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.

In its effort to nullify the Resolutions herein before mentioned, petitioner points out that the Court of
Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction (a) in denying
petitioner's affirmative defenses set forth in its answer and motion for reconsideration, and in setting the
case for trial and reception of evidence; and, (b) in giving due course to private respondent's petition for
annulment of decision despite the palpable setting-in of the 5-year statute of limitations within which to
file claims before the court a quo set forth in Rule 91 of the Revised Rules of Court and Art. 1014 of the
Civil Code.

Petitioner argues that the lower court had jurisdiction when it escheated the properties in question in
favor of the city government and the filing of a petition for annulment of judgment on the ground of
subsequent discovery of the deeds of donation did not divest the lower court of its jurisdiction on the
matter. It further contends that Rule 47 of the 1997 Rules of Civil Procedure only provides for two (2)
grounds for the annulment of judgment, namely: extrinsic fraud and lack of jurisdiction. As such the
discovery of the deeds of donation seven (7) years after the finality of the escheat proceedings is an
extraneous matter which is clearly not an instance of extrinsic fraud nor a ground to oust the lower court
of its jurisdiction.

Petitioner also insists that notwithstanding the execution of the deeds of donation in favor of private
respondent, the 5-year statute of limitations within which to file claims before the court a quo as set forth
in Rule 91 of the Revised Rules of Court has set in.

The present controversy revolves around the nature of the parcels of land purportedly donated to private
respondent which will ultimately determine whether the lower court had jurisdiction to declare the same
escheated in favor of the state.

We rule for the petitioner. Escheat is a proceeding, unlike that of succession or assignment, whereby the
state, by virtue of its sovereignty, steps in and claims the real or personal property of a person who dies
intestate leaving no heir. In the absence of a lawful owner, a property is claimed by the state to forestall
an open "invitation to self-service by the first comers."5 Since escheat is one of the incidents of
sovereignty, the state may, and usually does, prescribe the conditions and limits the time within which a
claim to such property may be made. The procedure by which the escheated property may be recovered
is generally prescribed by statue, and a time limit is imposed within which such action must be brought.

In this jurisdiction, a claimant to an escheated property must file his claim "within five (5) years from the
date of such judgment, such person shall have possession of and title to the same, or if sold, the
municipality or city 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 device capriciously conjured by the state
to defraud any claimant; on the contrary, it is decidedly prescribed to encourage would-be claimants to
be punctilious in asserting their claims, otherwise they may lose them forever in a final judgment.

Incidentally, the question may be asked: Does herein private respondent, not being an heir but allegedly
a donee, have the personality to be a 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 claims to be the lessee thereof under a contract legally
entered with the former (underscoring supplied).

In the instant petition, the escheat judgment was handed down by the lower court as early as 27 June
1989 but it was only on 28 January 1997, more or less seven (7) years after, when private respondent
decided to contest the escheat judgment in the guise of a petition for annulment of judgment before the
Court of Appeals. Obviously, private respondent's belated assertion of her right over the escheated
properties militates against recovery.

A judgment in escheat proceedings when rendered by a court of competent jurisdiction is conclusive

against all persons with actual or constructive notice, but not against those who are not parties or privies
thereto. As held in Hamilton v. Brown,8 "a judgment of escheat was held conclusive upon persons
notified by advertisement to all persons interested. Absolute lack on the part of petitioners of any
dishonest intent to deprive the appellee of any right, or in any way injure him, constitutes due process of
law, proper notice having been observed." With the lapse of the 5-year period therefore, private
respondent has irretrievably lost her right to claim and the supposed "discovery of the deeds of
donation" is not enough justification to nullify the escheat judgment which has long attained finality.

