture, who supposedly made the Extrajudicial
Settlement and Special Power of Attorney (Exhs. 19 and 20) did not know
how to sign her name, thus contradicting Pizarro's statement that
Vicente, at age 7, already knew how to write and that when they met in
Hongkong, they conversed in Chavacano and in English. On the other
hand, the court pointed out, since Vicenta left for China in 1923 when she
was only 7 years old, and as she grew up in China, it could not be true that
she spoke Chavacano and could write in the Roman alphabet
(p. 194, Record on Appeal).
The Court did not believe that Pizarro and Vicenta met in Davao in 1960,
for if that were true, he did not need to be shown the scar on Vicenta's
thigh in order for him to recognize her. Furthermore, it is improbable that
a woman whom he had not seen for 43 years would bare her thigh to him.
The trial court pointed out in its decision that:
... There is no proof that Vicenta Tan, daughter of
Dominga Garcia, was the one who in fact sent the
picture other than the claim of Pizarro that he
received the same from her. Likewise, there is no
proof that the woman in Exhibit I is Vicenta Tan,
daughter of Dominga Garcia, except the testimony of
Pizarro that he received the picture from her. An
impostor might have sent her picture to Pizarro foist
herself upon him as the daughter of Dominga Garcia.
And this is the woman whom Pizarro met in
Hongkong (p. 196, Record on Appeal.)
The trial court found that Pizarro's testimonies "ring with untruthfulness;
they are replete with inconsistencies" (p. 17, Record on Appeal) and the
witnesses who corroborated him were "unworthy of belief" (p. 198,
Record on Appeal).
On March 23, 1972, the trial court rendered judgment whose dispositive
portion is quoted below:
WHEREFORE, the land in the name of Dominga
Garcia covered by Transfer Certificate of Title No.
296 (T-2774) of the Register of Deeds of Davao City,
as well as the rentals thereon, shall escheat and the
same are hereby assigned to the City of Davao for
the benefit of public schools and public charitable
institutions and centers in the said city.
Ramon Pizarro shall make an accounting of the
income he collected from himself and those who are
occupying the land from the time he took possession
of it in 1936 when his aunt Cornelia Pizarro died
until the City of Davao takes possession of the
property and shall deliver the same to the city.
Ramon Pizarro shall likewise deliver to the City of
Davao the owner's duplicate of Transfer Certificate
of Title No. 296 (T-2774) which is in his possession,
without costs. (p. 198, Record on Appeal.)
Pizarro appealed to the Court of Appeals (CA-G.R. No. L-51786-R). He
passed away on June 16, 1975 during the pendency of the appeal.
On August 19,1975, a certain Luis Tan, alias Chen Yek An claiming to be
the long missing son of Dominga Garcia, filed a motion for intervention in
the Court of Appeals. He alleged that he had been living in mainland
China; that he failed to come to the trial because of a government
prohibition barring his entry to the Philippines; that after diplomatic
relations with China were restored, he returned to this country to oppose
the escheat proceedings on the properties of his mother, Dominga Garcia.
The City of Davao opposed the motion for intervention for tardiness. The
Court of Appeals disallowed it because the trial had long been terminated,
Rule 91_Full Text 4 of 18
and the intervention, if allowed, would unduly delay the adjudication of
the rights of the original parties
(p. 26, Rollo).
On April 2, 1976, the Court of Appeals affirmed the appealed decision of
the trial court. Vicenta Tan and/or her attorney-in-fact, Ramon Pizarro,
appealed by petition for certiorari to this Court, alleging that the Court of
Appeals erred:
1. in ruling that the city of Davao had personality to
file the escheat petition; and
2. in declaring that petitioner Vicenta Tan may be
presumed dead.
We find no merit in the petition for review.
With respect to the argument that only the Republic of the Philippines,
represented by the Solicitor-General, may file the escheat petition under
Section 1, Rule 91 of the Revised (1964) Rules of Court, the Appellate
Court correctly ruled that the case did not come under Rule 91 because
the petition was filed on September 12,1962, when the applicable rule
was still Rule 92 of the 1940 Rules of Court which provided:
Sec. 1. When and by whom,petition filed.—When a
person dies intestate, seized of real or personal
property in the Philippines, leaving no heirs or
person by law entitled to the same, the municipality
or city where the deceased last resided, if he resided
in the Philippines, or the municipality or city in
which he had estate if he resided out of the
Philippines, may file a petition in the court of first
instance of the province setting forth the facts, and
praying that the estate of the deceased be declared
escheated. (Emphasis supplied.)
Rule 91 of the Revised rules of Court, which provides that only the
Republic of the Philippines, through the Solicitor General, may commence
escheat proceedings, did not take effect until January 1, 1964. Although
the escheat proceedings were still pending then, the Revised Rules of
Court could not be applied to the petition because to do so would work
injustice to the City of Davao. Rule 144 of the 1964 Rules of Court
contains this "saving" clause:
These rules shall take effect on January 1, 1964.
They shall govern all cases brought after they take
effect, and also all further proceedings in cases
pending, except to the extent that in the opinion of
the court, their application would not be feasible or
would work injustice, in which event the former
procedure shall apply.
The Court of Appeals should have dismissed the appeal of Vicenta Tan
and Ramon Pizarro earlier because the records show that Vicenta was
never a party in the escheat proceedings. The trial court's order
dated February 4, 1972 ordering that she be substituted for Ramon
Pizarro as oppositor (p. 16, Record on Appeal) was set aside by the same
court in its Order of March 23, 1972 (p. 178, Record on Appeal) which
was not appealed.
Vicenta Tan, if she still exists, was never served with summons extra-
territorially under Section 17, Rule 14 of the Rules of Court. She never
appeared in the trial court by herself, or counsel and never filed a
pleading therein, hence, she never submitted to the court's jurisdiction.
Every action must be prosecuted and defended in the name of the real
party-in-interest (Sec. 2, Rule 3, Rules of Court; Ferrer vs. Villamor, 60
SCRA 106; Filipinas Industrial Corp. vs. San Diego, 23 SCRA 706; 1 Moran
144). Ramon Pizarro, the alleged administrator of Dominga Garcia's
 Rule 91_Full Text 5 of 18

property, was not a real party in interest. He had no personality to oppose why he omitted to secure copies of her departure
the escheat petition. papers from either the Department of Foreign
Affairs, the Bureau of Immigration or the former
Chinese Embassy, and present them to the court to
The Court of Appeals did not err in affirming the trial court's ruling that
establish her existence as late as 1960.
Dominga Garcia and her heirs may be presumed dead in the escheat
proceedings as they are, in effect, proceedings to settle her estate. Indeed,
while a petition instituted for the sole purpose of securing a judicial For another, if it is also true that he met her in
declaration that a person is presumptively dead cannot be entertained if Hongkong in 1966, we are at a loss why he failed to
that were the only question or matter involved in the case, the courts are arrange for her return to the Philippines. We do not
not barred from declaring an absentee presumptively dead as an incident believe it would have been difficult to do so,
of, or in connection with, an action or proceeding for the settlement of the considering that she had been a resident of this
intestate estate of such absentee. Thus ruled this Court in In re country for more than 40 years and had been absent
Szatraw 81 Phil 461: for only about six years and that her return was
imperative on account of a court action against her
property which required her personal presence. But
... This presumption ... may arise and be invoked and
even if this were impossible, oppositor Pizarro
trade in a case, either in an action or in a special
would not be left without any other remedy. He
proceeding, which is tried or heard by, and submitted
could have arranged for the taking of her deposition
for-decision to, competent court. Independently of
in Hongkong by means of letters rogatory under
such an action or special proceeding, the
Sections 11 and 12, Rule 24 of the Revised Rules of
presumption of death cannot be invoked, nor can it
Court, in the same manner that, according to him, he
be made the subject of an action or special
arranged their meeting in the Crown Colony
proceeding. (Emphasis added.)
sometime in 1966.

