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9 Bank of The Phil. Islands vs. Intermediate Appellate Court PDF
9 Bank of The Phil. Islands vs. Intermediate Appellate Court PDF
bankÊs capacity to enter into the contract, was ever filed. Hence, the
bank is deemed to have admitted not only GarciaÊs authority, but
also the bankÊs power, to enter into the contract in question.
Corporation Law; Unauthorized Acts of Corporate Officers; To
absolve a corporation from liability arising from the unauthorized
630 SUPREME COURT REPORTS ANNOTATED acts of its corporate officers, there must be proper allegation or proof
that the corporation has not authorized nor ratified the officersÊ act.
Bank of the Phil. Islands vs. Intermediate Appellate Court
·PetitionerÊs argument must also be rejected for another reason.
The practical effect of absolving a corporation from liability every
No. L-66826. August 19, 1988.* time an officer enters into a contract which is beyond corporate
powers, even without the proper allegation or proof that the
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. corporation has not authorized nor ratified the officerÊs act, is to
THE INTERMEDIATE APPELLATE COURT and cast corporations in so perfect a mold that transgressions and
RIZALDY T. ZSHORNACK, respondents. wrongs by such artificial beings become impossible [Bissell v.
Michigan Southern and N.I.R. Cos, 22 N.Y. 258 (1860).] „To say that
a corporation has no right to do unauthorized acts is only to put
Civil Procedure; Causes of Action; Actionable Documents; As the
forth a very plain truism; but to say that such bodies have no power
second cause of action was based on an actionable document, it is
or capacity to err is to impute to them an excellence which does not
incumbent upon the bank to deny under oath the due execution of the
belong to any created existence with which we are acquainted. The
document, as provided in Rule 8, Sec. 8 of the Rules of Court.·The
distinction between power and right is no more to be lost sight of in
second cause of action is based on a document purporting to be
respect to artificial than in respect to natural persons.‰
signed
Banking Laws; Central Bank Laws; Foreign Exchange
Transactions; CB Circular No. 281; Sec. 6 of CB Circular No. 281
_______________
requires that all receipts of foreign exchange by any resident person
shall be sold to authorized Central Bank agents within one business
* THIRD DIVISION.
day following the receipt of said foreign exchange.·Paragraph 4 (a)
above was modified by Section 6 of Central Bank Circular No. 281,
631 Regulations on Foreign Exchange, promulgated on November 26,
1969 by limiting its coverage to Philippine residents only. Section 6
provides:‰ SEC. 6. All receipts of foreign exchange by any resident
person, firm, company or corporation shall be sold to authorized
VOL. 164, AUGUST 19, 1988 631 agents of the Central Bank by the recipients within one business
day following the
Bank of the Phil. Islands vs. Intermediate Appellate Court
632
by COMTRUST, a copy of which document was attached to the
complaint. In short, the second cause of action was based on an
actionable document. It was therefore incumbent upon the bank to
specifically deny under oath the due execution of the document, as 632 SUPREME COURT REPORTS ANNOTATED
prescribed under Rule 8, Section 8, if it desired: (1) to question the
Bank of the Phil. Islands vs. Intermediate Appellate Court
authority of Garcia to bind the corporation; and, (2) to deny its
capacity to enter into such contract. [See, E.B. Merchant v.
International Banking Corporation, 6 Phil. 314 (1906).] No sworn receipt of such foreign exchange. Any resident person, firm,
answer denying the due execution of the document in question, or company or corporation residing or located within the Philippines,
who acquires foreign exchange shall not, unless authorized by the VOL. 164, AUGUST 19, 1988 633
Central Bank, dispose of such foreign exchange in whole or in part,
nor receive less than its full value, nor delay taking ownership Bank of the Phil. Islands vs. Intermediate Appellate Court
thereof except as such delay is customary; Provided, That, within
one business day upon taking ownership or receiving payment of a criminal offense, both parties being in pari delicto, they shall have
foreign exchange the aforementioned persons and entities shall sell no cause of action against each other . . .‰ [Art. 1411, New Civil
such foreign exchange to the authorized agents of the Central Bank. Code.] The only remedy is one on behalf of the State to prosecute
As earlier stated, the document and the subsequent acts of the the parties for violating the law.