In the mind of this Court the subject properties were owned by the decedent during the time that the
escheat proceedings were being conducted and the lower court was not divested of its jurisdiction to
escheat them in favor of Pasay City notwithstanding an allegation that they had been previously
donated. We recall that a motion for intervention was earlier denied by the escheat court for failure to
show "valid claim or right to the properties in question."9 Where a person 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 properties were in the name of
the decedent indicating that no transfer of ownership involving the disputed properties was ever made
by the deceased during her lifetime. In the absence therefore of any clear and convincing proof showing
that the subject lands had been conveyed by Hankins to private respondent Solano, the same still
remained, at least before the escheat, part of the estate of the decedent and the lower court was right
not to assume otherwise. The Court of Appeals therefore cannot perfunctorily presuppose that the
subject properties were no longer part of the decedent's estate at the time the lower court handed down
its decision on the strength of a belated allegation that the same had 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 case with deliberate precision and unadulterated thoroughness, the judgment not being diluted by
speculations, conjectures and unsubstantiated assertions.

WHEREFORE, the petition is GRANTED. The assailed Resolution of the Court of Appeals dated 12
November 1998 giving due course to the petition for annulment of judgment, and its Resolution dated 4
May 2000 denying petitioner's motion for reconsideration, are SET ASIDE. The decision of the RTC-Br.
114, Pasay City, dated 27 June 1989, is REINSTATED.

SO ORDERED.

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).

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.

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

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."

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

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, 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 property, was not a real
party in interest. He had no personality to oppose the escheat petition.

The Court of Appeals did not err in affirming the trial court's ruling that 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 declaration that a
person is presumptively dead cannot be entertained if that were the only question or matter involved in
the case, the courts are not barred from declaring an absentee presumptively dead as an incident of, or
in connection with, an action or proceeding for the settlement of the intestate estate of such absentee.
Thus ruled this Court in In re Szatraw 81 Phil 461:

... This presumption ... may arise and be invoked and trade in a case, either in an action or in a special
proceeding, which is tried or heard by, and submitted for-decision to, competent court. Independently of
such an action or special proceeding, the presumption of death cannot be invoked, nor can it be made
the subject of an action or special proceeding. (Emphasis added.)

Direct evidence proving that Dominga Garcia, her husband and her children are in fact dead, is not
necessary. It may be presumed under Article 390 of the New Civil Code which provides:

ART. 390. After an absence of seven years, it being unknown whether or not the absentee still lives, he
shall be presumed dead for all purposes, except for those of succession.

The absentee shall not be presumed dead for the purpose of opening his succession till after an
absence of ten years ...

The Court of Appeals found that the City of Davao was able to prove the facts from which the
presumption arises. It said:

... 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 why he omitted to secure copies of her departure papers
from either the Department of Foreign Affairs, the Bureau of Immigration or the former Chinese Embassy,
and present them to the court to establish her existence as late as 1960.

For another, if it is also true that he met her in Hongkong in 1966, we are at a loss why he failed to
arrange for her return to the Philippines. We do not believe it would have been difficult to do so,
considering that she had been a resident of this country for more than 40 years and had been absent 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 even if this were impossible, oppositor Pizarro would not be
left without any other remedy. He could have arranged for the taking of her deposition in Hongkong by
means of letters rogatory under Sections 11 and 12, Rule 24 of the Revised Rules of Court, in the same
manner that, according to him, he arranged their meeting in the Crown Colony sometime in 1966.

The unexplained failure of oppositor Pizarro to take advantage of any of these remedies available to him
heavily tilts the scale against the credibility of his claim.

(pp. 30-31, Rollo.)

These factual findings of the Court of Appeals are binding on Us. They may not be disturbed in this
petition for review where only legal questions may be raised

(Sec. 2, Rule 45).

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 of merit.

SO ORDERED.

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 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 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.

Avanceña, C.J., Abad Santos, Hull, Vickers, Butte, Goddard, and Diaz, JJ., concur.

Villa-Real and Recto, JJ., concur in the result.

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:

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 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.

G.R. Nos. L-43697 and L-442200             March 31, 1938

In re Liquidation of the Mercantile Bank of China, 

GOPOCO GROCERY (GOPOCO), ET AL., claimants-appellants,
vs.
PACIFIC COAST BISCUIT CO., ET AL., oppositors-appellees.
A.M. Zarate for appellants Gopoco Grocery et al.

Laurel, Del Rosario and Sabido for appellant Tiong-Chui Gion.

Ross, Lawrence and Selph for appellees Pacific Coast Biscuit Co. et al.

