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Republic v First National City Bank of New York (FNCB)

1961
Bautista-Angelo, J.
DIGEST BY Cocoy Licaros
Note: Im not sure if this is the correct case since I cant seem to score a direct hit on either the case title or the scra
citation via internet, but this case seems to discuss our topic albeit indirectly. For reference, the Finals reviewer says
the case after Clark v Sellner is Republic Bank v CA and contains a concise recit-friendly digest of the same.
TOPIC and Provisions: Liability of Parties Status of drawee prior to acceptance or payment; effect of stop order
Act No. 3936. Act requiring banks to transfer unclaimed balances held by them to the insular treasury
Section 1 - "Unclaimed balances" within the meaning of this Act shall include credits or deposits of money,
bullion, security or other evidence of indebtedness of any kind, and interest thereon with banks, as
hereinafter defined, in favor of any person unheard from for a period of ten years or more. Such unclaimed
balances, together with the increase and proceeds thereof, shall be deposited with the Insular Treasure to
the credit of the Government of the Philippine Islands to be as the Philippine Legislature may direct.
Facts:
The Republic of the Philippines filed a complaint for escheat (reversion of property to the state) of certain
unclaimed bank deposit balances, under Act No 3936, against several banks (FNCB of New York one of them).
Republic prayed that the credits and deposits belonging to persons known to be dead or who have not made
further deposits or withdrawals during the past 10 years, be escheated to the treasurer of the Philippines.
FNCB sent a report enumerating the list of such deposits among its accounts, but inadvertently included several
accounts (cashiers and managers checks, as well as demand drafts) that were not credits or deposits within the
contemplation of Act no 3936. Because of this, they prayed that such accounts be excluded from the escheat
claim.
TC rendered judgment in favor of the Republic by declaring that the accounts sought to be excluded by FNCB
fell within the purview of Act No 3936. They reversed their judgment (now excluding demand drafts from the
escheat order) on MR by FNCB.
Issue: How can we distinguish a demand draft from other bills of exchange (ie. Cashiers or managers
checks) as to place it beyond the ambit of Act No. 3936?
The liability of parties on unaccepted bills of exchange was discussed in making the distinction
Held: A demand draft is very different from a cashier's or manager's check, contrary to appellant's pretense, for it
has been held that the latter is a primary obligation of the bank which issues it and constitutes its written promise
to pay upon demand. A demand draft is not therefore of the same category as a cashier's check which should come
within the purview of the law.
Dispositive: WHEREFORE, the decision of the trial court is hereby modified. No costs.
Ratio:
The court began by likening a demand draft to a bill of exchange payable on demand, and specifying the liabilities
of parties to the latter:
A bill of exchangedoes not operate as an assignment of funds in the hands of the drawee
who is not liable on the instrument until he accepts it. This is the clear import of Section 127.
In other words, in order that a drawee may be liable on the draft and then become
obligated to the payee it is necessary that he first accepts the same. In fact, our law requires
that with regard to drafts or bills of exchange there is need that they be presented either for
acceptance or for payment within a reasonable time after their issuance or after their last
negotiation thereof as the case may be. Failure to make such presentment will discharge the
drawer from liability or to the extent of the loss caused by the delay
As to demand drafts:

Since it is admitted that the demand drafts herein involved have not been presented either
for acceptance or for payment, the inevitable consequence is that the appellee bank never had
any chance of accepting or rejecting them. Verily, appellee bank never became a debtor of
the payee concerned and as such the aforesaid drafts cannot be considered as credits
subject to escheat within the meaning of the law.
Finally, as to cashiers and managers checks:
But a demand draft is very different from a cashier's or manager's cheek, contrary to
appellant's pretense, for it has been held that the latter is a primary obligation of the bank
which issues it and constitutes its written promise to pay upon demand. (In Re Bank of the US)