Direct evidence proving that Dominga Garcia, her husband and her
The unexplained failure of oppositor Pizarro to take
children are in fact dead, is not necessary. It may be presumed under
advantage of any of these remedies available to him
Article 390 of the New Civil Code which provides:
heavily tilts the scale against the credibility of his
claim.
ART. 390. After an absence of seven years, it being (pp. 30-31, Rollo.)
unknown whether or not the absentee still lives, he
shall be presumed dead for all purposes, except for
These factual findings of the Court of Appeals are binding on Us. They
those of succession.
may not be disturbed in this petition for review where only legal
questions may be raised
The absentee shall not be presumed dead for the (Sec. 2, Rule 45).
purpose of opening his succession till after an
absence of ten years ...
WHEREFORE, finding no reversible error in the decision of the Court of
Appeals in CA-G.R. No. 51786-R, the petition for review is denied for lack
The Court of Appeals found that the City of Davao was able to prove the of merit.
facts from which the presumption arises. It said:
SO ORDERED.
... Its evidence preponderantly shows that in 1923
Dominga Garcia and her family left the Philippines
bound for China. Since then until the instant petition
was filed on September 12, 1962, a period covering
about 39 years, nothing had been heard about them.
It is not known whether all or any of them is still
alive at present. No heir, devisee or any other person
entitled to the estate of Dominga Garcia has
appeared and claimed the same up to this time
except Luis Tan whose status as alleged heir has still
to be proven in the proper court.

The assertion of appellant Pizarro that in 1960 he

met and talked with Vicenta Tan in Claveria, Davao
City, before she went to China, and again in 1966,
when he went to Hongkong, was not believed by the
court below. After assessing and evaluating the
evidence, we find no sufficient cause to disturb the
conclusion of the trial court made on a finding of fact
based on conflicting testimony and depending
largely upon the credibility of witnesses who
testified before it. In our review of the evidence, we
have not come across any material fact or
circumstance which the court a quo has overlooked
and failed to consider, or has misunderstood and
misapplied, and which if properly appreciated and
accurately were held would change the result of this
litigation.

For one thing, if it is true that Vicenta Tan left the

Philippines only in 1960, as oppositor Pizarro would
like the court to believe, it has not been explained

EN BANC
G.R. No. L-44658 January 24, 1936
EMILIA DIVINO, as guardian of the minors Bienvenido Esperanza
and Narciso surnamed Loo Tan y Divino,petitioner,
vs.
CEFERINO HILARIO, Judge of the Court of First Instance of Davao and
THE MUNICIPALITY OF GUIANGA,respondents.
Suazo, Bastida and Pelayo for petitioner.
No appearance for respondents.
IMPERIAL, J.:
This petition for certiorari was filed by the petitioner, as guardian of the
minors Bienvenido, Esperanza and Narciso, surnamed Loo Tan y Divino,
to the end that this court should set aside and nullify the order issued by
the respondent judge on August 24, 1935, that the respondent
municipality with the clerk of court the sum of P5,000, that the above-
named minors should be declared heirs of the deceased Tan Chay entitled
to inherit in equal share said amount of money, and that they should be
granted such other remedy as may be just and equitable.
In the Court of First Instance of Davao, Tan Kui Sing began the intestate of
the deceased Tan Chay, special proceeding No. 314, stating in the petition
filed by him that the deceased was a party in civil case No. 1147 of the
same Court of First Instance the Judgment of which was appealed to this
court, and asking that, while his properties are yet unknown, a special
administrator be appointed to duly represent said deceased in the appeal.
In an order of November 5, 1932, the court appointed Ang Liongto special
administrator. The latter qualified and on April 9, 1934, he filed an
inventory of the properties left by the deceased Tan Chay wherein he
stated that he had left P5,000 in cash in the possession of the Philippine
Foreign Trading & Company and P390 as rents of a house. On July 6,
1935, the respondent judge ordered that the petition of Tan Kui Sing be
set for trial. On the 9th of the same month the clerk of court set the trial of
the petition on August 24, 1935, at 8:30 a. m., and ordered that the notice
of trial be published in the newspaper El Magindanaw, published in
Davao, once a week for three consecutive weeks. It does not appear that
the notice was actually published. On August 24, 1935, the court called
the petition for hearing, and after the presentation of the evidence
declared that Tan Chay, had died intestate, that he left no legal heirs, that
he left as his only estate the sum of P5,000 deposited with the Philippine
Foreign Trading & Company, and decreed the escheat of said funds to the
municipality of Guianga, Province of Davao. Thereafter the municipal
president of Guianga took charge of the funds. On October 16, 1935, the
petitioner, in the same capacity as guardian, appeared in the case and
through her attorneys filed a motion to set aside the decree escheating
the P5,000 to the municipality of Guianga, to declare the minors the only
heirs of Tan Chay, and, finally, to adjudicated to them share and share
alike the sum of P5,000. The motion was based on the allegation under
oath that the minors were the only legitimate nephews and niece left by
the deceased and that the latter had not been survived by another that
the decree of reversion was already irrevocable and that, in any case, the
minors could avail themselves of the procedure under section 752 of the
Code of Civil Procedure. On the 24th of the same month, the petitioner
excepted in writing to the said resolution. It was does not appear that the
petitioner eventually appealed from the order of August 24, 1935, and
from the resolution of October 21 of the same year denying the motion,
nor does it appear that an appeal is pending.
Sections 750 and 752 of the Code of Civil Procedure, applicable to case,
provide as follows:
SEC. 750. Procedure when persons dies intestate without
heirs. — When a person dies intestate, seized of real or
personal by law entitled to the same, the president and
municipal council of the municipality where the deceased last
resided, if he was an inhabitant of these Islands, or of the
municipality in which he had estate, if he resided out of the
Islands, may, on behalf of the municipality, file a petition with
Rule 91_Full Text 6 of 18
the Court of First Instance of the province for an inquisition in
the premises; the court shall thereupon appoint a time and
place of hearing, and deciding on such petition, cause a notice
thereof to be published in some newspaper of general
circulation in the province of which the deceased was last an
inhabitant, if within the Philippine Islands, and if not, in some
newspaper of general circulation in the province in which he
had estate. The notice shall recite the substance of the facts and
request set forth in the petition, the time and place at which
persons claiming the estate may appear and be heard before
the court, and shall be published at least six weeks
successively, the last of which publications shall be at least six
weeks before the time appointed by the court to make
inquisition.
SEC. 752. Right of heir, and so forth subsequently appearing. —
If a devise, legatee, heir, widow, husband, or other person
entitled to such estate, within seventeen years from the date of
such decree, appears and files a claim with the court to such
estate, he shall have possession of the same, or if sold, the
municipality shall be accountable to him for the avails, after
deducting reasonable charges for the care of the estate; but if a
claim is not made within the time mentioned, it shall be forever
barred.
Section 750 provides how the Court of First Instance may acquire
jurisdiction over the properties left by s deceased who resided in the
Philippine Islands and may decree its escheat to the municipality where
he resided. It provides that the municipal president and the municipal
council may file a petition to that effect, whereupon the court shall set the
same for hearing and shall cause the latter to be published in a
newspaper of general circulation in the province where the deceased had
resided, or in default thereof, in some newspaper of general circulation in
the province in which he had estate, for a period of six successive weeks,
the last of which publications shall be at least six weeks before the time
appointed for the trial. Section 752 provides that any heir or legatee may
appear in the proceeding within 17 years, and after establishing his
hereditary right, it shall be the duty of the court to order the municipality
to which the estate was escheated to return the same for adjudication to
the former, and in case it had been sold the municipality shall return its
avails after deducting charges for its care.
In the case under consideration, the procedure fixed by section 750 has
neither been followed nor complied with, wherefore, we hold that the
respondent judge and the Court of First Instance of Davao did not acquire
jurisdiction either to take cognizance of the escheat case or to promulgate
the order of August 24, 1935, whereby the sum of P5,000 was escheated
or adjudicated the municipality of Guianga. No petition was filed either by
the required publication made which was the essential step which should
have conferred jurisdiction.
As the special proceeding No. 314 has been instituted, neither could the
petitioner resort to the remedy granted by section 752, because if the
respondent judge and the Court of First Instance of Davao never acquired
jurisdiction to take cognizance of the escheat case, it is clear and logical
that they neither have jurisdiction to grant the aforesaid remedy. As we
have seen, the only petition which conferred jurisdiction over the state of
the deceased Tan Chay was that filed by Tan Kui Sing, which was for the
sole purpose of appointing a special administrator to represent the
deceased in the appeal interposed in civil cause No. 1147 of the Court of
First Instance of Davao. If another petition for the appointment of a
regular administrator had been filed, it should have been incumbent on
the court to follow the entire procedure in intestacy in order to determine
the heirs and to distribute finally the estate among them.
In view of the foregoing, the petition is granted, and the order of August
24, 1935 as well as the resolution of October 21 of the same year are set
aside.
The respondent judge or the presiding judge of the Court of First Instance
of Davao is instructed to immediately order the municipal president and
the municipal council of the municipality of Guianga, Province of Davao,
to return forthwith the sum of P5,000 and deposit the same with the clerk
 Rule 91_Full Text 7 of 18