Eusebio Orense and Carmelino G. Alvendia for appellees Chinese Grocers Asso. et al.

Marcelo Nubla for appellees Ang Cheng Lian et al.
DIAZ, J.:

On petition of the Bank Commissioner who alleged to have found, after an investigation, that the
Mercantile Bank of China could not continue operating as such without running the risk of suffering
losses and prejudice its depositors and customers; and that with the requisite approval of the
corresponding authorities, he had taken charge of all the assets thereof; the Court of First Instance of
Manila declared the said bank in liquidation; approved all the acts theretofore executed by the
commissioner; prohibited the officers and agents of the bank from interfering with said commissioner in
the possession of the assets thereof, its documents, deed, vouchers, books of account, papers,
memorandum, notes, bond, bonds and accounts, obligations or securities 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 fact done, of
the order containing all these provisions, for the two consecutive weeks in two news-papers of general
circulation in the City of Manila, at the expenses of the aforesaid bank. After these publications, and
within the period of ninety days, the following creditors, among others, presented their presented their
claims:

Tiong Chui Gion, Gopoco Grocery, Tan Locko, Woo & Lo & Co., Sy Guan Huat and La Bella Tondeña.

I. The claim of Tiong Chui Gion is for the sum of P10,285.27. He alleged that he deposited said sum in
the bank under liquidation on current account.

II. The claim of Gopoco Grocery (Gopoco) is for the sum of P4,932.48 plus P460. It described its claim
as follows:

Balance due on open account subject P4,927.9

to check 5

Interest on c/a 4,53

4,932.48

Surety deposit 460.00

III. The claim of Tan Locko is for the sum of P7,624.20, and he describes it in turn as follows:

Balance due on open account subject P7,610.4

to check L-759 4

Savings account No. 156 (foreign)

with Mercantile Bank of China L-1611
Amoy $15,000,00 Interest on said
Savings Account No. 156 8.22

Interest on checking a/c 10.54

7,624.20

IV. The claim of Woo & Lo & Co. is for the sum of P6,972.88 and is set out in its written claim appearing
in the record on appeal as follows:

V. The claim of Sy Guan Huat is for the sum of P6,232.88 and the described it as follows:

Balance due on open subject to P6,961.0

check L-845 1

Interest on checking a/c 11.37

6,972.83

Balance due on open account subject P6,224.3

to check L-718 4

Interest on checking a/c 8.54

 6,232.88

VI. The claim of La Bella Tondeña is for the sum of P1,912.79, also described as follows:

Balance due on open account subject P1910.5

to check 9

Interest on account 2.20

1,912.79

To better resolve not only these claims but also the many others which were presented against the bank,
the lower court, on July 15, 1932, appointed Fulgencio Borromeo as commissioner and referee to
receive the evidence which the interested parties may desire to present; and the commissioner and
referee thus named, after qualifying for the office and receiving the evidence presented to him, resolved
the aforesaid six claims by recommending that the same be considered as an ordinary credit only, and
not as a preferred credit as the interested parties wanted, because they were at the same time debtors
of the bank.

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 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 P633.76
but also in the sum of P664.77, the amount of a draft which he accepted, plus interest thereon and the
protest fees paid therefor; (b) the claimant Gopoco Grocery (Gopoco) had a current account in the bank
in the sum of P5,392.48, but it is indebted to it, in Turn, in the sum of $2,334.80, the amount of certain
drafts which it had accepted; (c) the claimant Tan Locko had a deposit of P7,624.20, but he owed
$1,378.90, 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 $3,464.84, the amount also of certain drafts accepted by
it; (e) the claimants Sy Guan Huat and Sy Kia had a deposit of P6,232.88, but they owed the sum of
$3,107.37, for two drafts accepted by them and already due; and (f) the claimant La Bella Tondeña had,
in turn, a deposit of 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.

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 except that of creditors and debtor, they being the creditors and the bank the debtor.

II.
What has so far been said resolves adversely the contention of the appellants, the question raised in the
first and second assigned errors Tiong Chui Gion in case G. R. No. 44200, and the appellants' second
and third assigned errors in case G. R. No. 43697.

