04 RCBC vs. HI-TRI DEVELOPMENT CORP.
 The Spouses Bakunawa gave Millan the
G.R. NO. 192413 | June 13, 2012 | PONENTE: J.
SERENO
DIGESTED BY: MINA, ADRIAN PAOLO R.
TOPIC: Complete but Undelivered Instruments
DOCTRINE/S:
 The mere issuance of a manager’s check
does not ipso facto work as an automatic
transfer of funds to the account of the payee.
In case the procurer of the manager’s or
cashier’s check retains custody of the
instrument, does not tender it to the intended
payee, or fails to make an effective delivery,
the rule on undelivered instruments under
the Negotiable Instruments Law is
applicable.
EMERGENCY RECIT:
Respondents spouses Bakunawa entered into a
contract of sale for their 6 properties to Millan. As
downpayment, Millan wrote a check for the amount of
P1.019M. The sale did not materialize. Respondents
returned the downpayment received by tendering
Millan a Manager’s Check worth P1.019M, funded by
their corporation Hi-Tri from their RCBC account,
which was not accepted by Millan. A case between
the two ensued. The parties reached an amicable
settlement. When the respondents inquired to RCBC
about their P1.019M, the bank notified them that the
fund is already a subject of an escheat proceeding,
being a dormant account for at least 10 years. The
spouses filed a motion for partial reconsideration with
the RTC but was denied. CA reversed and ruled that
the spouses should have been notified. On appeal to
SC, the Court ruled that the mere issuance of a
manager’s check does not ipso facto work as an
automatic transfer of funds to the account of the
payee. In case the procurer of the manager’s or
cashier’s check retains custody of the instrument,
does not tender it to the intended payee, or fails to
make an effective delivery, the rule on undelivered
instruments under the Negotiable Instruments Law is
applicable. Since there was no delivery, presentment
of the check to the bank for payment did not occur. An
order to debit the account of respondents was never
made. In fact, petitioner confirms that the Manager’s
Check was never negotiated or presented for
payment to its Ermita Branch, and that the allocated
fund is still held by the bank. As a result, the assigned
fund is deemed to remain part of the account of Hi-Tri,
which procured the Manager’s Check.
FACTS:
 Spouses Luz and Manuel Bakunawa
(owners of Hi-Tri Corp), entered into a sale
transaction of 6 parcels of land with Teresita
Millan.
owner’s copy of the TCT of the properties
and in turn, Millan gave the spouses a check
amounting to P1.019M, representing the
downpayment.
 The sale did not push through; spouses
Bakunawa offered to return the
downpayment by issuing a Manager’s Check
from petitioner RCBC. The fund was sourced
from their Hi-Tri Corp.
 They used this to file a complaint with the
RTC against Teresita Millan in 1991.
 On January 31, 2003, during the pendency
of the case between the spouses and Millan,
without the knowledge of Hi-Tri and the
spouses Bakunawa, RCBC reported the
P1.019M credit existing in favor of Millan to
the Bureau of Treasury as among its
unclaimed balances.
 On December 14, 2006, the Republic, thru
the Office of the Solicitor General (OSG) filed
with the RTC an action for escheat against
the said unclaimed balance.
 On April 30, 2008, the spouses Bakunawa
and Millan settled amicably. During the
negotiations, the spouses Bakunawa
discovered that the amount was already the
subject of escheat proceedings.
 Manuel Bakunawa wrote a demand letter to
RCBC, but to no avail. Another letter was
sent, reiterating their demand, but RCBC
replied that the said amount does not form
part of Hi-Tri’s account, and assuming
arguendo that the bank was duty bound to
make good the check, it’s obligation to do so
prescribed as early as 2001.
 The RTC (escheat proceeding) held that the
amount be deposited in the Treasury and
credited in favor of the Republic.
 The spouses Bakunawa filed an Omnibus
Motion seeking partial reconsideration
insofar as their claim is concerned. This was
denied.
 On appeal to the CA, the CA reversed the
decision, on the ground that the bank failed
to prove that it had communicated with the
spouses Bakunawa or Hi-Tri regarding the
Manager’s Check before the escheat was
initiated.
 RCBC argues that since the funds
represented by the Manager’s Check were
deemed transferred to the credit of the payee
upon issuance of the check, the proper party
entitled to the notices was the payee—
Millan—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 Millan. Petitioner avers that it was not
under any obligation to record the address of
the payee of a Manager’s Check.

ISSUE/S:
Whether the funds allocated for the Manager’s Check
may be escheated in favor of the Republic.
HELD:
NO.
An ordinary check refers to a bill of exchange drawn
by a depositor (drawer) on a bank (drawee),
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. 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. Here, the bank becomes liable only after it
accepts or certifies the check. 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 manager’s or cashier’s checks. These are bills
of exchange drawn by the bank’s manager or cashier,
in the name of the bank, against the bank itself.
Typically, a manager’s or a cashier’s check is
procured from the bank by allocating a particular
amount of funds to be debited from the depositor’s
account or by directly paying or depositing to the bank
the value of the check to be drawn. Since the bank
issues the check in its name, with itself as the drawee,
the check is deemed accepted in advance. Ordinarily,
the check becomes the primary obligation of the
issuing bank and constitutes its written promise to pay
upon demand.
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.”
Petitioner acknowledges that the Manager’s Check
was procured by respondents, and that the amount to
be paid for the check would be sourced from the
deposit account of Hi-Tri. When Millan did not accept
the Manager’s Check offered by respondents, the
latter retained custody of the instrument instead of
cancelling it. As the Manager’s Check neither went to
the hands of Millan 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.
Since there was no delivery, presentment of the check
to the bank for payment did not occur. An order to
debit the account of respondents was never made. In
fact, petitioner confirms that the Manager’s Check
was never negotiated or presented for payment to its
Ermita Branch, and that the allocated fund is still held
by the bank. As a result, the assigned fund is deemed
to remain part of the account of Hi-Tri, which procured
the Manager’s Check. The doctrine that the deposit
represented by a manager’s check automatically
passes to the payee is inapplicable, because the
instrument—although accepted in advance—remains
undelivered. Hence, respondents should have been
informed that the deposit had been left inactive for
more than 10 years, and that it may be subjected to
escheat proceedings if left unclaimed.
Petition is DENIED.

Nevertheless, the mere issuance of a manager’s

check does not ipso facto work as an automatic
transfer of funds to the account of the payee. In case
the procurer of the manager’s or cashier’s check
retains custody of the instrument, does not tender it to
the intended payee, or fails to make an effective
delivery, we find the following provision on
undelivered instruments under the Negotiable
Instruments Law applicable:

“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