of said court for distribution among the legal heirs of the deceased Tan
Chay. This is without prejudice to the petitioner's right, in her capacity as
administratrix, to present in the special proceeding No. 314 an amended
petition for the appointment of a regular administrator and that the
amount of P5,000 with other properties left by the deceased Tan Chay be
distributed among his heirs, upon payment of his legal debts that might
be established and other expenses of administration.

The costs of this proceeding shall be assessed against the respondent

municipality of Guianga. So ordered.

THIRD DIVISION
G.R. No. L-30381 August 30, 1988
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
COURT OF FIRST INSTANCE OF MANILA, BRANCH XIII, HON. JESUS P.
MORFE, PRESIDING JUDGE, AND PRES. ROXAS RURAL BANK
INC., respondents.
The Solicitor General for petitioner.
Leonardo De Ocampo, Jr. and Alfredo Arungayan Jr., for private respondent.
FERNAN, C.J.:
The instant appeal by certiorari seeks (1) to annul and set aside the
Orders dated October 26,1968 and March 1, 1969 of the then Court of
First Instance (CFI) of Manila, Branch XIII in Civil Case No. 73707 entitled
"Republic of the Philippines, Plaintiff, versus Bank of America, et al.,
Defendants," which orders respectively dismissed herein petitioner's
complaint for escheat as against private respondent Pres. Roxas Rural
Bank for improper venue and denied petitioner's motion for
reconsideration of such dismissal order; and (2) the reinstatement of the
aforesaid against private respondent.
The antecedents are as follows:
Pursuant to Section 2 of Act No. 3936, otherwise known as the Unclaimed
Balance Law, some 31 banks including herein private respondent Pres.
Roxas Rural Bank forwarded to the Treasurer of the Philippines in
January of 1968 separate statements under oath by their respective
managing officers of all deposits and credits held by them in favor, or in
the names of such depositors or creditors known to be dead, or who have
not been heard from, or who have not made further deposits or
withdrawals during the preceding ten years or more. In the sworn
statement submitted by private respondent Bank, only two (2) names
appeared: Jesus Ydirin with a balance of P126.54 and Leonora Trumpeta
with a deposit of P62.91.
Upon receipt of these sworn statements, the Treasurer of the Philippines
caused the same to be published in the February 25, March 3 and March
10, 1968 issues of the "Philippines Herald", an English newspaper, and
the"El Debate", a Spanish newspaper, both of general circulation in the
Philippines.
Thereafter, or on July 25, 1968, the Republic of the Philippines instituted
before the CFI of Manila a complaint for escheat against the aforesaid 31
banks, including herein private respondent. Likewise named defendants
therein were the individual depositors and/or creditors reported in the
sworn statements and listed in Annex "A" of the complaint. Summonses
were accordingly issued to defendant banks and the creditors/depositors
requiring them to file severally their answers to the complaint within 60
days after the first publication of the summons with notice that should
they fail to file their answers, plaintiff would take judgment against them
by default. The aforesaid complaint, list of depositors-creditors (Annex
"A"of the complaint), summons and notice were duly published in the
August 25, September 1, and September 8, 1968 issues of the "Philippines
Herald" and "El Debate."
On October 5,1968, private respondent Bank filed before the CFI a motion
to dismiss the complaint as against it on the ground of improper venue.
Opposed by the petitioner, the motion to dismiss was granted in the first
assailed Order. Its motion for reconsideration of said dismissal order
having been denied in the second assailed order, petitioner interposed
the instant appeal on pure questions of law, to wit:
Rule 91_Full Text 8 of 18
a. Whether or not Pres. Roxas Rural Bank is a real party in interest in the
escheat proceedings or in Civil Case No. 73707 of the Court of First
Instance of Manila.
b. Whether or not venue of action in Civil Case No. 73707 has been
properly laid in the City of Manila, since all defendant banks, wherever
they may be found, could be included in one single action, pursuant to the
provisions of Act No. 3936.
c. Whether or not Section 2(b), Rule 4 of the Revised Rules of Court on
venue, likewise, governs escheat proceedings instituted by the Republic
in the Court of First Instance of Manila.
It is petitioner's contention that private respondent bank, being a mere
nominal party, could not file a motion to dismiss on the ground of
improper venue, the real party in interest being the depositors
themselves; that the avowed purpose of Act No. 3936 is to benefit the
government by escheating unto itself dormant bank deposits and that this
purpose will be defeated if escheat proceedings will have to be instituted
in each and every province or city where a bank is located because of the
publication expense; that the convenience or inconvenience of the
depositors is not the determining factor as to venue of action, but that in
view of Rule 144 of the Revised Rules of Court, which provides that all
cases brought after the effectivity of the Rules on January 1, 1964 shall be
governed by the provisions of the Rules of Court, Section 2(b) of Rule 4 on
venue is made applicable and available to the Republic in the instant case.
We find these contentions unmeritorious.
A "real party in interest" has been defined as the party who would be
benefitted or injured by the judgment of the suit or the party entitled to
avail of the suit. 1 There can be no doubt that private respondent bank
falls under this definition for the escheat of the dormant deposits in favor
of the government would necessarily deprive said bank of the use of such
deposits. It is in this sense that it stands to be "injured by the judgment of
the suit;" and it is for this reason that Section 3 of Act No. 3936
specifically provides that the bank shall be joined as a party in the action
for escheat, thus:
Section 3. Whenever the Attorney General shall be
informed of such unclaimed balances, he shall
commence an action or actions in the name of the
People of the Philippines in the Court of First
Instance of the province where the bank is located,
in which shall be joined as parties the bank and such
creditors or depositors. All or any member of such
creditors or depositors or banks, may be included in
one action. (Emphasis supplied.)
Indeed, if the bank were not a real party in interest, the legislature would
not have provided for its joining as a party in the escheat proceedings.
Besides, under Section 2, Rule 3 of the Rules of Court, private respondent
bank is a real party in interest as its presence in the action is necessary
for a complete determination and settlement of the questions involved
therein. Private respondent bank being a real party in interest, it may and
can file a motion to dismiss on the ground of improper venue.
In defense of the second issue raised, petitioner points to the last
sentence of Section 3 of Act No. 3936 above-quoted as authority for
saying that the venue of the escheat proceedings was properly laid in the
City of Manila. Petitioner's reliance on said sentence is patently
misplaced, the same having been obviously read out of context instead of
in relation to the sentence preceding it.
The first sentence of Section 3 of Act No. 3936 directs the Attorney
General, now Solicitor General, to commence an action or actions in the
name of the People of the Philippines in the Court of First Instance of the
province where the bank is located. The phrase "or actions" in this section
is very significant. It manifests awareness on the part of the legislators
that a single action to cover all banks wherever located in the Philippines
 Rule 91_Full Text 9 of 18