II. As to the third and first errors attributed to lower court by Tiong Chui 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 P1,917.50 of La Bella Tondeña, plus their
corresponding interest up to 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 Grocery (Gopoco); P2,757.80 of Tan Locko; P6,929.68 of Woo &
Lo & Co.; P6,214.74 of Sy Huat; and P1,130.80 of La Bella Todeña; and we order that the set-offs in
question be made in the manner stated in this decision, that is, as of the date already indicated,
December 4, 1931. In all other respects, we affirm the aforesaid judgments, without special
pronouncement as to costs. So ordered.

Avanceña, C.J., Villa-Real, Abad Santos, Imperial and Horrilleno, JJ., concur.

G.R. No. 158230

REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS, Petitioner,

versus -
REGISTER OF DEEDS OF ROXAS CITY, ELIZABETH LEE, and PACITA YU-LEE, Respondents.

CARPIO, J.:
 The Case
 

This is a petition for review[1] of the Decision[2] 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 courts 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 States 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 Liongs 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.

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 Decision[7] dated 12 July 2002, reversing the trial courts
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 Resolution[8] 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 Liongs 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 Liongs estate. Hence, Lot No. 398 could not be transmitted by succession to
Lee Liongs surviving heirs and eventually to private respondents.

We do not subscribe to petitioners 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 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.

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 Philippines[10]
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.

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 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.

G.R. No. 192413

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

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 CA[4] as follows:

x x x Luz [R.] Bakunawa and her husband Manuel, now deceased (Spouses Bakunawa) are registered
owners of six (6) parcels of land covered by TCT Nos. 324985 and 324986 of the Quezon City Register
of Deeds, and TCT Nos. 103724, 98827, 98828 and 98829 of the Marikina Register of Deeds. These lots
were sequestered by the Presidential Commission on Good Government [(PCGG)].

Sometime in 1990, a certain Teresita Millan (Millan), through her representative, Jerry Montemayor,
offered to buy said lots for ₱6,724,085.71, with the promise that she will take care of clearing whatever
preliminary obstacles there may[]be to effect a completion of the sale. The Spouses Bakunawa gave to
Millan the Owners Copies of said TCTs and in turn, Millan made a down[]payment of ₱1,019,514.29 for
the intended purchase. However, for one reason or another, Millan was not able to clear said obstacles.
As a result, the Spouses Bakunawa rescinded the sale and offered to return to Millan her down[]payment
of ₱1,019,514.29. However, Millan refused to accept back the ₱1,019,514.29 down[]payment.
Consequently, the Spouses Bakunawa, through their company, the Hi-Tri Development Corporation (Hi-
Tri) took out on October 28, 1991, a Managers Check from RCBC-Ermita in the amount of
₱1,019,514.29, payable to Millans company Rosmil Realty and Development Corporation (Rosmil) c/o
Teresita Millan and used this as one of their basis for a complaint against Millan and Montemayor which
they filed with the Regional Trial Court of Quezon City, Branch 99, docketed as Civil Case No.
Q-91-10719 [in 1991], praying that:

1.      That the defendants Teresita Mil[l]an and Jerry Montemayor may be ordered to return to plaintiffs
spouses the Owners Copies of Transfer Certificates of Title Nos. 324985, 324986, 103724, 98827, 98828
and 98829;

2.          That the defendant Teresita Mil[l]an be correspondingly ordered to receive the amount of One
Million Nineteen Thousand Five Hundred Fourteen Pesos and Twenty Nine Centavos (₱1,019,514.29);

3.          That the defendants be ordered to pay to plaintiffs spouses moral damages in the amount of
₱2,000,000.00; and

4.      That the defendants be ordered to pay plaintiffs attorneys fees in the amount of ₱50,000.00.

Being part and parcel of said complaint, and consistent with their prayer in Civil Case No. Q-91-10719
that Teresita Mil[l]an be correspondingly ordered to receive the amount of One Million Nineteen
Thousand Five Hundred Fourteen Pesos and Twenty Nine [Centavos] (₱1,019,514.29)[], the Spouses
Bakunawa, upon advice of their counsel, retained custody of RCBC Managers Check No. ER 034469
and refrained from canceling or negotiating it.