parties show that they intended the bank to safekeep the foreign
exchange, and return it later to Zshornack, who alleged in his APPEAL from the decision of the Intermediate Appellate
complaint that he is a Philippine resident. The parties did not Court.
intend to sell the US dollars to the Central Bank within one
business day from receipt. Otherwise, the contract of depositum The facts are stated in the opinion of the Court.
would never have been entered into at all. Since the mere Pacis & Reyes Law Office for petitioner.
safekeeping of the greenbacks, without selling them to the Central Ernesto T. Zshornack, Jr. for private respondent.
Bank within one business day from receipt, is a transaction which
is not authorized by CB Circular No. 20, it must be considered as CORTÉS, J.:
one which falls under the general class of prohibited transactions.
The original parties to this case were Rizaldy T. Zshornack
Civil Law; Obligations and Contracts; Contract of Deposit; The and the Commercial Bank and Trust Company of the
contract between Zshornack and the bank, as to the $3,000.00, was a Philippines [hereafter referred to as „COMTRUST.‰] In
contract of deposit defined under Art. 1962 of the New Civil Code. 1980, the Bank of the Philippine Islands (hereafter referred
·The document which embodies the contract states that the to as „BPI‰) absorbed COMTRUST through a corporate
US$3,000.00 was received by the bank for safekeeping. The merger, and was substituted as party to the case.
subsequent acts of the parties also show that the intent of the Rizaldy Zshornack initiated proceedings on June 28,
parties was really for the bank to safely keep the dollars and to 1976 by filing in the Court of First Instance of Rizal·
return it to Zshornack at a later time. Thus, Zshornack demanded Caloocan City a complaint against COMTRUST alleging
the return of the money on May 10, 1976, or over five months later. four causes of action. Except for the third cause of action,
The above arrangement is that contract defined under Article 1962, the CFI ruled in favor of Zshornack. The bank appealed to
New Civil Code, which reads: Art. 1962. A deposit is constituted the Intermediate Appellate Court which modified the CFI
from the moment a person receives a thing belonging to another, decision absolving the bank from liability on the fourth
with the obligation of safely keeping it and for returning the same. cause of action. The pertinent portions of the judgment, as
If the safekeeping of the thing delivered is not the principal purpose modified, read:
of the contract, there is no deposit but some other contract.
IN VIEW OF THE FOREGOING, the Court renders judgment as
Same; Same; Void Contracts; The contract between the parties
follows:
being void, affords neither of the parties a cause of action against
each other.·Hence, pursuant to Article 5 of the Civil Code, it is 1. Ordering the defendant COMTRUST to restore to the dollar
void, having been executed against the provisions of a savings account of plaintiff (No. 25-4109) the amount of U.S
mandatory/prohibitory law. More importantly, it affords neither of $1,000.00 as of October 27, 1975 to earn interest together
the parties a cause of action against the other. „When the nullity with the remaining balance of the said account at the rate
proceeds from the illegality of the cause or object of the contract, fixed by the bank for dollar deposits under Central Bank
and the act constitutes Circular 343;
2. Ordering defendant COMTRUST to return to the plaintiff
633
the amount of U.S. $3,000.00 immediately upon the finality
of this decision, without interest for the reason that the said
amount was merely held in custody for safekeeping, but was to the order of Leovigilda D. Dizon in the sum of US$1,000
not actually deposited with the defendant COMTRUST drawn on the Chase Manhattan Bank, New York, with an
because being cash currency, it cannot by law be deposited indication that it was to be charged to Dollar Savings Acct.