would not be legally feasible in view of the venue prescribed for such
action under the same section, i.e., the province where the bank is located.
Thus, the addition of the last sentence, which the lower court had
correctly interpreted to mean "that for escheat of unclaimed bank
balances all banks located in one and the same province where the Court
of First Instance concerned is located may be made parties defendant "in
one action" 2 was clearly intended to save on litigation and publication
expenses, but certainly not as authority for the lumping together of all
banks wherever found in the Philippines in one single escheat
proceedings.

Anent the third issue raised, suffice it to say that Section 2(b) of Rule 4 of
the Revised Rules of Court cannot govern escheat proceedings principally
because said section refers to personal actions. Escheat proceedings are
actions in rem which must be brought in the province or city where
the rem in this case the dormant deposits, is located.

We note that while private respondent bank's motion to dismiss was

granted, the trial court in a subsequent order dated November 16, 1968
declared private respondent bank's depositors and co-defendants Jose
Ydirin and Leonora Trumpeta in default for failure to file their answers.
Considering that the complaint in Civil Case No. 73707 states a common
cause of action against private respondent bank and its depositors-co-
defendants, and considering further that the motion to dismiss filed by
private respondent bank alleged facts 3 that would warrant dismissal of
the complaint against said co-defendants, we apply by analogy Section 4
of Rule 18 of the Rules of Court, 4 thereby decreeing the benefits of the
dismissal of the complaint to extend to private respondent bank's co-
defendants Jose Ydirin and Leonora Trumpeta and their successors- in-
interest.

WHEREFORE, the instant appeal by certiorari is hereby denied. No costs.

SO ORDERED.
 Rule 91_Full Text 10 of 18

EN BANC
on said Savings
Account No. 156
G.R. Nos. L-43697 and L-442200 March 31, 1938
Interest on
10.54
checking a/c
In re Liquidation of the Mercantile Bank of China,
GOPOCO GROCERY (GOPOCO), ET AL., claimants-appellants,
vs. 7,624.20
PACIFIC COAST BISCUIT CO., ET AL., oppositors-appellees.
IV. The claim of Woo & Lo & Co. is for the sum of P6,972.88 and is set
A.M. Zarate for appellants Gopoco Grocery et al. out in its written claim appearing in the record on appeal as follows:
Laurel, Del Rosario and Sabido for appellant Tiong-Chui Gion.
Ross, Lawrence and Selph for appellees Pacific Coast Biscuit Co. et al. Balance due on
Eusebio Orense and Carmelino G. Alvendia for appellees Chinese Grocers open subject to P6,961.01
Asso. et al. check L-845
Marcelo Nubla for appellees Ang Cheng Lian et al.
Interest on
11.37
checking a/c
DIAZ, J.:
6,972.83
On petition of the Bank Commissioner who alleged to have found, after an
investigation, that the Mercantile Bank of China could not continue V. The claim of Sy Guan Huat is for the sum of P6,232.88 and the
operating as such without running the risk of suffering losses and described it as follows:
prejudice its depositors and customers; and that with the requisite
approval of the corresponding authorities, he had taken charge of all the Balance due on
assets thereof; the Court of First Instance of Manila declared the said open account
P6,224.34
bank in liquidation; approved all the acts theretofore executed by the subject to check L-
commissioner; prohibited the officers and agents of the bank from 718
interfering with said commissioner in the possession of the assets
thereof, its documents, deed, vouchers, books of account, papers, Interest on
8.54
memorandum, notes, bond, bonds and accounts, obligations or securities checking a/c
and its real and personal properties; required its creditors and all those
who had any claim against it, to present the same in writing before the
commissioner within ninety days; and ordered the publication, as was in 6,232.88
fact done, of the order containing all these provisions, for the two
VI. The claim of La Bella Tondeña is for the sum of P1,912.79, also
consecutive weeks in two news-papers of general circulation in the City
described as follows:
of Manila, at the expenses of the aforesaid bank. After these publications,
and within the period of ninety days, the following creditors, among
Balance due on
others, presented their presented their claims:
open account P1910.59
subject to check
Tiong Chui Gion, Gopoco Grocery, Tan Locko, Woo & Lo & Co., Sy Guan
Huat and La Bella Tondeña. Interest on account 2.20

I. The claim of Tiong Chui Gion is for the sum of P10,285.27. He alleged 1,912.79
that he deposited said sum in the bank under liquidation on current
account.
To better resolve not only these claims but also the many others which
II. The claim of Gopoco Grocery (Gopoco) is for the sum of P4,932.48 were presented against the bank, the lower court, on July 15, 1932,
plus P460. It described its claim as follows: appointed Fulgencio Borromeo as commissioner and referee to receive
the evidence which the interested parties may desire to present; and the
Balance due on commissioner and referee thus named, after qualifying for the office and
open account P4,927.95 receiving the evidence presented to him, resolved the aforesaid six claims
subject to check by recommending that the same be considered as an ordinary credit only,
and not as a preferred credit as the interested parties wanted, because
Interest on c/a 4,53 they were at the same time debtors of the bank.