All throughout the proceedings in Civil Case No. Q-91-10719, especially during negotiations for a
possible settlement of the case, Millan was informed that the Managers Check was available for her
withdrawal, she being the payee.

On January 31, 2003, during the pendency of the abovementioned case and without the knowledge of
[Hi-Tri and Spouses Bakunawa], x x x RCBC reported the ₱1,019,514.29-credit existing in favor of
Rosmil to the Bureau of Treasury as among its unclaimed balances as of January 31, 2003. Allegedly, a
copy of the Sworn Statement executed by Florentino N. Mendoza, Manager and Head of RCBCs Asset
Management, Disbursement & Sundry Department (AMDSD) was posted within the premises of RCBC-
Ermita.

On December 14, 2006, x x x Republic, through the [Office of the Solicitor General (OSG)], filed with the
RTC the action below for Escheat [(Civil Case No. 06-244)].

On April 30, 2008, [Spouses Bakunawa] settled amicably their dispute with Rosmil and Millan. Instead of
only the amount of ₱1,019,514.29, [Spouses Bakunawa] agreed to pay Rosmil and Millan the amount of
₱3,000,000.00, [which is] inclusive [of] the amount of []₱1,019,514.29. But during negotiations and
evidently prior to said settlement, [Manuel Bakunawa, through Hi-Tri] inquired from RCBC-Ermita the
availability of the ₱1,019,514.29 under RCBC Managers Check No. ER 034469. [Hi-Tri and Spouses
Bakunawa] were however dismayed when they were informed that the amount was already subject of
the escheat proceedings before the RTC.

On April 17, 2008, [Manuel Bakunawa, through Hi-Tri] wrote x x x RCBC, viz:

We understand that the deposit corresponding to the amount of Php 1,019,514.29 stated in the
Managers Check is currently the subject of escheat proceedings pending before Branch 150 of the
Makati Regional Trial Court.

Please note that it was our impression that the deposit would be taken from [Hi-Tris] RCBC bank
account once an order to debit is issued upon the payees presentation of the Managers Check. Since
the payee rejected the negotiated Managers Check, presentation of the Managers Check was never
made.

Consequently, the deposit that was supposed to be allocated for the payment of the Managers Check
was supposed to remain part of the Corporation[s] RCBC bank account, which, thereafter, continued to
be actively maintained and operated. For this reason, We hereby demand your confirmation that the
amount of Php 1,019,514.29 continues to form part of the funds in the Corporations RCBC bank
account, since pay-out of said amount was never ordered. We wish to point out that if there was any
attempt on the part of RCBC to consider the amount indicated in the Managers Check separate from the
Corporations bank account, RCBC would have issued a statement to that effect, and repeatedly
reminded the Corporation that the deposit would be considered dormant absent any fund movement.
Since the Corporation never received any statements of account from RCBC to that effect, and more
importantly, never received any single letter from RCBC noting the absence of fund movement and
advising the Corporation that the deposit would be treated as dormant.

On April 28, 2008, [Manuel Bakunawa] sent another letter to x x x RCBC reiterating their position as
above-quoted.

In a letter dated May 19, 2008, x x x RCBC replied and informed [Hi-Tri and Spouses Bakunawa] that:

The Banks Ermita BC informed Hi-Tri and/or its principals regarding the inclusion of Managers Check
No. ER034469 in the escheat proceedings docketed as Civil Case No. 06-244, as well as the status
thereof, between 28 January 2008 and 1 February 2008.

xxx xxx xxx

Contrary to what Hi-Tri hopes for, the funds covered by the Managers Check No. ER034469 does not
form part of the Banks own account. By simple operation of law, the funds covered by the managers
check in issue became a deposit/credit susceptible for inclusion in the escheat case initiated by the
OSG and/or Bureau of Treasury.

xxx xxx xxx

Granting arguendo that the Bank was duty-bound to make good the check, the Banks obligation to do
so prescribed as early as October 2001.

(Emphases, citations, and annotations were omitted.)

