CHAPTER 9: Unclaimed Balances and Trust Receipts  Whenever the Solicitor General is informed

of such unclaimed balances, he shall

I. Unclaimed Balances
commence an action or actions in the name
of the People of the Republic of the
A. Definition
Philippines in the CFI of the province or city
 Includes credits or deposits of money,
where the bank, building and loan
bullion, security or other evidence of
association or trust corporation is located, in
indebtedness of any kind, and interest
which shall be joined as parties the bank,
thereon with banks, buildings and loan
building and loan association or trust
associations, and trust corporations, in favor
corporation and all such creditors or
of any person known to be dead or who has
depositors
not made further deposits or withdrawals
o All or any of such creditors or
during the preceding ten years or more
depositors or banks, building and
 Such unclaimed balances, together with the
loan associations or trust
increase and proceeds thereof shall be
corporations may be included in one
deposited with Treasurer of the Philippines
action.
to the credit of the Government of the
 Service of Process inn such action or actions
Republic of the Philippines to be used as the
shall be made by delivery of a copy of the
national assembly may direct
complaint and summons to the president,
cashier or managing officer of each
B. Procedures
defendant bank, building and loan
 Within the month of January (every odd
association or trust corporation and by
year), all banks, building and loan
publication of a copy of such summons in a
associations, and trust corporations shall
newspaper of general circulation, either in
forward to the Treasurer of the Philippines a
English or in Filipino, or in a local dialect,
statement, under oath; of their respective
published in the locality where the bank,
managing officers, of all credits and deposits
building and loan association or trust
held by them in favor of persons known to be
corporation is situated, if there be any, and in
dead or who have not made further deposits
any case there is none, in the City of Manila,
or withdrawals during the preceding ten
at such time as the court may order.
years or more.
 At the time of issuing summons in the action,
 A copy of the above sworn statement shall be
the clerk of court shall also issue a notice
posted in a conspicuous place in the premises
o Signed by him, giving the title and the
of the bank, building and loan association, or
number of said action, and referring
trust corporation concerned for at least 60
to the complaint therein
days from the date of filing thereof.
o Directed to all persons, other than
 Immediately before filing the above, sworn those named as defendants therein
statement, the bank, building and loan claiming any interest in any
association, or trust corporation shall unclaimed balance mentioned in said
communicate with the person in whose favor complaint
the unclaimed balance stands at his last o Requiring them to appear within 60
known place of residence or post office days after the publication, if there
address. are several of such summons.
o It is the duty of the treasurer of the o Show cause if they have any, why the
Philippines to inform the Solicitor unclaimed balances involved in said
General from time to time the action should not be deposited with
existence of unclaimed balances held the treasurer of the Philippines.
by banks, buildings and loan o Notifying them that if they do not
associations, and trust corporations. 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 defendants banks, buildings
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 issued herein, and
render the appropriate judgment thereon.
 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, 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 fortwith 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.
C. Penalties
 If the president, cashier or managing officer
of the bank, building and loan association or
trust corporation NEGLECTS or REFUSES to
make and file the sworn statement required
by this action, they shall pay to the
government the sum of 500 per month or
fraction thereof during which such default
shall continue.
D. Immunity from Suit
 Any B,B and LA or TC which shall make any
deposit with the treasurer of the Philippines
shall not thereafter be liable to any person
for the same and any action which may be
brought by any person against any B,B and LA
or TC for unclaimed balances so deposited
with the Treasurer of the Philippines
 It shall be defended by the Solicitor General
without cost to such B,B and LA or TC
E. Disclosure of Service and Maintenance Fees on
Dormant Accounts
 Banks may impose service or maintenance
fees on dormant or inactive savings and
demand deposit accounts PROVIDED that
before such charges or fees may be imposed,
the rate of service charges or maintenance
fee, the period of dormancy and the
minimum balance of deposits shall be
properly disclosed among the terms and
conditions of the deposit.