4,932.48 The evidence adduced and the very admissions of the said interested
parties in fact show that (a) the claimant Tiong Chui Gion, while he was a
Surety deposit 460.00 creditor of the Mercantile Bank of China in the sum of P10,285.27 which
he deposited on current account, was also a debtor not only in the sum of
III. The claim of Tan Locko is for the sum of P7,624.20, and he describes P633.76 but also in the sum of P664.77, the amount of a draft which he
it in turn as follows: accepted, plus interest thereon and the protest fees paid therefor; (b) the
claimant Gopoco Grocery (Gopoco) had a current account in the bank in
Balance due on the sum of P5,392.48, but it is indebted to it, in Turn, in the sum of
open account $2,334.80, the amount of certain drafts which it had accepted; (c) the
P7,610.44 claimant Tan Locko had a deposit of P7,624.20, but he owed $1,378.90,
subject to check L-
759 the amount of a draft which he also accepted; (d) the claimant Woo & Lo
& Co. had a deposit of P6,972.88, but it was indebted in the sum of
Savings account No. $3,464.84, the amount also of certain drafts accepted by it; (e) the
156 (foreign) with claimants Sy Guan Huat and Sy Kia had a deposit of P6,232.88, but they
Mercantile Bank of owed the sum of $3,107.37, for two drafts accepted by them and already
China L-1611 Amoy due; and (f) the claimant La Bella Tondeña had, in turn, a deposit of
$15,000,00 Interest 8.22 P1,912.79, but it was, in turn, indebted in the sum of $565.40 including

interest and other expenses, the amount of two drafts drawn upon and
accepted by it.
The lower court approved all the recommendations of The commissioner
and referee as to claims of the six appellants as follows; (1) To approve
the claim of Tiong Chui Gion (P10,285.27) but only as an ordinary credit,
minus the amount of the draft for P664.77; (2) to approve the claim of
Gopoco Grocery (Gopoco) but also as an ordinary credit only (P5,387.95
according to the referee), minus its obligation amounting to $2,334.80 or
P4,669.60; (3) to approve the claim of Tan Locko but as an ordinary
credit only (P7,610.44 according to the referee), deducting therefrom his
obligation amounting to $1,378.90 or P2,757.80; to approve the claim of
Woo & Lo & Co. but only as an ordinary credit (P6,961.01 according to the
referee). after deducting its obligation to the bank, amounting to
$3,464.84 or P6,929.68; (5) to approve the claim of Sy Guan Huat but only
as an ordinary credit (P6,224.34 according to the referee), after
deducting his obligation amounting to $3,107.37) or P6,214.74; and,
finally, (6) to approve the claim of la Bella Tondeña but also as an
ordinary credit only (1,917.50 according to the referee), after deducting it
obligation amounting to $565.40 or P1,130.80; but he expressly refused
to authorize the payment of the interest by reason of impossibility upon
the ground set out in the decision. Not agreeable to the decision of the
lower court, each of the interested parties appealed therefrom and
thereafter filed their respective briefs.
Tiong Chui Gion argues in his brief filed in case in G. R. No. 442200, that
the lower court erred:
1. In holding that his deposit of P10,285.27 in the Mercantile
Bank of China, constitutes an ordinary credit only and not a
preferred credit.
2. In holding as preferred credits the drafts and checks issued
by the bank under liquidation in payment of the drafts
remitted to it for collection from merchants residing in the
country, by foreign entities or banks; and in not holding that
the deposits on current account in said bank should enjoy
preference over said drafts and checks; and
3. In holding that the amount of P633.76 (which should be
understood as P664.77), which the claimant owes to the bank
under liquidation, be deducted from his current account
deposit therein, amounting to P10,285.27, upon the
distribution of the assets of the bank among its various
creditors, instead of holding that, after deducting the aforesaid
sum of P633.76 (should be P664.77) from his aforesaid
deposit, there be turned over to him the balance together with
the dividends or shares then corresponding to him, on the
basis of said amount.
The other five claimants, that is, Gopoco Grocery Tan Locko, Woo & Lo &
Co., Sy Guan Huat and La Bella Tondeña, in turn argue in the brief they
jointly filed in case G. R. No. 43697, that the lower court erred:
1. In not first deducting from their respective deposits in the
bank under liquidation, whose payment they claim, their
respective obligation thereto.
2. In not holding that their claims constitute a preferred credit.
3. In holding that the drafts and checks issued by the bank
under liquidation in payment of the drafts remitted to it by
foreign entitles and banks for collection from the certain
merchant residing in the country, are preferred credits; and in
not holding that the deposits made by each of them enjoy
preference over said drafts and checks, and
4. In denying their motion for a new trial base on the
proposition that the appealed decision is not in accordance
with law and is contrary to the evidence adduced at the trial.
Rule 91_Full Text 11 of 18
The questions raised by the appellant in case G. R. No. 44200 and by
appellants in case G.R. 43697 being identical in nature, we believe it
practical and proper to resolve said questions jointly in one decision.
Before proceeding, however, it is convenient to note that the
commissioner and referee, classifying the various claims presented
against the bank, placed under one group those partaking of the same
nature, the classification having resulted in six groups.
In the first group he included all the claims for current account, savings
and fixed deposits.
In the second group he included the claims for checks or drafts sold by
the bank under liquidation and not paid by the agents or banks in whose
favor they had been issued.
In the third group he included the claims checks or drafts issued by the
bank under liquidation in payment or reimbursement of the drafts or
goods remitted to it for collection, from resident merchants and entitles,
by foreign banks and entities.
In the fourth group he included the claims for drafts or securities to be
collected from resident merchants and entities to be collected from
resident merchants and entities which were pending collection on the
date payments were suspended.
In the fifth group he included the claims of certain depositors or creditors
of the bank who were at the same time debtors thereof; and he
considered of this class the claims of the appellants in these two cases,
and
In the sixth group he included the other claims different in nature from
the of the aforesaid five claims.
I. Now, then, should the appellants' deposits on current account in the
bank now under liquidation be considered preferred credits, and not
otherwise, or should they be considered ordinary credits only? The
appellants contend that they are preferred credits only? The appellants
contend that they are preferred credits because they are deposits in
contemplation of law, and as such should be returned with the
corresponding interest thereon. In support thereof they cite Manresa (11
Manresa, Civil Code, page 663), and what has been insinuated in the case
of Rogers vs. Smith, Bell & Co. (10 Phil., 319), citing the said commentator
who maintains that, notwithstanding the provisions of articles 1767 and
1768 and others of the aforesaid Code, from which it is inferred that the
so-called irregular deposits no longer exist, the fact is that said deposits
still exist. And they contend and argue that what they had in the bank
should be considered as of this character. But it happens that they
themselves admit that the bank owes them interest which should have
been paid to them before it was declared in a state of liquidation. This fact
undoubtedly destroys the character which they nullifies their contention
that the same be considered as irregular deposits, because the payment of
interest only takes place in the case of loans. On the other hand, as we
stated with respect to the claim of Tan Tiong Tick (In re Liquidation of
Mercantile Bank of China, G.R. No. 43682), the provisions of the Code of
Commerce, and not those of the Civil Code, are applicable to cases of the
nature of those at bar, which have to do with parties who are both
merchants. (Articles 303 and 309, Code of Commerce.) We there said, and
it is not amiss to repeat now, that the so-called current account and
savings deposits have lost their character of deposits, properly so-called
and are convertible into simple commercial loans because, in cases of
such deposits, the bank has made use thereof in the ordinary course of its
transactions as an institution engaged in the banking business, not
because it so wishes, but precisely because of the authority deemed to
have been granted to it by the appellants to enable them to collect the
interest which they had been and they are now collecting, and by virtue
further of the authority granted to it by section 125 of the Corporation
Law (Act No. 1459), as amended by Acts Nos. 2003 and 3610 and section
9 of the Banking Law (Act No. 3154), without considering of course the
provisions of article 1768 of the Civil Code. Wherefore, it is held that the
deposits on current account of the appellants in the bank under
liquidation, with the right on their right on their part to collect interest,
have not created and could not create a juridical relation between them
 Rule 91_Full Text 12 of 18