The RTC Ruling

The escheat proceedings before the Makati City RTC continued. On 19 May 2008, the trial court
rendered its assailed Decision declaring the deposits, credits, and unclaimed balances subject of Civil
Case No. 06-244 escheated to the Republic. Among those included in the order of forfeiture was the
amount of ₱1,019,514.29 held by RCBC as allocated funds intended for the payment of the Managers
Check issued in favor of Rosmil. The trial court ordered the deposit of the escheated balances with the
Treasurer and credited in favor of the Republic. Respondents claim that they were not able to participate
in the trial, as they were not informed of the ongoing escheat proceedings.

Consequently, respondents filed an Omnibus Motion dated 11 June 2008, seeking the partial
reconsideration of the RTC Decision insofar as it escheated the fund allocated for the payment of the
Managers Check. They asked that they be included as party-defendants or, in the alternative, allowed to
intervene in the case and their motion considered as an answer-in-intervention. Respondents argued
that they had meritorious grounds to ask reconsideration of the Decision or, alternatively, to seek
intervention in the case. They alleged that the deposit was subject of an ongoing dispute (Civil Case No.
Q-91-10719) between them and Rosmil since 1991, and that they were interested parties to that case.[5]

On 3 November 2008, the RTC issued an Order denying the motion of respondents. The trial court
explained that the Republic had proven compliance with the requirements of publication and notice,
which served as notice to all those who may be affected and prejudiced by the Complaint for Escheat.
The RTC also found that the motion failed to point out the findings and conclusions that were not
supported by the law or the evidence presented, as required by Rule 37 of the Rules of Court. Finally, it
ruled that the alternative prayer to intervene was filed out of time.

The CA Ruling

On 26 November 2009, the CA issued its assailed Decision reversing the 19 May 2008 Decision and 3
November 2008 Order of the RTC. According to the appellate court,[6] RCBC failed to prove that the
latter had communicated with the purchaser of the Managers Check (Hi-Tri and/or Spouses Bakunawa)
or the designated payee (Rosmil) immediately before the bank filed its Sworn Statement on the dormant
accounts held therein. The CA ruled that the banks failure to notify respondents deprived them of an
opportunity to intervene in the escheat proceedings and to present evidence to substantiate their claim,
in violation of their right to due process. Furthermore, the CA pronounced that the Makati City RTC Clerk
of Court failed to issue individual notices directed to all persons claiming interest in the unclaimed
balances, as well as to require them to appear after publication and show cause why the unclaimed
balances should not be deposited with the Treasurer of the Philippines. It explained that the jurisdictional
requirement of individual notice by personal service was distinct from the requirement of notice by
publication. Consequently, the CA held that the Decision and Order of the RTC were void for want of
jurisdiction.

Issue

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

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

II.                              Whether petitioner had the obligation to notify respondents immediately before it filed its
Sworn Statement with the Treasurer

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

Discussion

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

We quote the pertinent provision of Act No. 3936, as amended, on the rule on service of processes, to
wit:

Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he shall
commence an action or actions in the name of the People of the Republic of the 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.

At the time of issuing summons in the action above provided for, the clerk of court shall also issue a
notice signed by him, giving the title and number of said action, and referring to the complaint therein,
and directed to all persons, other than those named as defendants therein, claiming any interest in any
unclaimed balance mentioned in said complaint, and requiring them to appear within sixty days after the
publication or first publication, if there are several, of such summons, and show cause, if they have any,
why the unclaimed balances involved in said action should not be deposited with the Treasurer of the
Philippines as in this Act provided and notifying them that if they do not appear and show cause, the
Government of the Republic of the Philippines will apply to the court for the relief demanded in the
complaint. A copy of said notice shall be attached to, and published with the copy of, said summons
required to be published as above, and at the end of the copy of such notice so published, there shall be
a statement of the date of publication, or first publication, if there are several, of said summons and
notice. Any person interested may appear in said action and become a party thereto. Upon the
publication or the completion of the publication, if there are several, of the summons and notice, and the
service of the summons on the defendant banks, building and loan associations or trust corporations,
the court shall have full and complete jurisdiction in the Republic of the Philippines over the said
unclaimed balances and over the persons having or claiming any interest in the said unclaimed
balances, or any of them, and shall have full and complete jurisdiction to hear and determine the issues
herein, and render the appropriate judgment thereon. (Emphasis supplied.)