F. Reclassification
 All unclaimed balances which include credits
or deposits of money, bullion, securities or
other evidence of indebtedness of any kind,
and interest thereon already reported to the
Treasurer of the Philippines in accordance
with the unclaimed balances act (Act 3936)
shall be transferred/reclassified from the
deposit liability/other credit accounts to the
liability account, “Due to the treasurer of the
Philippines” until they are deposited with or
turned over to the treasurer of the
Philippines upon order of the court that the
same have been escheated in favor of the
government of the Republic of the
Philippines and as such, the unclaimed
deposit liabilities shall no longer be covered
by reserves required of deposit liabilities.
G. Escheats under the Rules of Court
Rule 91 of Rules of Court Secs. 1-5
Section 1. When and by whom petition filed. — When a
person dies intestate, seized of real property in the
Philippines, leaving no heir or person by law entitled to
the same, the Solicitor General or his representative in
behalf of the Republic of the Philippines, may file a
petition in the Court of First Instance of the province
where the deceased last resided or in which he had
estate, if he resided out of the Philippines, setting forth
the facts, and praying that the estate of the deceased be
declared escheated.
Section 2. Order for hearing. — If the petition is sufficient
in form and substance, the court, by an order reciting the
purpose of the petition, shall fix a date and place for the
hearing thereof, which date shall be not more than six (6)
months after the entry of the order, and shall direct that
a copy of the order be published before the hearing at
least once a week for six (6) successive weeks in some
newspaper of general circulation published in the
province, as the court shall be deem best.
Section 3. Hearing and judgment. — Upon satisfactory
proof in open court on the date fixed in the order that
such order has been published as directed and that the
person died intestate, seized of real or personal property
in the Philippines, leaving no heir or person entitled to the
same, and no sufficient cause being shown to the
contrary, the court shall adjudge that the estate of the
estate of the deceased in the Philippines, after the
payment of just debts and charges, shall escheat; and
shall, pursuant to law, assign the personal estate to the
municipality or city where he last resided in the
Philippines, and the real estate to the municipalities or
cities, respectively, in which the same is situated. If the
deceased never resided in the Philippines, the whole
estate may be assigned to the respective municipalities or
cities where the same is located. Shall estate shall be for
the benefit of public schools, and public charitable
institutions and centers in said municipalities or cities.
The court, at the instance of an interested party, or on its
own motion, may order the establishment of a
permanent trust, so that the only income from the
property shall be used.
Section 4. When and by whom claim to estate filed. — If
a devisee, legatee, heir, widow, widower, or other person
entitled to such estate appears and files a claim thereto
with the court 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
reasonable charges for the care of the estate; but a claim
not made within the said time shall be forever barred.
Section 5. Other actions for escheat. — Until otherwise
provided by law, actions reversion or escheat of
properties alienated in violation of the Constitution or of
any statute shall be governed by this rule, except that the
action shall be instituted in the province where the land
lies in whole or in part.
H. State as an heir of decedent
 The state’s right over the property of the
decedent is anchored on the following civil
code provisions stating that the State shall
inherit the decedent’s estate in default of
persons entitled to succeed:
Article 1011. In default of persons entitled to succeed in
accordance with the provisions of the preceding Sections,
the State shall inherit the whole estate. (956a)
Article 1012. In order that the State may take possession
of the property mentioned in the preceding article, the
pertinent provisions of the Rules of Court must be
observed. (958a)
Article 1013. After the payment of debts and charges, the
personal property shall be assigned to the municipality or
city where the deceased last resided in the Philippines,
and the real estate to the municipalities or cities,
respectively, in which the same is situated.
If the deceased never resided in the Philippines, the
whole estate shall be assigned to the respective
municipalities or cities where the same is located.
Such estate shall be for the benefit of public schools, and
public charitable institutions and centers, in such
municipalities or cities. The court shall distribute the
estate as the respective needs of each beneficiary may
warrant.