except that of creditors and debtor, they being the creditors and the bank P1,917.50 of La Bella Tondeña, plus their corresponding interest up to
the debtor. December 4, 1931; that their obligations to the bank under liquidation
which should be set off against said deposits, are respectively for the
following amounts: P664.77 of Tiong Chui Gion; P4,669.60 of Gopoco
What has so far been said resolves adversely the contention of the
Grocery (Gopoco); P2,757.80 of Tan Locko; P6,929.68 of Woo & Lo & Co.;
appellants, the question raised in the first and second assigned errors
P6,214.74 of Sy Huat; and P1,130.80 of La Bella Todeña; and we order
Tiong Chui Gion in case G. R. No. 44200, and the appellants' second and
that the set-offs in question be made in the manner stated in this decision,
third assigned errors in case G. R. No. 43697.
that is, as of the date already indicated, December 4, 1931. In all other
respects, we affirm the aforesaid judgments, without special
II. As to the third and first errors attributed to lower court by Tiong Chui pronouncement as to costs. So ordered.
Gion in his case, and by the other appellants in theirs, respectively, it
should be stated that the question of set-off raised by them cannot be
resolved a like question in the said case, G. R. No. 43682, entitled "In
re Liquidation of Mercantile Bank of China. Tan Tiong Tick, claimant." It is
proper that set-offs be made, inasmuch as the appellants and the bank
being reciprocally debtors and creditors, the same is only just and
according to law (art. 1195, Civil Code), particularly as none of the
appellants falls within the exceptions mentioned in section 58 of the
Insolvency Law (Act No. 1956), reading:

SEC. 58. In all cases of mutual debts and mutual credits between the
parties, the account between them shall be stated, and one debt set off
against the other, and the balance only shall be allowed and paid. But no
set-off or counterclaim shall be allowed of a claim in its nature not
provable against the estate: Provided, That no set-off on counterclaim
shall be allowed in favor of any debtor to the insolvent of a claim
purchased by or transferred to such debtor within thirty days
immediately preceding the filing, or after the filing of the petition by or
against the insolvent.

It has been said with much basis by Morse, in his work on Bank and
Banking (6th ed., vol. 1, pages 776 and 784) that:

The rules of law as to the right of set-off between the bank and its
depositors are not different from those applicable to other parties. (Page
776.)

Where the bank itself stops payment and becomes insolvent, the
customer may avail himself in set-off against his indebtedness to the bank
of any indebtedness of the bank to himself, as, for example, the balance
due him on his deposit account. (Page 784.)

But if set-offs are proper in these cases, when and how should they be
made, considering that the appellants ask for the payment of interest? Are
they by any chance entitled to interest? If they are, when and until what
time should they be paid the same?

The question of whether they are entitled to interest should be resolved

in the same way that we resolved the case of the claimant Tan Tiong Tick
in the said case, G. R. No. 43682. The circumstances in these two cases are
certainly the same as those in the said case with reference to the said
question. The Mercantile Bank of China owes to each of the appellants the
interest claimed by them, corresponding to the year ending December 4,
1931, the date it was declared in a state of liquidation, but not which the
appellants claim should be earned by their deposits after said date and
until the full amounts thereof are paid to them. And with respect to the
question of set-off, this should be deemed made, of course, as of the date
when the Mercantile Bank of China was declared in a state of liquidation,
that is, on December 4, 1931, for then there was already a reciprocal
concurrence of debts, with respect to said bank and the appellants. (Arts.
1195 and 1196 of the Civil Code; 8 Manresa, 4th ed., p. 361.)

III. With respect to the fourth assigned error of the appellants in case G. R.
No. 43697, we hold, in view of the considerations set out in resolving the
other assignments of errors, that the lower court properly denied the
motion for new trial of said appellants.

In view of the foregoing, we modify the appealed judgments by holding

that the deposits claimed by the appellants, and declared by the lower
court to be ordinary credits are for the following amounts: P10,285.27 of
Tiong Chui Gion; P5,387.95 of Gopoco Grocery (Gopoco); P7,610.44 of
Tan Locko; P6961.01 of Woo & Lo & Co.; P6,224.34 of Sy Guan Huat; and