Hence, insofar as banks are concerned, service of processes is made by delivery of a copy of the
complaint and summons upon the president, cashier, or managing officer of the defendant bank.[8] On
the other hand, as to depositors or other claimants of the unclaimed balances, service is made by
publication of a copy of the summons in a newspaper of general circulation in the locality where the
institution is situated.[9] A notice about the forthcoming escheat proceedings must also be issued and
published, directing and requiring all persons who may claim any interest in the unclaimed balances to
appear before the court and show cause why the dormant accounts should not be deposited with the
Treasurer.

Accordingly, the CA committed reversible error when it ruled that the issuance of individual notices upon
respondents was a jurisdictional requirement, and that failure to effect personal service on them
rendered the Decision and the Order of the RTC void for want of jurisdiction. Escheat proceedings are
actions in rem,[10] whereby an action is brought against the thing itself instead of the person.[11] Thus, an
action may be instituted and carried to judgment without personal service upon the depositors or other
claimants.[12] Jurisdiction is secured by the power of the court over the res.[13] Consequently, a judgment
of escheat is conclusive upon persons notified by advertisement, as publication is considered a general
and constructive notice to all persons interested.[14]

Nevertheless, we find sufficient grounds to affirm the CA on the exclusion of the funds allocated for the
payment of the Managers Check in the escheat proceedings.

Escheat proceedings refer to the judicial process in which the state, by virtue of its sovereignty, steps in
and claims abandoned, left vacant, or unclaimed property, without there being an interested person
having a legal claim thereto.[15] In the case of dormant accounts, the state inquires into the status,
custody, and ownership of the unclaimed balance to determine whether the inactivity was brought about
by the fact of death or absence of or abandonment by the depositor.[16] If after the proceedings the
property remains without a lawful owner interested to claim it, the property shall be reverted to the state
to forestall an open invitation to self-service by the first comers.[17] However, if interested parties have
come forward and lain claim to the property, the courts shall determine whether the credit or deposit
should pass to the claimants or be forfeited in favor of the state.[18] We emphasize that escheat is not a
proceeding to penalize depositors for failing to deposit to or withdraw from their accounts. It is a
proceeding whereby the state compels the surrender to it of unclaimed deposit balances when there is
substantial ground for a belief that they have been abandoned, forgotten, or without an owner.[19]

Act No. 3936, as amended, outlines the proper procedure to be followed by banks and other similar
institutions in filing a sworn statement with the Treasurer concerning dormant accounts:

Sec. 2. Immediately after the taking effect of this Act and within the month of January of every odd year,
all banks, building and loan associations, and trust corporations shall forward to the Treasurer of the
Philippines a statement, under oath, of their respective managing officers, of all credits and deposits
held by them in favor of persons known to be dead, or who have not made further deposits or
withdrawals during the preceding ten years or more, arranged in alphabetical order according to the
names of creditors and depositors, and showing:

(a)        The names and last known place of residence or post office addresses of the persons in whose
favor such unclaimed balances stand;

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

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

(d)    The interest due on such unclaimed balance, if any, and the amount thereof.

A copy of the above sworn statement shall be posted in a conspicuous place in the premises of the
bank, building and loan association, or trust corporation concerned for at least sixty days from the date
of filing thereof: Provided, That immediately before filing the above sworn statement, the bank, building
and loan association, and trust corporation shall communicate with the person in whose favor the
unclaimed balance stands at his last known place of residence or post office address.

It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to time the
existence of unclaimed balances held by banks, building and loan associations, and trust corporations.
(Emphasis supplied.)