The court, at the instance of an interested party, or on its
own motion, may order the establishment of a
permanent trust, so that only the income from the
property shall be used. (956a)
Article 1014. If a person legally entitled to the estate of
the deceased appears and files a claim thereto with the
court within five years from the date the property was
delivered to the State, such person shall be entitled to the
possession of the same, or if sold, the municipality or city
shall be accountable to him for such part of the proceeds
as may not have been lawfully spent. (n)
II. Trust Receipts
A. Policy
It is the policy of the state:
 To encourage and promote the use of trust
receipts as an additional and convenient aid
to commerce and trade
 To provide for the regulation of trust receipts
transactions in order to assure the protection
of the rights and enforcement of obligations
of the parties involved therein
 To declare the misuse and/or
misappropriation of goods or proceeds
realized from the sale of goods, documents
or instruments released under trust receipts
as a criminal offense punishable under Article
315 of the RPC (Estafa)
B. Definition of Terms
 DOCUMENT means written or printed
evidence of title to goods
 ENTRUSTEE is the person having or taking
possession of goods, documents, or
instruments under a trust receipt
transaction, and any successor in interest of
such persons for the purpose or purposes
specified in the trust receipt agreement
 ENTRUSTER refers to the persons holding
title over the goods, documents, or
instruments subject of a trust receipt
transaction and any successor in interest of
such person
 INSTRUMENT is any negotiable instrument as
defined in the Negotiable Instrument Law;
any certificate of stock, or bond or debenture
for the payment of money issued by a public
or private corporation or any certificate of
deposit, participation certificate or receipt,
any credit or investment instrument of a sort
marketed in the ordinary course of business
or finance, whereby the entrustee after the
issuance of the trust receipt, appears by
virtue of possession and the face of the
instrument to be the owner. “Instrument”
shall not include a document as defined
above
 PURCHASE is taking by sale, conditional sale,
lease, mortgage, or pledge, legal or equitable
 PURCHASER means any person taking by
purchase
 SECURITY INTEREST means a property
interest in goods, documents or instruments
to secure performance off some obligations
of the entrustee or of some third persons to
the entruster and includes title, whether or
not expressed to be absolute, whenever such
title is in substance taken or retained for
security only.
 PERSON as the case may be, an individual,
trustee, receiver, or other fiduciary,
partnership, corporation, business trust, or
other association and two more persons
having a joint or common interest
 TRUST RECEIPT is a written or printed
document signed by the entrustee in favor of
the entruster containing terms and
conditions substantially complying with the
provisions of the Trust Receipts Law
discussed blow. No further formality of the
execution or authentication shall be
necessary to the validity of a trust receipt
 VALUE means any consideration sufficient to
support a simple contract.
C. Trust Receipt Transaction
 Any transaction by and between a person as
the entruster, and another person as
entrustee, whereby the entruster, who owns
or holds absolute title or security interests
over certain specified goods, documents, or
instruments, releases the same to the
possession of the entrustee upon the latter’s
execution and delivery to the entruster of a
signed document called a “TRUST RECEIPT”
wherein the entrustee binds himself to hold
the designated goods, documents or
instruments in trust for the entruster and to
sell or otherwise dispose of the goods,
documents or instruments with the
obligation to turn over to the entruster the
proceeds thereof to the extent of the amount
owing to the entruster or as appears in the
trust receipt or the goods, documents or
 instruments themselves if they are unsold or
not otherwise disposed of in accordance with
the terms and conditions specified in the
trust receipt, or for other purposes
substantially equivalent to any of the
following:
o In the case of goods or documents,
a. To sell the goods or procure their
sale
b. To manufacture or process the
goods with the purpose ultimate sale
PROVIDED that in case of goods
delivered under trust receipt for the
purpose of manufacturing or
processing before its ultimate sale,
the entruster shall retain its title over
the goods whether in its original or
processed form until the entrustee
has complied fully with his obligation
under the trust receipt
c. To load, unload, ship or transship or
otherwise deal with them in a
manner preliminary or necessary to
their sale; or
o In case of instruments
a. To sell or procure their sale or
exchange
b. To deliver them to a principal
c. To effect the consummation of some
transactions involving delivery to a
depository or register
d. To effect their presentation,
collection or renewal
*The sale of goods, documents or instruments by a
person in the business of selling goods, documents or
instruments for profit who, at the outset of the
transaction, documents or instrument for profit who at
the outset of the transaction, has, as against the buyer,
general property rights in such goods, documents, or
instruments or who sells the same to the buyer on credit,
retaining title or other interest as security for the
payment of the purchase price, does not constitute a
trust receipt transaction and is outside the purview and
coverage of the trust receipt law.