with plaintiff Ês dollar account and defendantÊs only No. 25-4109. When Zshornack noticed the withdrawal of
obligation is to return the same to plaintiff upon demand; US$1,000.00 from his account, he demanded an
explanation from the bank. In answer, COMTRUST
634 claimed that the peso value of the withdrawal was given to
Atty. Ernesto Zshornack, Jr., brother
634 SUPREME COURT REPORTS ANNOTATED
635
Bank of the Phil. Islands vs. Intermediate Appellate Court
637
636 SUPREME COURT REPORTS ANNOTATED
Bank of the Phil. Islands vs. Intermediate Appellate Court
VOL. 164, AUGUST 19, 1988 637
with the trial court alleged that on December 8, 1975, Bank of the Phil. Islands vs. Intermediate Appellate Court
Zshornack entrusted to COMTRUST, thru Garcia,
US$3,000.00 cash (popularly known as greenbacks) for to ZshornackÊs current account per deposit slip
safekeeping, and that the agreement was embodied in a accomplished by Garcia; the remaining US$1,000.00 was
document, a copy of which was attached to and made part sold on February 3, 1976 and the peso proceeds amounting
of the complaint. The document reads: to P8,350.00 were deposited to his current account per
deposit slip also accomplished by Garcia.
Makati Cable Address: Aside from asserting that the US$3,000.00 was properly
Philippines „COMTRUST‰ credited to ZshornackÊs current account at prevailing
conversion rates, BPI now posits another ground to defeat
COMMERCIAL BANK AND TRUST COMPANY
private re-spondentÊs claim. It now argues that the contract
of the Philippines embodied in the document is the contract of depositum (as
Quezon City Branch defined in Article 1962, New Civil Code), which banks do
not enter into. The bank alleges that Garcia exceeded his
December 8, 1975
powers when he entered into the transaction. Hence, it is
MR. RIZALDY T. ZSHORNACK claimed, the bank cannot be liable under the contract, and
&/OR MRS SHIRLEY E. ZSHORNACK the obligation is purely personal to Garcia.
Before we go into the nature of the contract entered into,
Sir/Madam: an important point which arises on the pleadings, must be
considered.
We acknowledged (sic) having received from you today the The second cause of action is based on a document
sum of US DOLLARS: THREE THOUSAND ONLY purporting to be signed by COMTRUST, a copy of which
(US$3,000.00) for safekeeping. document was attached to the complaint. In short, the
Received by: second cause of action was based on an actionable
(Sgd.) VIRGILIO V. GARCIA document. It was therefore incumbent upon the bank to
specifically deny under oath the due execution of the
document, as prescribed under Rule 8, Section 8, if it reason. The practical effect of absolving a corporation from
desired: (1) to question the authority of Garcia to bind the liability every time an officer enters into a contract which
corporation; and (2) to deny its capacity to enter into such is beyond corporate powers, even without the proper
contract. [See, E.B. Merchant v. International Banking allegation or proof that the corporation has not authorized
Corporation, 6 Phil. 314 (1906).] No sworn answer denying nor ratified the officerÊs act, is to cast corporations in so
the due execution of the document in question, or perfect a mold that transgressions and wrongs by such
questioning the authority of Garcia to bind the bank, or artificial beings become impossible [Bissell v. Michigan
denying the bankÊs capacity to enter into the contract, was Southern and N.I.R. Cos, 22 N.Y 258 (1860).] „To say that a
ever filed. Hence, the bank is deemed to have admitted not corporation has no right to do unauthorized acts is only to
only GarciaÊs authority, but also the bankÊs power, to enter put forth a very plain truism; but to say that such bodies
into the contract in question. have no power or capacity to err is to impute to them an
In the past, this Court had occasion to explain the excellence which does not belong to any created existence
reason behind this procedural requirement. with which we are acquainted. The distinction between
power and right is no more to be lost sight of in respect to
The reason for the rule enunciated in the foregoing authorities will, artificial than in respect to natural persons.‰ [Ibid.]
we think, be readily appreciated. In dealing with corporations the Having determined that GarciaÊs act of entering into the
public at large is bound to rely to a large extent upon outward contract binds the corporation, we now determine the
correct nature of the contract, and its legal consequences,
638
including its enforceability.
The document which embodies the contract states that
638 SUPREME COURT REPORTS ANNOTATED the
Bank of the Phil. Islands vs. Intermediate Appellate Court
639
642