BPI v.

IAC & Zshornack Facts:

Cortes, J.

Zshornack and wife, Shirley Gorospe, maintained with Comtrust QC a dollar SA and peso CA. On October 27, 1975, an application for a dollar draft was accomplished by Virgilio Garcia, Asst. Branch Mgr, payable to LEovigilda Dizon for USD 1,000. Garcia indicated that the amount was to be charged to dollar SA of the Zshornacks; and the commission, DST and other fees totaling P17.46 be charged to CA of the Zshornacks. The name of the purchaser of the dollar draft was not indicated. On same date, Comtrust under the signature of Garcia, issued a check to Dizon for USD 1,000. When Zshornack noticed the withdrawal, he demanded an explanation. The bank explained that the peso equivalent of the withdrawal (PHP 8,450) was given to Ernesto Zshornack (brother) when he encashed a Manilabank cashiers check with Comtrust. Zshornack alleged that in December 1975, he entrusted to Comtrust, through Garcia, USD 3,000 cash (or greenbacks) for safekeeping. The agreement was in a document wherein Garcia acknowledged the receipt of said amount for safekeeping. Zshornacks alleged that despite demand in May 1976, Comtrust refused to return the money. June 1976 - Rizaldy Zshornack filed a complaint against Commercial Bank & Trust Co. (COMTRUST). CFI Caloocan ruled for Zshornack. IAC modified the decision. Dispositive portion: Comtrust to restore USD 1,000 with interest as of October 1975 to the dollar SA of Zshornack Comtrust to return USD 3,000 without interest as said amount was merely held in custody for safekeeping. BPI absorbed Comtrust in 1980, and was thus substituted as party to the case. BPI appealed that it be totally absolved from liability. Issue: WON BPI is liable for the withdrawal of USD 1,000 Yes WON BPI is bound to return the USD 3,000 under the contract of depositum No Ratio: Issue 1 CFI & IAC held that the bank was liable for the unauthorized withdrawal. SC affirmed. SC The inconsistent explanation of the bank was unavailing. First theory was that Ernesto encashed a Manilabank check. Second was that Zshornack authorized the bank to withdraw from the dollar account any amount needed to fund his peso account. Comtrust has not shown how the check encashment is related to the dollar draft which was financed by the dollar account. In addition, Ernesto is distinct from Zshornack. Payment to Ernesto is not payment to Zshornack. Lastly, records show that the withdrawal was not to fund the peso account but to fund the dollar draft. Because the withdrawal was not authorized by Zshornack, the bank is liable to return the amount unlawfully debited from their account. Issue 2 Comtrust explained that USD 2,000 was sold on December 29, 1975 and the peso proceeds of PHP 14,920 were deposited to his peso CA per deposit slip accomplished by Garcia. The remaining USD 1,000 was sold in Feb 1976 and the PHP 8,350 proceeds were again deposited to his account based on the deposit slip of Garcia. BPI also argues that the contract embodied in the document was a contract of depositum (NCC 1962) which banks do not enter into. BPI argues that Garcia exceeded his powers when he entered into said transaction. Therefore, it claims that it cannot be liable under the contract as it is a purely personal obligation of Garcia. The SC held that: This cause of action is based on a document signed by COMtrust, hence it is based on an actionable document. It was incumbent upon the bank to specifically deny under oath the execution of the document (Rule 8, Sec 8) if it desired to (1) question the authority of Garcia to bind the bank, and (2) to deny its capacity to enter into such contract. No sworn answer denying the due execution of the document was filed. Hence, the bank is deemed to have admitted to Garcias authority and the banks power to enter into such contract. The reason for this rule is that any person without notice of lack of authority usually relies upon the representation of a man acting for a corporation with the

external indicia of authority. If it is found that the directors had permitted the agent to exercise that authority and held him as a person competent to bind the corporation, the corporation will be bound, even if the actual authority was not granted. In addition, the practical effect of absolving a corporation from liability every time an officer enters into a contract which is beyond corporate powers, even without the proper allegation or proof that the corporation has not authorized nor ratified the officers act, is to cast corporations in so perfect a mold that transgressions and wrongs by such artificial beings become impossible. Therefore, the contract entered into by Garcia binds BPI. As to the contract of depositum: NCC 1962 A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract. The object of the contract was foreign exchange. It is covered by CB Circular No. 20 Restrictions on Gold and Forex. It provides that transactions in assets (including money and checks) expressed in foreign currencies shall not be effected, except with respect to deposit accounts owned by and in the name of banks. All receipts of forex shall be sold daily to the Central Bank. CB Circular No. 20 was modified in 1969 by CB 281 Regulations on Forex by limiting its coverage to PH residents only. Sec 6 states that all receipts of forex by any resident person, firm, company or corporation shall be sold to authorized agents of the CB within one business day following the receipt of such forex. Any resident personresiding or located within the PH, who acquires forex, shall not, unless authorized by CB, dispose of such forex The acts of the parties show that they intended the bank to safekeep the forex and return to Zshornack, a PH resident. They did not intend to sell the dollars to CB, hence they entered into the contract of depositum. Since the safekeeping of the dollars without selling them to the CB is not authorized by CB Circular No. 20, it is considered a prohibited transaction. Under NCC Art 5, it is void, having been executed against the provisions of a mandatory/prohibitory law. Because the object of the contract is void, then neither of the parties have a cause of action the the object of the contract is void, then the parties have no cause of action against the other (NCC 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no cause of action against each other.) Therefore, Zshornack cannot recover. Held: BPI to pay USD 1,000 with interest as of Oct 1975. 2
nd

cause of action is dismissed.