There are two possible situations in a trust receipt
transaction:
1. Covered by the provision which refers to
italicized money received under the obligation
involving the duty to deliver it (entregarla) to the
owner of the merchandise.
2. Covered by the provision which refers to
merchandise received under the application to
“return” it (devolvera) to the owner.
Under pertinent laws the trust receipt is a separate and
independent security transaction intended to aid in
financing importers whereby the imported goods are held
as security by the lending institution for the loan
obligation.
It is a document in which is expressed a security
transaction where the lender, having no prior title to the
goods on which the lien is to e constituted and not having
possession over the same since possession thereof
remains in the borrower, lends his money to the borrower
on security of the goods which the borrower is privileged
to sell, clear of the lien, with an agreement to pay all or
part of the proceeds of the sale to the lender.
It is a security agreement pursuant to which a bank
acquires “security interest” in the goods. It secures a debt
and there can be no such thing as security interest that
secures no obligation.
D. Form of Trust Receipts; Contents
 A TR need not be in any particular form, but
every such TR must substantially contain:
o Description of the goods, documents, or
instruments subject of the TR
o The total invoice value of the goods and
the amount of the draft to be paid by the
entrustee
o An undertaking or a commitment of the
entrustee
 To hold in trust for the entruster
the goods, documents or
instruments therein described.
 To dispose of them in the
manner provided for in the TR
 To turn over the proceeds of the
sale of the goods, documents, or
instruments to the entruster to
the extent of the amount owing
to the entruster or as appears in
the TR or to return the goods,
documents or instruments in the
 event of their non-sale within
the period specified therein.
 The TR may contain other T&C agreed upon
by the parties in addition to those
hereinabove enumerated PROVIDED that
such T&C shall not be contrary to the Trust
Receipts Law, any existing laws, public policy
or morals, public order or good custom.
E. Currency in which a Trust Receipt may be
Denominated
 A TR may be denominated in the Philippine
currency or any foreign currency acceptable
and eligible as part of international reserves
of the Philippines, the provisions of existing
law, executive orders, rules and regulations
to the contrary notwithstanding: PROVIDED
however, that in the case of TR denominated
in foreign currency, payment shall be made
in its equivalent in Philippine currency
computed at the prevailing exchange rate on
the date the proceeds of sale of goods,
documents or instruments held in trust by
the entrustee are turned over to the
entrustor or on such other date as may be
stipulated in the TR or other agreements
executed between the entruster and the
entrustee.
F. Rights of the Entruster
 Entitled to the PROCEEDS OF THE SALE OF
THE GOODS, DOCUMENTS, OR
INSTRUMENTS released under a TR to the
entrustee to the extent of the amount owing
to the entruster or as appears in the TR, or to
the return of the G, D, or I in case non-sale
and to the enforcement of all other rights
conferred on him in TR provided such are not
contrary to law.
 MAY CANCEL THE TRUST and TAKE
POSSESSION of the G,D, or I subject of the
trust or of the proceeds realized therefrom at
any time upon default or failure of the
entrustee to comply with any of the
conditions of the trust receipt or any other
agreement between the ER and EE, and the
ER in possession of the G, D or I, may on or
after default, give notice to the entrustee of
the intention to sell, and may, not less than 5
days after serving or sending of such notice,
sell the G, D, or I at public or private sale, and
the ER may at a public sale may, become a
purchaser.
 The proceeds of any such sale whether public
or private, shall be applied:
o To the payment of the expenses thereof
o To the payment of the expenses of re-
taking, keeping and storing the G, D or I.
o To the satisfaction of the EE
indebtedness to the ER
 The EE shall receive any surplus but shall be
liable to the entruster for any deficiency.
Notice of sale shall be deemed sufficiently
given if in writing, and either personally
served on the EE or sent by post-paid
ordinary mail to the EE last known business
address
TR “in a certain manner, … partake of the nature of a
conditional sale as provided by the chattel mortgage law,
that is, the importer becomes absolute owner of the
important merchandise as soon as he has paid its price.