As seen in the afore-quoted provision, the law sets a detailed system for notifying depositors of
unclaimed balances. This notification is meant to inform them that their deposit could be escheated if
left unclaimed. Accordingly, before filing a sworn statement, banks and other similar institutions are
under obligation to communicate with owners of dormant accounts. The purpose of this initial notice is
for a bank to determine whether an inactive account has indeed been unclaimed, abandoned, forgotten,
or left without an owner. If the depositor simply does not wish to touch the funds in the meantime, but
still asserts ownership and dominion over the dormant account, then the bank is no longer obligated to
include the account in its sworn statement.[20] It is not the intent of the law to force depositors into
unnecessary litigation and defense of their rights, as the state is only interested in escheating balances
that have been abandoned and left without an owner.

In case the bank complies with the provisions of the law and the unclaimed balances are eventually
escheated to the Republic, the bank shall not thereafter be liable to any person for the same and any
action which may be brought by any person against in any bank xxx for unclaimed balances so
deposited xxx shall be defended by the Solicitor General without cost to such bank.[21] Otherwise,
should it fail to comply with the legally outlined procedure to the prejudice of the depositor, the bank
may not raise the defense provided under Section 5 of Act No. 3936, as amended.

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

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

An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank (drawee),[24]
requesting the latter to pay a person named therein (payee) or to the order of the payee or to the bearer,
a named sum of money.[25] The issuance of the check does not of itself operate as an assignment of any
part of the funds in the bank to the credit of the drawer.[26] Here, the bank becomes liable only after it
accepts or certifies the check.[27] After the check is accepted for payment, the bank would then debit the
amount to be paid to the holder of the check from the account of the depositor-drawer.

There are checks of a special type called managers or cashiers checks. These are bills of exchange
drawn by the banks manager or cashier, in the name of the bank, against the bank itself.[28] Typically, a
managers or a cashiers check is procured from the bank by allocating a particular amount of funds to be
debited from the depositors account or by directly paying or depositing to the bank the value of the
check to be drawn. Since the bank issues the check in its name, with itself as the drawee, the check is
deemed accepted in advance.[29] Ordinarily, the check becomes the primary obligation of the issuing
bank and constitutes its written promise to pay upon demand.[30]

Nevertheless, the mere issuance of a managers check does not ipso facto work as an automatic transfer
of funds to the account of the payee. In case the procurer of the managers or cashiers check retains
custody of the instrument, does not tender it to the intended payee, or fails to make an effective delivery,
we find the following provision on undelivered instruments under the Negotiable Instruments Law
applicable:[31]

Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto.
As between immediate parties and as regards a remote party other than a holder in due course, the
delivery, in order to be effectual, must be made either by or under the authority of the party
making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be
shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the
property in the instrument. But where the instrument is in the hands of a holder in due course, a valid
delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed.
And where the instrument is no longer in the possession of a party whose signature appears thereon, a
valid and intentional delivery by him is presumed until the contrary is proved. (Emphasis supplied.)

Petitioner acknowledges that the Managers Check was procured by respondents, and that the amount
to be paid for the check would be sourced from the deposit account of Hi-Tri.[32] When Rosmil did not
accept the Managers Check offered by respondents, the latter retained custody of the instrument
instead of cancelling it. As the Managers Check neither went to the hands of Rosmil nor was it further
negotiated to other persons, the instrument remained undelivered. Petitioner does not dispute the fact
that respondents retained custody of the instrument.[33]

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

After a careful review of the RTC records, we find that it is no longer necessary to remand the case for
hearing to determine whether the claim of respondents was valid. There was no contention that they
were the procurers of the Managers Check. It is undisputed that there was no effective delivery of the
check, rendering the instrument incomplete. In addition, we have already settled that respondents
retained ownership of the funds. As it is obvious from their foregoing actions that they have not
abandoned their claim over the fund, we rule that the allocated deposit, subject of the Managers Check,
should be excluded from the escheat proceedings. We reiterate our pronouncement that the objective of
escheat proceedings is state forfeiture of unclaimed balances. We further note that there is nothing in the
records that would show that the OSG appealed the assailed CA judgments. We take this failure to
appeal as an indication of disinterest in pursuing the escheat proceedings in favor of the Republic.

WHEREFORE the Petition is DENIED. The 26 November 2009 Decision and 27 May 2010 Resolution of
the Court of Appeals in CA-G.R. SP No. 107261 are hereby AFFIRMED.

SO ORDERED.