FIRST DIVISION
G.R. No. 158230 July 16, 2008
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF
LANDS, Petitioner,
vs.
REGISTER OF DEEDS OF ROXAS CITY, ELIZABETH LEE, and PACITA
YU-LEE, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the Decision2 dated 12 July 2002 and the
Resolution dated 9 May 2003 of the Court of Appeals in CA-G.R. CV No.
53890.
The Facts
In March 1936, Lee Liong, a Chinese citizen, bought Lot No. 398 from
Vicenta Arcenas, Francisco, Carmen Ramon, Mercedes, Concepcion,
Mariano, Jose, and Manuel, all surnamed Dinglasan. Lot No. 398, with an
area of 1,574 square meters, is located at the corner of Roxas Avenue and
Pavia Street in Roxas City. In February 1944, Lee Liong died intestate and
was survived by his widow Ang Chia, and his sons Lee Bing Hoo and Lee
Bun Ting. On 30 June 1947, the surviving heirs of Lee Liong
extrajudicially settled the estate of the deceased and partitioned among
themselves Lot No. 398. When Lee Bing Hoo and Lee Bun Ting died, Lot
No. 398 was transferred by succession to their respective wives,
Elizabeth Lee (Elizabeth) and Pacita Yu-Lee (Pacita).
In the 1956 case of Dinglasan v. Lee Bun Ting,3 involving Lot No. 398, the
Court held that even if the sale of the property was null and void for
violating the constitutional prohibition on the sale of land to an alien, still
the doctrine of in pari delicto barred the sellers from recovering the title
to the property. Eleven years later, in the case of Lee Bun Ting v. Judge
Aligaen,4 the Court ordered the trial court to dismiss the complaint of the
Dinglasans for the recovery of Lot No. 398. Applying the doctrine of res
judicata, the Court held that the case was a mere relitigation of the same
issues previously adjudged with finality in the Dinglasan case, involving
the same parties or their privies and concerning the same subject matter.
On 7 September 1993, Elizabeth and Pacita (private respondents) filed a
petition for reconstitution of title of Lot No. 398 because the records of
the Register of Deeds, Roxas City were burned during the war. On 3
October 2001, the Court held that the trial court’s order of reconstitution
was void for lack of factual support because it was based merely on the
plan and technical description approved by the Land Registration
Authority.5
Meanwhile, on 26 January 1995, petitioner Republic of the Philippines
(petitioner), through the Office of the Solicitor General (OSG), filed with
the Regional Trial Court of Roxas City a Complaint 6 for Reversion of Title
against private respondents and the Register of Deeds of Roxas City,
praying that (1) the sale of Lot No. 398 to Lee Liong be set aside for being
null and void ab initio; and (2) Lot No. 398 be reverted to the public
domain for the State’s disposal in accordance with law.
In their Answer, private respondents invoked as affirmative defenses: (1)
prescription; (2) private ownership of Lot No. 398; and (3) Lee Liong’s
being a buyer in good faith and for value. Furthermore, private
respondents claimed that as Filipino citizens, they are qualified to acquire
Lot No. 398 by succession.
The Register of Deeds of Roxas City did not file an answer.
Rule 91_Full Text 13 of 18
On 7 May 1996, the trial court rendered a decision ordering the reversion
of Lot No. 398 to the State.
On appeal, the Court of Appeals rendered its Decision7 dated 12 July
2002, reversing the trial court’s decision and declaring private
respondents as the absolute and lawful owners of Lot No. 398. Petitioner
moved for reconsideration, which the Court of Appeals denied in its
Resolution8 dated 9 May 2003.
Hence, this petition for review.
The Ruling of the Trial Court
The trial court ordered the reversion of Lot No. 398 to the State. The trial
court held that private respondents could not have acquired a valid title
over Lot No. 398 because the sale of the lot to their predecessor-in-
interest Lee Liong was null and void. Being an innocent purchaser in good
faith and for value did not cure Lee Liong’s disqualification as an alien
who is prohibited from acquiring land under the Constitution. The trial
court further held that prescription cannot be invoked against the State
as regards an action for reversion or reconveyance of land to the State.
The Ruling of the Court of Appeals
The Court of Appeals agreed with the trial court that the State is not
barred by prescription. However, the Court of Appeals held that the trial
court erred in ordering the reversion of Lot No. 398 to the State. Although
the sale of Lot No. 398 to Lee Liong violated the constitutional prohibition
on aliens acquiring land, the Court of Appeals noted that Lot No. 398 had
already been acquired by private respondents through succession. The
transfer of Lot No. 398 to private respondents, who are Filipino citizens
qualified to acquire lands, can no longer be impugned on the basis of the
invalidity of the initial transfer. The flaw in the original transaction is
considered cured and the title of the transferee is deemed valid
considering that the objective of the constitutional proscription against
alien ownership of lands, that is to keep our lands in Filipino hands, has
been achieved.
The Issue
Petitioner raises the lone issue that:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND
SET ASIDE THE APPEALED DECISION AND DECLARED PRIVATE
RESPONDENTS THE ABSOLUTE AND LAWFUL OWNERS AND
POSSESSORS OF LOT NO. 398 OF ROXAS CITY CADASTRE CONSIDERING
THAT LEE LIONG, WHO IS AN ALIEN, AND THUS, CONSTITUTIONALLY
PROHIBITED TO OWN REAL PROPERTY IN THE PHILIPPINES, ACQUIRED
NO RIGHT OR TITLE OVER SUBJECT LOT WHICH HE COULD HAVE
TRANSMITTED BY SUCCESSION TO PRIVATE RESPONDENTS’
PREDECESSORS-IN-INTEREST.
The Ruling of the Court
The petition is without merit.
Petitioner argues that since the sale of Lot No. 398 to Lee Liong was void,
Lot No. 398 never became part of the deceased Lee Liong’s estate. Hence,
Lot No. 398 could not be transmitted by succession to Lee Liong’s
surviving heirs and eventually to private respondents.
We do not subscribe to petitioner’s position. The circumstances of this
case are similar to the case of De Castro v. Teng Queen Tan,9 wherein a
residential lot was sold to a Chinese citizen. Upon the death of the alien
vendee, his heirs entered into an extrajudicial settlement of the estate of
the deceased and the subject land was transferred to a son who was a
naturalized Filipino. Subsequently, the vendor of the lot filed a suit for
annulment of sale for alleged violation of the Constitution prohibiting the
sale of land to aliens. Independently of the doctrine of in pari delicto, the
 Rule 91_Full Text 14 of 18

Court sustained the sale, holding that while the vendee was an alien at the
time of the sale, the land has since become the property of a naturalized
Filipino citizen who is constitutionally qualified to own land.
Similarly, in this case, upon the death of the original vendee who was a
Chinese citizen, his widow and two sons extrajudicially settled his estate,
including Lot No. 398. When the two sons died, Lot No. 398 was
transferred by succession to their respective spouses, herein private
respondents who are Filipino citizens.
can no longer be assailed. Hence, reversion proceedings will no longer
prosper since the land is now in the hands of Filipino citizens.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 12
July 2002 and the Resolution dated 9 May 2003 of the Court of Appeals in
CA-G.R. CV No. 53890.
SO ORDERED.

We now discuss whether reversion proceedings is still viable considering

that Lot No. 398 has already been transfered to Filipino citizens. In the
reconstitution case of Lee v. Republic of the Philippines10 involving Lot No.
398, this Court explained that the OSG may initiate an action for reversion
or escheat of lands which were sold to aliens disqualified from acquiring
lands under the Constitution. However, in the case of Lot No. 398, the fact
that it was already transferred to Filipinos militates against escheat
proceedings, thus:

Although ownership of the land cannot revert to the original sellers,

because of the doctrine of pari delicto, the Solicitor General may initiate
an action for reversion or escheat of the land to the State, subject to other
defenses, as hereafter set forth.

In this case, subsequent circumstances militate against escheat

proceedings because the land is now in the hands of Filipinos. The
original vendee, Lee Liong, has since died and the land has been
inherited by his heirs and subsequently their heirs, petitioners
herein [Elizabeth Lee and Pacita Yu Lee]. Petitioners are Filipino
citizens, a fact the Solicitor General does not dispute.