The ownership of the merchandise continues to be vested
in the owner thereof or in the person who has advanced
payment, until he has been paid in full, or if the
merchandise has already been sold, the proceeds of the
sale should be turned over to him by the importer or his
representative or successor-in-interest
*ER has discretion to pursue action it deems best to make
sure of compliance
G. Entruster not responsible on Sale by Entrustee
 The ER holding a security interest shall not
merely by the virtue of such interest or
having given the EE liberty of sale or other
disposition of the G, D or I, under the terms
of the TR transaction be responsible as
principal or as vendor under any sale or
contract to sale made by the EE
H. Obligations of the Entrustee
Entrustee shall:
 HOLD THE G, D, or I in trust for the ER and
shall dispose of them strictly in accordance
with the T&C of the TR
 RECEIVE THE PROCEEDS IN TRUST for the ER
turnover the same to the ER to the extent of
 the amount owing to the ER or as appears on
the TR
 INSURE THE GOODS for their total value
against loss from FIRE, THEFT, PILFERAGE or
other CASUALTIES
 KEEP GOODS OR PROCEEDS thereof whether
in money or whatever form, separate and
capable of identification as property of the ER
 RETURN THE G, D, or I in the event of non-
sale or upon demand of the ER
 OBSERVE ALL OTHER T&C of the TR not
contrary to the provisions of the law.
I. Liability of Entrustee for Loss
 Risk of Loss borne by EE
 Loss of G, D, or I which are the subject of a TR
pending their disposition, irrespective of
whether or not it is due to the fault or
negligence of the EE, SHALL NOT EXTINGUISH
his obligation to the ER for the value thereof.
J. Rights of Purchaser for Value in Good Faith
 Any purchaser of goods from an EE with right
to sell, or of D or I through their customary
form of transfer, who buys the G, D or I for
value and in GF from the EE, acquires said G,
D or I free from the ER’s security interest.
K. Validity of Entruster’s Security Interest as Against
Creditor
 The ER’s security interest in G, D, or I
pursuant to the written terms of TR shall be
valid as against all creditors of the EE for the
duration of the TR agreement
L. Violation of Trust Receipts Law
 The TR Law is violated whenever the EE fails
to:
o Turnover the proceeds of the sale of
the goods or
o Return the goods covered by the TR
if the goods are not sold
 The mere failure to account or return gives
rise to the crime which is malum prohibitum.
o There is no requirement to prove
intent to defraud
o What the law punishes is the
dishonesty and abuse of confidence
in the handling of money or goods to
the prejudice of another whether the
latter is the owner.
 The Malum Prohibitum nature of the offense
notwithstanding, the intent to misuse or
misappropriate the goods or their proceeds
shall be proved.
 It is a well settled doctrine that failure to
account, upon demand, for funds or
properties held in trust is evidence of
conversion or misappropriation
 Under the law mere failure by the EE to
account for the goods received constitutes
estafa.
 The TR law punishes dishonesty and abuse of
confidence in the handling of money or
goods to the prejudice of public order.
 The mere failure to deliver the proceeds of
the sale or the goods if not sold constitutes a
criminal offense that causes prejudice not
only to the creditor but also to the public
interest.
M. Application
 In Allied v. Ordonez, it was held that the TR
law applies to items
o Destined for sale
o Processed as a component of a
product ultimately sold
o Used to repair and maintain
equipment in business
N. Penalty
 Failure of an EE to turn over the proceeds of
the sale of the Go, D, or I covered by a TR to
the extent of the amount owing to the ER or
as appears in the TR or to return said G, D, or
I if they were not sold or disposed of in
accordance with the terms of the TR shall
constituted the crime of estafa punishable
under the provisions of Article 315 (1b) of the
Revised Penal Code
 If the violation or the offense is committed by
a corporation, partnership, association or
other juridical entities the penalty shall be
imposed upon the Directors, Officers,
Employees or other officials or persons
therein responsible for the offense, without
prejudice to the civil liabilities arising from
the criminal offense.
o If the violation or offense is
committed by a C, P, A, or OJE, the
penalty shall be imposed upon the D,
O, E, or other officials or persons
responsible for the offense.
o Penalty referred to is imprisonment,
the duration of which would depend
on the amount of the fraud as
provided for in Article 315 of the RPC