The constitutional proscription on alien ownership of lands of the public

or private domain was intended to protect lands from falling in the hands
of non-Filipinos. In this case, however, there would be no more public
policy violated since the land is in the hands of Filipinos qualified to
acquire and own such land. "If land is invalidly transferred to an alien
who subsequently becomes a citizen or transfers it to a citizen, the flaw in
the original transaction is considered cured and the title of the transferee
is rendered valid." Thus, the subsequent transfer of the property to
qualified Filipinos may no longer be impugned on the basis of invalidity of
the initial transfer. The objective of the constitutional provision to keep
our lands in Filipino hands has been achieved.11 (Emphasis supplied)

In this case, the reversion proceedings was initiated only after almost 40
years from the promulgation of the case of Dinglasan v. Lee Bun
Ting,12 where the Court held that the sale of Lot No. 398 was null and void
for violating the constitutional prohibition on the sale of land to an alien.
If petitioner had commenced reversion proceedings when Lot No. 398
was still in the hands of the original vendee who was an alien disqualified
to hold title thereto, then reversion of the land to the State would
undoubtedly be allowed. However, this is not the case here. When
petitioner instituted the action for reversion of title in 1995, Lot No. 398
had already been transferred by succession to private respondents who
are Filipino citizens.1avvphi1

Since Lot No. 398 has already been transferred to Filipino citizens, the
flaw in the original transaction is considered cured.13 As held in Chavez v.
Public Estates Authority:14

Thus, the Court has ruled consistently that where a Filipino citizen sells
land to an alien who later sells the land to a Filipino, the invalidity of the
first transfer is corrected by the subsequent sale to a citizen. Similarly,
where the alien who buys the land subsequently acquires Philippine
citizenship, the sale was validated since the purpose of the constitutional
ban to limit land ownership to Filipinos has been achieved. In short, the
law disregards the constitutional disqualification of the buyer to
hold land if the land is subsequently transferred to a qualified party,
or the buyer himself becomes a qualified party.15 (Emphasis supplied)

Clearly, since Lot No. 398 has already been transferred to private
respondents who are Filipino citizens, the prior invalid sale to Lee Liong

SECOND DIVISION
G.R. No. 192413 June 13, 2012
Rizal Commercial Banking Corporation, Petitioner,
vs.
Hi-Tri Development Corporation and Luz R. 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 Hi-Tri 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 CA4 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 Owner’s 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 Manager’s Check from RCBC-Ermita in the amount of
₱ 1,019,514.29, payable to Millan’s 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
Rule 91_Full Text 15 of 18
4. That the defendants be ordered to pay plaintiffs attorney’s
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 Manager’s 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 Manager’s 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 RCBC’s 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 Manager’s 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 Manager’s 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-Tri’s] RCBC bank account once an order to debit is issued upon
the payee’s presentation of the Manager’s Check. Since the payee rejected
the negotiated Manager’s Check, presentation of the Manager’s Check was
never made.
Consequently, the deposit that was supposed to be allocated for the
payment of the Manager’s 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 Corporation’s 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
Manager’s Check separate from the Corporation’s 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 Bank’s Ermita BC informed Hi-Tri and/or its principals regarding
the inclusion of Manager’s 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 Manager’s
Check No. ER034469 does not form part of the Bank’s own account. By
simple operation of law, the funds covered by the manager’s 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 Bank’s 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 Manager’s 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 Manager’s 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 Manager’s Check (Hi-Tri and/or
Spouses Bakunawa) or the designated payee (Rosmil) immediately before
Rule 91_Full Text 16 of 18
the bank filed its Sworn Statement on the dormant accounts held therein.
The CA ruled that the bank’s 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 assails7 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 Manager’s 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 Philippines in 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.
 Rule 91_Full Text 17 of 18

At the time of issuing summons in the action above provided for, the clerk Act No. 3936, as amended, outlines the proper procedure to be followed
of court shall also issue a notice signed by him, giving the title and by banks and other similar institutions in filing a sworn statement with
number of said action, and referring to the complaint therein, and the Treasurer concerning dormant accounts:
directed to all persons, other than those named as defendants therein,
claiming any interest in any unclaimed balance mentioned in said
Sec. 2. Immediately after the taking effect of this Act and within the
complaint, and requiring them to appear within sixty days after the
month of January of every odd year, all banks, building and loan
publication or first publication, if there are several, of such summons, and
associations, and trust corporations shall forward to the Treasurer of the
show cause, if they have any, why the unclaimed balances involved in said
Philippines a statement, under oath, of their respective managing officers,
action should not be deposited with the Treasurer of the Philippines as in
of all credits and deposits held by them in favor of persons known to be
this Act provided and notifying them that if they do not appear and show
dead, or who have not made further deposits or withdrawals during the
cause, the Government of the Republic of the Philippines will apply to the
preceding ten years or more, arranged in alphabetical order according to
court for the relief demanded in the complaint. A copy of said notice shall
the names of creditors and depositors, and showing:
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 (a) The names and last known place of residence or post office
publication, if there are several, of said summons and notice. Any person addresses of the persons in whose favor such unclaimed
interested may appear in said action and become a party thereto. Upon balances stand;
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
(b) The amount and the date of the outstanding unclaimed
defendant banks, building and loan associations or trust corporations, the
balance and whether the same is in money or in security, and if
court shall have full and complete jurisdiction in the Republic of the
the latter, the nature of the same;
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 (c) The date when the person in whose favor the unclaimed
issues herein, and render the appropriate judgment thereon. (Emphasis balance stands died, if known, or the date when he made his
supplied.) last deposit or withdrawal; and

Hence, insofar as banks are concerned, service of processes is made by (d) The interest due on such unclaimed balance, if any, and the
delivery of a copy of the complaint and summons upon the president, amount thereof.
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
A copy of the above sworn statement shall be posted in a conspicuous
made by publication of a copy of the summons in a newspaper of general
place in the premises of the bank, building and loan association, or trust
circulation in the locality where the institution is situated. 9 A notice about
corporation concerned for at least sixty days from the date of filing
the forthcoming escheat proceedings must also be issued and published,
thereof: Provided, That immediately before filing the above sworn
directing and requiring all persons who may claim any interest in the
statement, the bank, building and loan association, and trust corporation
unclaimed balances to appear before the court and show cause why the
shall communicate with the person in whose favor the unclaimed balance
dormant accounts should not be deposited with the Treasurer.
stands at his last known place of residence or post office address.

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 Manager’s 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
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 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 Manager’s Check. It explains that, pursuant to the law,
only those "whose favor such unclaimed balances stand" are entitled to
 Rule 91_Full Text 18 of 18

receive notices. Petitioner argues that, since the funds represented by the
Manager’s 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
Manager’s Check.
In contrast, respondents Hi-Tri and Bakunawa allege23 that they have a
legal interest in the fund allocated for the payment of the Manager’s
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
Manager’s 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.25The 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.
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 Manager’s 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
Manager’s Check. The doctrine that the deposit represented by a
manager’s 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.1âwphi1
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 Manager’s 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 Manager’s 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.

There are checks of a special type called manager’s or cashier’s checks.

WHEREFORE the Petition is DENIED. The 26 November 2009 Decision
These are bills of exchange drawn by the bank’s manager or cashier, in
and 27 May 2010 Resolution of the Court of Appeals in CA-G.R. SP No.
the name of the bank, against the bank itself.28 Typically, a manager’s or a
107261 are hereby AFFIRMED.
cashier’s check is procured from the bank by allocating a particular
amount of funds to be debited from the depositor’s account or by directly
paying or depositing to the bank the value of the check to be drawn. Since SO ORDERED.
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 manager’s check does not ipso facto
work as an automatic transfer of funds to the account of the payee. In
case the procurer of the manager’s or cashier’s 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 Manager’s 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 Manager’s Check offered by respondents, the latter retained custody
of the instrument instead of cancelling it. As the Manager’s 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